AKBA US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve significant risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Please also refer to the section under the heading “Note Regarding Forward-Looking Statements.”

Business Overview

We are a biopharmaceutical company with the purpose of bettering the life of each person impacted by kidney disease. Since our initial public offering in 2014, we have built a business focused on developing and commercializing innovative therapeutics that we believe serves as a foundation for future growth. We have established ourselves as a leader in the kidney community, and we remain committed to helping patients and others where we believe our current and future products have the ability to deliver value. We believe that delivering value broadly to the kidney community, as well as others who may benefit from our medicines, will result in delivering value for shareholders. Our portfolio includes a late-stage product candidate and a commercial product:

•Vadadustat is an investigational oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH, inhibitor designed to mimic the physiologic effect of altitude on oxygen availability. At higher altitudes, the body responds to lower oxygen availability with stabilization of hypoxia-inducible factor, or HIF, which stimulates erythropoietin, or EPO, production and leads tored blood cell, or RBC, production and improved oxygen delivery to tissues. The significance of the HIF pathway was recognized by the 2019 Nobel Prize and the

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2016 Albert Lasker Basic Medical Research Award, which honored the three physician-scientists who discovered the HIF pathway and elucidated this primary oxygen sensing mechanism that is essential for survival. We believe that, based on the HIF-PH inhibitor mechanism of action and the results of our Phase 3 clinical trials, vadadustat has the potential to become the new oral standard of care for the treatment of anemia due to chronic kidney disease, or CKD.

We completed the global Phase 3 clinical development program for vadadustat in September 2020 to support regulatory filings in the United States, Europe, and other countries, which included two separate programs, INNO2VATE and PRO2TECT. INNO2VATE evaluated vadadustat for the treatment of anemia due to CKD in adult patients on dialysis, or DD-CKD, and PRO2TECT evaluated vadadustat for the treatment of anemia due to CKD in adult patients not on dialysis, or NDD-CKD.

In May of 2020, we announced positive top-line results from our Phase 3 INNO2VATE program that showed vadadustat was non-inferior to darbepoetin alfa, an injectable erythropoiesis-stimulating agent, or ESA, with respect to hematological efficacy (change in hemoglobin concentration) and cardiovascular safety (assessed in a time to the first occurrence of a major adverse cardiovascular event, or MACE, analysis, which is the composite of all-cause mortality, nonfatal myocardial infarction, or a nonfatal stroke) in treating anemia due to CKD in DD-CKD adult patients. In addition to meeting the primary endpoints of the INNO2VATE program, vadadustat met the key secondary hematological efficacy endpoint in each of the two studies in the program and also met the program's key secondary safety endpoints. The results of the INNO2VATE program were presented at American Society of Nephrology, or ASN, in October of 2020 and published in the New England Journal of Medicine in April of 2021.

In September of 2020, we announced top-line results from our Phase 3 PRO2TECT program that showed vadadustat was non-inferior to darbepoetin alfa with respect to hematological efficacy in treating anemia due to CKD in NDD-CKD adult patients. While the PRO2TECT data showed that vadadustat achieved both the primary and key secondary hematological efficacy endpoints, it did not meet the program's primary cardiovascular safety, or MACE, endpoint. These cardiovascular outcomes contrast with those reported within the INNO2VATE program, which evaluated vadadustat for the treatment of anemia due to CKD in DD-CKD adult patients. The results of the PRO2TECT program were presented at ASN in October of 2020 and published in the New England Journal of Medicine in April of 2021.

We submitted a New Drug Application, or NDA, to the U.S. Food and Drug Administration, or FDA, for vadadustat in March of 2021 for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients. Our NDA submission was accepted for filing by the FDA in May of 2021 and the FDA has indicated that they are not currently planning to hold an Advisory Committee meeting to discuss the NDA for vadadustat. The FDA also assigned the application standard review and a Prescription Drug User Fee Act, or PDUFA, target action date of March 29, 2022. Our collaboration partner, Otsuka Pharmaceutical Co. Ltd., or Otsuka, submitted a Marketing Authorization Application, or MAA, for vadadustat for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients to the European Medicines Agency, or EMA, in October 2021. As vadadustat did not meet the PRO2TECT program's primary safety endpoint, we are remaining cautious in our outlook for potential approval of vadadustat in NDD-CKD adult patients in the United States and Europe.

In June of 2020, we announced the first regulatory approval of vadadustat for the treatment of anemia due to CKD in DD-CKD and NDD-CKD adult patients in Japan. Our collaboration partner in Japan, Mitsubishi Tanabe Pharma Corporation, or MTPC, commenced commercial sales of vadadustat in Japan under the trade name, VafseoTM, in August 2020. In addition, MTPC filed a new drug application for vadadustat for the treatment of anemia due to CKD in adult patients in Taiwan in January of 2022.

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In addition to anemia due to CKD, we believe that vadadustat has the potential to treat other serious or life-threatening conditions, including preventing and lessening the severity of acute respiratory distress syndrome, or ARDS, a complication of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), or COVID-19, infection. More specifically, in July of 2020, we announced an investigator-sponsored clinical study by The University of Texas Health Science Center at Houston, or UTHealth, in Houston, Texas, evaluating the use of vadadustat as a potential therapy to prevent and lessen the severity of ARDS adult patients who have been hospitalized due to COVID-19. With the support of their data monitoring committee, UTHealth decided to expand their study beyond the initial 400 patients, an enrollment target they have now surpassed. Within this randomized, double-blind, placebo-controlled study, patients will be dosed with vadadustat or a placebo starting within 24 hours of hospital admission and continuing for up to 14 days. This study is being conducted under an Investigational New Drug application, or IND, with UTHealth as the study sponsor and is currently enrolling patients. In January of 2021, UTHealth announced that it had been awarded $5.1 million in funding from the U.S. Department of Defense, or DOD, to expand this clinical trial at its facilities.

•Auryxia®(ferric citrate) is approved and marketed in the United States for two indications: (1) the control of serum phosphorus levels in adult patients with DD-CKD, or the Hyperphosphatemia Indication, and (2) the treatment of iron deficiency anemia, or IDA, in adult patients with NDD-CKD, or the IDA Indication. Ferric citrate is also approved and marketed in Japan as an oral treatment for the improvement of hyperphosphatemia in patients with CKD, including DD-CKD and NDD-CKD, and for the treatment of patients with IDA, under the trade name Riona (ferric citrate hydrate). Since 2018, Auryxia product revenue has grown at a compounded annual growth rate of 14% due to market share gains and improved net price per pill, while total prescriptions for phosphate binders in the United States have declined 8%. We believe this growth is due to the benefits of the product perceived by the prescribing nephrologists as communicated by our nephrology-focused commercial and medical organizations.

If we obtain FDA approval of vadadustat, we plan to commercialize vadadustat in the United States with our well-established, nephrology-focused commercial organization, while also leveraging our collaboration with Otsuka and its U.S. nephrology commercial organization. In addition, in February 2022, we entered into a Second Amended and Restated License Agreement, or the Vifor Second Amended Agreement with Vifor (International) Ltd., or Vifor Pharma, which amended and restates the Amended and Restated License Agreement, dated April 8, 2019, or the Vifor First Amended Agreement. Pursuant to the Vifor Second Amended Agreement, we granted Vifor Pharma an exclusive license to sell vadadustat to Fresenius Medical Care North America and its affiliates, including Fresenius Kidney Care Group LLC, to certain third-party dialysis organizations approved by us, to independent dialysis organizations that are members of group purchase organizations, and to certain non-retail specialty pharmacies in the United States, or the Territory. We refer to Fresenius Medical Care North America and its affiliates, these organizations and specialty pharmacies collectively as the “Supply Group". We currently retain rights to commercialize vadadustat for use in the non-dialysis dependent CKD market and to sell to dialysis organizations outside of the Supply Group. During the term of the Vifor Second Amended Agreement, Vifor Pharma is not permitted to sell any HIF product that competes with vadadustat in the Territory to the Supply Group.

We market Auryxia in the United States with our well-established, nephrology-focused commercial organization. Our Japanese sublicensee, Japan Tobacco, Inc., or JT, and its subsidiary, Torii Pharmaceutical Co., Ltd., or Torii, commercialize Riona in Japan. Auryxia is our only product approved for sale in the United States and it generated approximately $142.2 million in revenue from U.S. product sales during the year ended December 31, 2021.

In addition, we continue to explore additional development opportunities to expand our pipeline and portfolio of novel therapeutics through both internal research and external innovation. Our development pipeline includes several earlier stage opportunities, including praliciguat, an investigational oral soluble guanylate cyclase, or sGC, stimulator, that we licensed from Cyclerion Therapeutics, Inc., or Cyclerion, in June 2021. Praliciguat is in development for the treatment of focal segmental glomerulosclerosis, which is highly complementary of our strategy to identify and develop novel therapeutics for people impacted by kidney diseases.

Further, our internal innovation efforts include several preclinical opportunities, both in the HIF pathway, leveraging our learnings from the research and development of vadadustat, as well as new areas of focus we are currently exploring.

Operating Overview

We have never been profitable and have incurred net losses in each year since inception. Our net losses were $282.8 million, $383.5 million and $279.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. Substantially all of our net losses resulted from costs incurred in connection with the continued commercialization of Auryxia and development efforts relating to vadadustat, including conducting clinical trials of, and seeking regulatory approval for, vadadustat, providing general and administrative support for these operations and protecting our intellectual property.

We expect to continue to incur significant expenses and operating losses for the foreseeable future. The amount of our future net losses will depend, in part, on the rate of our future expenditures, and our financial position will depend, in part, on product

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revenue, collaboration revenue, and our ability to obtain additional funding. We expect to continue to incur significant expenses if and as we:

•conduct and enroll patients in any clinical trials, including any post-marketing studies or any other clinical trials for Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired;

•continue our commercialization activities for Auryxia and vadadustat, if approved, and any other product or product candidate, including those that may be in-licensed or acquired;

•seek marketing approvals for vadadustat and any other product candidate, including those that may be in-licensed or acquired,

•maintain marketing approvals for Auryxia, vadadustat, if approved, and any other product, including those that may be in-licensed or acquired;

•have Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired, manufactured for clinical trials and for commercial sale;

•conduct discovery and development activities for additional product candidates or platforms that may lead to the discovery of additional product candidates;

•engage in transactions, including strategic, merger, collaboration, acquisition and licensing transactions, pursuant to which we would market and develop commercial products, or develop and commercialize other product candidates and technologies;

•make royalty, milestone or other payments under our license agreements and any future license agreements;

•maintain, protect and expand our intellectual property portfolio;

•attract, hire and retain qualified personnel;

•continue to create additional infrastructure and expend additional resources to support our operations as a fully integrated, publicly traded biopharmaceutical company; and

•experience any delays or encounter issues with any of the above.

We have not generated, and may not generate, enough product revenue to realize net profits from product sales. We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize contract research organizations, or CROs, to carry out our clinical development activities. If we obtain marketing approval for vadadustat, and as we continue to commercialize Auryxia, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We expect to finance future cash needs through product revenue, public or private equity or debt transactions, payments from our collaborators, royalty transactions, strategic transactions, or a combination of these approaches. If we are unable to raise additional capital in sufficient amounts when needed or on attractive terms, we may not be able to pursue development and commercial activities related to Auryxia and vadadustat, if approved, or any additional products and product candidates, including those that may be in-licensed or acquired. Any of these events could significantly harm our business, financial condition and prospects.

From inception through December 31, 2021, we raised approximately $792.7 million of net proceeds from the sale of equity, including $519.8 million from various underwritten public offerings, $222.9 million from at-the-market offerings, or ATM offerings, pursuant to sales agreements with Cantor Fitzgerald & Co., and $50.0 million from the sale of 3,571,429 shares of common stock to Vifor Pharma. During the year ended December 31, 2021, we raised $88.4 million of net proceeds from ATM offerings. At the inception of our collaboration agreements with Otsuka and MTPC, our collaborators committed to an aggregate of approximately $573.0 million or more in cost-share funding, which we generally continue to receive on a quarterly prepaid basis, and license payments. Of these commitments, we received approximately $272.0 million at the onset of the collaboration agreements. On November 11, 2019, we entered into a loan agreement, or the Loan Agreement, with funds managed by Pharmakon Advisors LP, or Pharmakon, pursuant to which term loans in an aggregate principal amount of $100.0 million were made available to us in two tranches, subject to certain terms and conditions, or the Term Loans. As of March 31, 2021, we had drawn down the full $100.0 million made available to us under the Loan Agreement. In addition, on February 25, 2021, we received an upfront payment of $44.8 million (net of certain transaction expenses) in connection with our sale to HealthCare Royalty Partners IV, L.P., or HCR, of the right to receive all royalties and sales milestones payable to us under our collaboration agreement with MTPC, or the MTPC Agreement, subject to certain caps and other terms and conditions described in Note 4 to our consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Impacts of COVID-19 Pandemic

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The ongoing severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), or COVID-19, pandemic has presented a substantial public health and economic challenge around the world and continues to affect our employees, patients, healthcare providers with whom we interact, customers, collaboration partners, CROs, contract manufacturing organizations, or CMOs, vendors, communities and business operations. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition continues to depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the COVID-19 pandemic, any resurgences or variants of COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets where the healthcare providers with whom we interact, our partners, our CROs, our CMOs, and our other vendors operate.

We believe our revenue growth was negatively impacted during 2021 primarily as the CKD patient population that we serve continue to experience both higher hospitalization and mortality rates due to COVID-19. While we are unable to quantify the impact of the COVID-19 pandemic on future revenues and revenue growth, COVID-19 continues to adversely and disproportionately impact CKD patients; therefore, we expect COVID-19 to continue to have a negative impact on our revenue growth for the foreseeable future.

The majority of our office-based employees began working from home in March 2020, and continue to primarily work from home. While most of our office-based operations can be performed remotely, there is no guarantee that we will continue to be as effective while working remotely because our team is dispersed, which has limited valuable in-person employee team interactions, and employees may become sick themselves and be unable to work. Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches.

Moreover, our future success and profitability substantially depends on the management skills of our executives and certain other key employees. The unanticipated loss or unavailability of key employees due to the pandemic could harm our ability to operate our business or execute our business strategy and we may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability. For example, as of January 1, 2022, we have required all of our employees be fully vaccinated, subject to limited medical and religions exemptions in accordance with applicable laws. At this time, it is not possible to predict with certainty the exact impact that our vaccine requirement will continue to have on us or on our workforce. The vaccine requirement has resulted, and may continue to result, in employee distraction and could result in litigation and difficulty securing future labor needs. This could have an adverse effect on our business, results of operations and cash flows.

In addition, several healthcare facilities have previously restricted access for non-patients, including the members of our sales force. For example, DaVita, Inc., or DaVita, and Fresenius Medical Care, or Fresenius, which account for a vast majority of the dialysis population in the United States, have previously restricted access to their clinics. As a result, we continue to engage with some healthcare providers and other customers virtually, where possible. The restrictions on our customer-facing employees' in-person interactions with healthcare providers could negatively impact our access to healthcare providers and, ultimately, our sales, including with respect to vadadustat, if approved. Recently, such precautionary measures have been relaxed at certain healthcare facilities and, as a result, members of our sales force have resumed in person interactions with certain customers. Nevertheless, some restrictions remain, and more restrictions may be put in place again due to a resurgence in COVID-19 cases, including those involving new variants of COVID-19 which may be more contagious and more severe than prior strains of the virus. Given this uncertain environment and the disproportionate impact of the COVID-19 pandemic on CKD patients, we are actively monitoring the demand for Auryxia, and will be for vadadustat, if approved, including the potential for further declines or changes in prescription trends and customer orders.

In addition, the direct and indirect impacts of the pandemic or the response efforts to the pandemic, including, among others, competition for labor and resources and increases in labor, sourcing, manufacturing and shipping costs, may cause disruptions to, closures of or other impacts on our CMOs and other vendors in our supply chain on which we rely for the supply of our products and product candidates. At this time, our third party contract manufacturers continue to operate at or near normal levels. However, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our contract manufacturers’ ability to manufacture and deliver Auryxia and vadadustat (if approved in the United States and which is currently marketed under the trade name VafseoTM by MTPC in Japan), which may result in increased costs and delays, or disruptions to manufacturing and supply of our products and product candidates and have a negative effect on our inventory reserves, which could result in an increase in inventory write-offs due to expiry.

COVID-19 pandemic precautions have caused moderate delays in enrolling new clinical trials and may cause delays in enrolling other new clinical trials. We are using remote monitoring and central monitoring, where possible.

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This uncertain COVID-19 pandemic environment has presented new risks to our business. While we are working to mitigate the impacts on our business, we are mindful that many of these risks and the impact to the larger healthcare market are outside of our control.

For additional information on the various risks posed by the COVID-19 pandemic, please refer to Part I, Item 1A. Risk Factors.

Financial Overview

Revenue

To date, our revenues have been derived from collaboration revenues, which include license and milestone payments, royalty and cost-sharing revenue generated through collaboration and license agreements with partners for the development and commercialization of vadadustat and, following the Merger, commercial sales of Auryxia and royalty revenue from sales of Riona in Japan. Cost-sharing revenue represents amounts reimbursed by our collaboration partners for expenses incurred by us for research and development activities and, potentially, co-promotion activities, under our collaboration agreements.

We expect our revenue to continue to be generated primarily from our collaborations with Otsuka and MTPC and any other collaborations into which we may enter, as well as commercial sales of Auryxia and vadadustat, if approved, in the United States, and royalty revenue from JT and Torii, based on net sales of Riona in Japan.

Cost of Goods Sold

Cost of goods sold includes direct costs to manufacture commercial drug substance and drug product for Auryxia, as well as indirect costs, including costs for packaging, shipping, insurance and quality assurance, idle capacity charges, write-offs for inventory that fails to meet specifications or is otherwise no longer suitable for commercial sale, changes in our excess purchase commitment liability, and royalties due to the licensor of Auryxia related to the U.S. product sales recognized during the period. Cost of goods sold also includes costs to manufacture drug product provided to MTPC for commercial sale of Vafseo in Japan.

As a result of the Merger and the application of purchase accounting, costs of goods sold also includes both amortization expense and, if applicable, impairment charges associated with the fair value of the developed product rights for Auryxia as well as expense associated with the fair value inventory step-up. The fair value of the developed product rights for Auryxia is being amortized over its estimated useful life, which as of December 31, 2021 is estimated to be six years. The fair value inventory step-up as a result of the Merger was fully amortized as of the first quarter of 2021.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the development of vadadustat, which include:

•personnel-related expenses, including salaries, benefits, recruiting fees, travel and stock-based compensation expense of our research and development personnel;

•expenses incurred under agreements with CROs and investigative sites that conduct our clinical trials;

•the cost of acquiring, developing and manufacturing clinical study materials through CMOs;

•facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies;

•costs associated with preclinical, clinical and regulatory activities; and

•costs associated with vadadustat pre-launch inventory build, which remains subject to approval in the United States.

Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

We cannot determine with certainty the duration and completion costs of current or future clinical trials of Auryxia and vadadustat or if, when, or to what extent we will generate revenue from the commercialization and sale of vadadustat, if approved. We may never succeed in achieving marketing approval for vadadustat.

The duration, costs and timing of clinical trials and development of Auryxia and vadadustat will depend on a variety of factors including, but not limited to, those described in Part I, Item 1A. Risk Factors. A change in the outcome of any of these variables with respect to the development of Auryxia and vadadustat could mean a significant change in the costs and timing associated

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with that development. For example, if the FDA, the EMA, or other regulatory authorities were to require us to conduct clinical trials in addition to or different from those that we currently anticipate, or if we experience delays in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

From inception through December 31, 2021, we have incurred $1.4 billion in research and development expenses. We expect to have significant research and development expenditures for the foreseeable future as we continue the development of Auryxia, vadadustat and any other product or product candidate, including those that may be in-licensed or acquired.

Our direct research and development expenses consist principally of external costs, such as fees paid to clinical trial sites, consultants, central laboratories and CROs in connection with our clinical trials, and drug substance and drug product manufacturing for clinical trials.

In 2020, we completed our global Phase 3 clinical program for vadadustat to which the majority of our research and development costs are attributable. A significant portion of our research and development costs have been external costs, which we track on a program-by-program basis. These external costs include fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials, and costs related to acquiring and manufacturing clinical trial materials. Our internal research and development costs are primarily personnel-related costs, depreciation and other indirect costs. We do not track our internal research and development expenses on a program-by-program basis as they are deployed across multiple projects under development.

The following table summarizes our external research and development expenses by program, as well as expenses not allocated to programs, for the years ended December 31, 2021 and 2020:

Year ended December 31,

(in thousands)

Total external research and development expenses 74,413 143,889

Headcount, consulting, facilities and other 73,439 74,596

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expenses for our commercial personnel, including our field sales force and other commercial support personnel, as well as personnel in executive and other administrative or non-research and development functions. Other selling, general and administrative expenses include facility-related costs, fees for directors, accounting and legal services fees, recruiting fees and expenses associated with obtaining and maintaining patents.

Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020

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Year ended December 31, Increase (Decrease)

(In Thousands)

Revenues:

Cost of goods sold:

Operating expenses:

Benefit from income taxes — — —

Product Revenue, Net. Net product revenue is derived from sales of our only commercial product in the United States, Auryxia. We distribute our product principally through a limited number of wholesale distributors as well as certain specialty pharmacy providers. Net product revenue was $142.2 million for the year ended December 31, 2021, compared to net product revenue of $128.9 million for the year ended December 31, 2020. The increase was primarily due to an increase in units sold and improved payer mix, partially offset by the negative impact from COVID-19 on our revenues during 2021. We believe our revenue growth continues to be negatively impacted primarily as the CKD patient populations that we serve continue to experience both higher hospitalization and mortality rates due to COVID-19.

As an oral drug, Auryxia is covered by Medicare only under Part D. However, in September 2018, CMS decided that Auryxia would no longer be covered by Medicare for the IDA Indication. While this decision does not impact CMS coverage of the Hyperphosphatemia Indication, it requires Part D plan sponsors to impose prior authorization or other steps to ensure that Auryxia is used only for the Hyperphosphatemia Indication. However, due to the COVID-19 pandemic, CMS has issued a guidance that expressly encouraged Part D plans to waive all prior authorization requirements. This guidance was issued in March of 2020 and updated in May of 2020. In both versions of the guidance, CMS clarified that due to COVID-19, Part D plan sponsors are encouraged to waive prior authorization requirements.

Further, on October 15, 2019, we filed a complaint in the United States District Court for the District of Massachusetts against CMS and the U.S. Department of Health and Human Services challenging CMS’s decision that Auryxia would no longer be covered by Medicare for the IDA Indication and imposing a prior authorization requirement for Auryxia in the Hyperphosphatemia Indication, or the CMS Decision. On October 22, 2021, the parties agreed to dismiss the litigation. See Part I, Item 3. Legal Proceedings for further information. While we believe that the vast majority of the Medicare prescriptions written for Auryxia today are for the Hyperphosphatemia Indication and therefore will continue to be covered by Medicare with prior authorization, the CMS Decision has had and will continue to have an adverse impact on the sales and future growth of Auryxia for the Hyperphosphatemia Indication and the IDA Indication.

License, Collaboration and Other Revenue. License, collaboration and other revenue was $71.4 million for the year ended December 31, 2021, compared to $166.4 million for the year ended December 31, 2020. We recognized $65.5 million in collaboration revenue for the year ended December 31, 2021from our cost sharing arrangement under the Otsuka collaboration agreement for the United States, or the Otsuka U.S. Agreement, and the Otsuka collaboration agreement for certain territories outside the United States, or the Otsuka International Agreement, and royalty revenue earned under our collaboration agreement with MTPC, or the MTPC Agreement.We recognized $154.3 million in collaboration revenue for the year ended December 31,

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2020 from our cost sharing arrangement under the Otsuka U.S. Agreement and the Otsuka International Agreement and recognition of a milestone and royalty revenue under the MTPC Agreement.The decrease in collaboration revenue was driven by lower payments recognized under both the Otsuka U.S. Agreement and the Otsuka International Agreement as we completed our global Phase 3 clinical development program for vadadustat in 2020 and are currently engaged in close-out activities with respect to the program.

Cost of Goods Sold - Product. Cost of goods sold of $117.4 million for the year endedDecember 31, 2021primarily consisted of costs associated with the manufacturing of Auryxia and supply of Vafseo to MTPC for commercial sale in Japan, $33.4 million in non-cash charges related to our excess purchase commitment liability, $21.6 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, and $15.6 million primarily related to excess and obsolescence reserves associated with Auryxia as well as inventory reserves associated with a previously disclosed manufacturing quality issue related to Auryxia. See Note 14 to our consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further details of the increase to the liability for excess purchase commitments.

Cost of goods sold of $148.9 million for the year ended December 31, 2020primarilyconsistedof costs associated with the manufacturing of Auryxia, $68.2 million in non-cash charges related to the fair-value inventory step-up from the application of purchase accounting, $25.1 million in non-cash charges related to an increase in the liability for excess purchase commitments, and $20.1 million primarily related to the write-down of inventory associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

Cost of Goods Sold - Amortization of Intangibles. Amortization of intangibles relates to the acquired developed product rights for Auryxia. Amortization of intangibles during the years ended December 31, 2021 and 2020 was $36.0 million and $31.5 million, respectively. The increase in amortization charges is due to the prospective adjustment of the estimated useful life of the developed product rights for Auryxia from seven years to six years that occurred in the fourth quarter of 2020.

Cost of Goods Sold - Impairment of Intangible Asset. In the second quarter of 2020, in connection with a routine business review, we reduced our short-term and long-term Auryxia revenue forecast. This reduction was primarily driven by the compounding impact of the CMS Decision that rescinded Medicare Part D coverage of Auryxia for the IDA Indication, and imposed a prior authorization requirement for Auryxia for the Hyperphosphatemia Indication. As a result, we recorded an impairment charge of $115.5 million to the Auryxia intangible asset during the year ended December 31, 2020. There were no such impairment charges during the year ended December 31, 2021.

Research and Development Expenses. Research and development expenses were $147.9 million for the year ended December 31, 2021, compared to $218.5 million for the year ended December 31, 2020. The net decrease of $70.6 million was due to the following:

(in millions)

Vadadustat external development expenses (80.4)

Other external research and development 10.9

Headcount, consulting and facilities (1.1)

Total net decrease $ (70.6)

The decrease in the costs related to the development of vadadustat is primarily attributable to a decrease in external costs related to our global Phase 3 program (INNO2VATE and PRO2TECT), for which we reported top-line data in the second and third quarters of 2020, respectively. Although we expect our research and development expenses to continue to decrease in the near term as we completed our global Phase 3 clinical development program for vadadustat in 2020, we will continue to incur significant research and development expenses in future periods in support of ongoing or planned studies with respect to Auryxia and vadadustat and development of other potential product candidates.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $174.2 million for the year ended December 31, 2021, compared to $153.9 million for the year ended December 31, 2020. The increase of $20.2 million was primarily due to higher marketing expenses, increased headcount related costs, and one-time legal costs. In 2022, we expect our selling, general and administrative expenses for our ongoing commercialization of Auryxia and for support of our potential commercialization of vadadustat to increase modestly from 2021.

License Expenses. License expense related to royalties due to Panion relating to sales of Riona in Japan were $3.5 million and $3.4 million for the years ended December 31, 2021 and 2020, respectively.

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Other Expense, Net. Other expense, net, was $17.5 million for the year ended December 31, 2021, compared to $7.0 million for the year ended December 31, 2020. The increase was primarily due to $9.1 million in non-cash interest expense on the liability related to the sale of our right to receive royalties and sales milestones from MTPC as further described in Note 5 to our consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K as well as interest expense associated with our Term Loans. Other expense, net for the year ended December 31, 2020 was primarily due to interest expense associated with our Term Loans.

Comparison of the Years Ended December 31, 2020 and 2019

For discussion of our 2020 results and a comparison with 2019 results please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 that was filed with the SEC on February 25, 2021, or the 2020 Form 10-K.

Liquidity and Capital Resources

We have funded our operations principally through sales of our common stock, payments received from our collaboration partners and, following the Merger, product sales, debt and a royalty transaction. As of December 31, 2021, we had cash and cash equivalents of approximately $149.8 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. At inception of our collaboration agreements with Otsuka and MTPC, our collaborators committed to an aggregate of approximately $573.0 million or more in cost-share funding, of which we received approximately $272.0 million at the onset of the collaborations, as further described in Note 4 contained in this Annual Report on Form 10-K and the remainder of which we will generally continue to receive on a quarterly prepaid basis, and through license payments.

Cash Flows

The following table sets forth the primary sources and uses of cash for each of the periods set forth below:

Year ended December 31,

(In Thousands)

Net cash provided by (used in):

Operating Activities. Net cash used in operating activities during the year ended December 31, 2021 of $253.0 million was largely driven by payroll-related expenses, rebate payments and payments for inventory. These payments were partially offset by adjustments for non-cash items, including amortization of intangibles of $36.0 million, increases to the liability for excess purchase commitments of $33.4 million, stock-based compensation expense of $22.7 million, fair value step-up of inventory sold or written off of $21.6 million, write-downs of inventory of $15.6 million, and non-cash interest expense related to the sale of future royalties of $9.1 million.

Net cash used in operating activities during the year ended December 31, 2020 of $110.4 million was largely driven by timing of payments on our Phase 3 development program for vadadustat, payments for inventory and merger-related liabilities. These payments were partially offset by adjustments for non-cash items, including the intangible asset impairment charge of $115.5 million, the fair value write-up of inventory sold or written off of $68.2 million, amortization of intangibles of $31.5 million, increases to the liability for excess purchase commitments of $25.1 million, stock-based compensation expense of $24.5 million, and write-downs of inventory of $20.1 million primarily associated with specific lots of Auryxia because it was determined that these lots were not manufactured in conformance with the FDA's GMP guidance relating to validation.

Investing Activities. Net cash provided by investing activities during the year ended December 31, 2021 of $39.9 million was comprised of proceeds from the maturities of available for sale securities of $40.0 million, partially offset by immaterial purchases of equipment.

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Net cash used in investing activities during the year ended December 31, 2020 of $40.0 million was comprised primarily of purchase of available for sale securities of $99.9 million, partially offset by proceeds from the maturities of available for sale securities of $60.2 million.

Financing Activities. Net cash provided by financing activities for the year ended December 31, 2021 was $133.7 million and consisted of net proceeds from the sale of future royalties of $44.8 million, net proceeds from the public issuance of common stock in connection with our ATM sales agreement of $88.2 million, and proceeds from the sale of stock under our employee stock purchase plan.

Net cash provided by financing activities for the year ended December 31, 2020 was $231.7 million and consisted of net proceeds from the public issuance of common stock in connection with our ATM sales agreement of $209.4 million, proceeds from the issuance of debt of $20.0 million, and proceeds from the exercise of stock options and from the sale of stock under our employee stock purchase plan.

A discussion of changes in our cash flow from the year ended December 31, 2019 to the year ended December 31, 2020 can be found in Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of the 2020 Form 10-K.

Operating Capital Requirements and Going Concern

We have one product, Auryxia, approved for commercial sale in the United States and one product candidate, vadadustat, subject to FDA approval in the U.S., but have not generated, and may not generate, enough product revenue from the sale of Auryxia or sales of vadadustat, if approved, to realize net profits from product sales. We have incurred losses and cumulative negative cash flows from operations since our inception in February 2007, and as of December 31, 2021, we had an accumulated deficit of $1.5 billion. We anticipate that we will continue to incur losses for the foreseeable future, and we expect to continue to incur additional research and development and selling, general and administrative expenses for our ongoing research and development and potential commercialization of vadadustat and our ongoing development and commercialization of Auryxia.

We expect our cash resources to fund our current operating plan for at least twelve months from the date of this filing. However, the potential timely regulatory approval of vadadustat and the receipt of associated regulatory milestones and product revenues are an important source of funding of our cash runway, which are outside of our control. We expect to finance future cash needs through product revenue, public or private equity or debt transactions, payments from our collaborators (including associated regulatory approval milestones), royalty transactions, strategic transactions, or a combination of these approaches. In any event, we will require additional funding to fund our strategy and operating plan beyond the next twelve months, including to pursue development and commercial activities related to Auryxia and vadadustat, if approved, or any additional products and product candidates, including those that may be in-licensed or acquired. If we are unable to obtain sufficient funding, we could be required to delay our development efforts, limit activities and reduce costs, which could adversely affect our business prospects. There can be no assurance that the current operating plan will be achieved in the time frame anticipated by us, or that its cash resources will fund our operating plan for the period anticipated by us or that additional funding will be available on terms acceptable to us, or at all.

In addition, on February 18, 2022, we entered into the First Amendment and Waiver with BioPharma Credit PLC, or the Collateral Agent, BPCR Limited Partnership, as a Lender, and BioPharma Credit Investments V (Master) LP, as a Lender, or the First Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement, dated November 11, 2019. The Collateral Agent and the lenders are collectively referred to as Pharmakon (see Note 18). Pursuant to the covenants in the Loan Agreement, as amended, our Quarterly Reports on Form 10-Q for the fiscal quarters ending June 30, 2022 and September 30, 2022 and our future Annual Reports on Form 10-K must not be subject to any qualification as to going concern. If any of these filings are subject to any qualification related to going concern, it will result in an event of default under the Loan Agreement. If an event of default occurs and is continuing under the Loan Agreement, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement, which we may not have the available cash resources to repay at such time. Should we not be able to meet the quarterly or annual covenants in the future, we would seek a waiver of this provision. However, there can be no assurances that we would be successful in obtaining such waiver.

Going Concern

Because the potential timely regulatory approval of vadadustat and the receipt of associated regulatory milestones and product revenues are outside of our control, there is uncertainty as to whether or not we will meet our quarterly and annual debt covenants. The conditions above, including the going concern covenants in our Loan Agreement, raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date the financial statements are issued.

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Management’s plans to alleviate the conditions that raise substantial doubt include raising additional funding through the sources detailed above for us to continue as a going concern for a period of twelve months from the date the financial statements are issued. We have concluded that the likelihood that our plan to obtain sufficient funding from one or more of these sources will be successful, while reasonably possible, is less than probable. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves numerous risks and uncertainties, and actual results could vary as a result of a number of factors, many of which are outside our control. We have based this estimate on assumptions that may be substantially different than actual results, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both near- and long-term, will depend on many factors including, but not limited to, those described under Part I, Item 1A. Risk Factors under the heading "Risks Related to our Financial Position, Need for Additional Capital and Growth Strategy."

Contractual Obligations and Commitments

Leases

We lease approximately 65,167 square feet of office and lab space in Cambridge, Massachusetts under a lease which was most recently amended in November 2020, collectively the Cambridge Lease. Under the Third Amendment to the Cambridge Lease, or the Third Amendment, executed in July 2016, total monthly lease payments under the initial base rent were approximately $242,000 and are subject to annual rent escalations. In addition to such annual rent escalations, base rent payments for a portion of said premises commenced on January 1, 2017 in the monthly amount of approximately $22,000. The Fourth Amendment to the Cambridge Lease, executed in May 2017, provided additional storage space to us and did not impact rent payments. In April 2018, we entered into a Fifth Amendment to the Cambridge Lease, or the Fifth Amendment, for an additional 19,805 square feet of office space on the 12th floor. Monthly lease payments for the existing 45,362 square feet of office and lab space, under the Third Amendment, remain unchanged. The new space leased by us was delivered in September 2018 and additional monthly lease payments of approximately $135,000 commenced in February 2019 and are subject to annual rent escalations, which commenced in September 2019. In November 2020, we entered into a Sixth Amendment to the Cambridge Lease, or the Sixth Amendment, to extend the term of the Cambridge Lease with respect to the lab space from November 30, 2021 to January 31, 2025. The Sixth Amendment includes two months of free rent starting in December 2020 and additional monthly lease payments of approximately $48,000 which commenced in December 2021, and is subject to annual rent escalations, which commence in December 2022.

Additionally, as a result of the Merger, we have a lease for 27,300 square feet of office space in Boston, Massachusetts, or the Boston Lease, which expires on February 28, 2023. The total monthly lease payments under the base rent are approximately $136,000 and are subject to annual rent escalations. On February 24, 2022, we entered into a First Amendment to Lease, or the First Lease Amendment, with CLPF One Marina Park Drive LLC (successor-in-interest to Fallon Cornerstone One MPD LLC), or the Landlord, amending the Boston Lease. Pursuant to the First Lease Amendment, we agreed to extend the term of the Boston Lease until July 31, 2031. The monthly lease payment pursuant to the First Amendment will be $200,122 commencing on August 1, 2023 and subject to annual rent escalation of approximately 2% commencing on August 1, 2024. The First Lease Amendment also includes a Landlord’s allowance for certain leasehold improvements to the Premises in an amount of up to $1,954,680, provided that such allowance must be used prior to August 1, 2024. See Note 18 to our consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.

In September 2019, Keryx entered into an agreement to sublease the Boston office space to Foundation Medicine, Inc., or Foundation. The sublease is subject and subordinate to the Boston Lease between Keryx and the landlord. The term of the sublease commenced on October 16, 2019, upon receipt of the required consent from the landlord for the sublease agreement, and expires on February 27, 2023. Foundation is obligated to pay Keryx rent that approximates the rent due from us to Keryx’s landlord with respect to the Boston Lease. Keryx continues to be obligated for all payment terms pursuant to the Boston Lease, and we will guaranty Keryx’s obligations under the sublease.

Term Loans

On November 11, 2019, Akebia, with Keryx as guarantor, entered into a loan agreement, or the Loan Agreement, with BioPharma Credit PLC as collateral agent and a lender, or the Collateral Agent, and BioPharma Credit Investments V (Master) LP as a lender, pursuant to which term loans in an aggregate principal amount of $100.0 million were made available to us in two tranches, subject to certain terms and conditions, or the Term Loans. BioPharma Credit PLC subsequently transferred its interest in the Term Loans, solely in its capacity as a lender, to its affiliate, BPCR Limited Partnership. The Collateral Agent

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and the lenders are collectively referred to as Pharmakon. The first tranche of $80.0 million, or Tranche A, was drawn on November 25, 2019, or the Tranche A Funding Date, and the second tranche of $20.0 million, or Tranche B, was drawn on December 10, 2020, or the Tranche B Funding Date. A more detailed description of the term loans can be found in Note 11 to our consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. On February 18, 2022, in connection with entering into the Vifor Second Amended Agreement, we, BioPharma Credit PLC, or the Collateral Agent, BPCR Limited Partnership, as a Lender, and BioPharma Credit Investments V (Master) LP, as a Lender, entered into the First Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement, dated November 11, 2019, between the parties. See Note 18 to our consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.

Manufacturing Agreements

As a result of the Merger, our contractual obligations include Keryx’s commercial supply agreements with BioVectra Inc., or BioVectra, and Siegfried Evionnaz SA, or Siegfried, to supply commercial drug substance for Auryxia.

Pursuant to the Manufacture and Supply Agreement with BioVectra and the Product Manufacture and Supply and Facility Construction Agreement with BioVectra, we agreed to purchase minimum quantities of Auryxia drug substance annually at predetermined prices. On September 4, 2020, we and BioVectra entered into an Amended and Restated Product Manufacture and Supply and Facility Construction Agreement, which provided for reduced minimum quantity commitments and revised the predetermined prices. The price per kilogram decreases with an increase in quantity above the predetermined purchase quantity tiers. In addition, the Manufacture and Supply Agreement with BioVectra and the Amended and Restated Product Manufacture and Supply and Facility Construction Agreement with BioVectra, requires us to reimburse BioVectra for certain costs in connection with construction of a new facility for the manufacture and supply of Auryxia drug substance. These construction costs are recorded in other assets and amortized into drug substance as inventory is released to us from BioVectra. The term of the Manufacture and Supply Agreement with BioVectra expires on December 31, 2022. The term of the Amended and Restated Product Manufacture and Supply and Facility Construction Agreement expires on December 31, 2026, after which, it automatically renews for successive one-year terms unless either party gives notice of its intention to terminate within a specified time prior to the end of the then-current term. In addition, we and BioVectra each have the ability to terminate these agreements upon the occurrence of certain conditions. As of December 31, 2021, we are required to reimburse BioVectra for certain costs in connection with the construction of the new facility and to purchase minimum quantities of Auryxia drug substance annually for a total cost of approximately $83.6 million through the end of the contract term.

Pursuant to the Siegfried Master Manufacturing Services and Supply Agreement, as amended (the most recent amendment having been executed on February 11, 2021), or the Siegfried Agreement, we have agreed to purchase a minimum quantity of drug substance of Auryxia at predetermined prices. The term of the Siegfried Agreement expires on December 31, 2022, subject to our option to extend the term through December 31, 2023, by providing 12 months' prior written notice to Siegfried. As of the date of the filing of this Annual Report on Form 10-K, we have notified Siegfried that we have elected not to exercise our option to extend the term of the Siegfried Agreement through December 31, 2023. In addition, the Siegfried Agreement provides us and Siegfried with certain early termination rights. As of December 31, 2021, we are required to purchase a minimum quantity of drug substance under the Siegfried Agreement for Auryxia annually at a total cost of approximately $15.6 million through the year ending December 31, 2022.

As part of purchase accounting, we identified executory contracts in the commercial supply agreements between Keryx and its contract manufacturers for Auryxia, which include future firm purchase commitments. These executory contracts were deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast. The liability related to the amount of purchase commitments that exceed the current forecast was $76.7 million and $55.8 million as of December 31, 2021 and 2020, respectively. The $20.9 million increase in liability, which was driven by reductions in the short-term and long-term Auryxia revenue sales forecast and related estimates of expiry during the year ended December 31, 2021 partially offset by a decrease due to inventory received that had been previously reserved within the excess purchase commitment liability and a reduction in commitments related to an amendment to the Siegfried Agreement during the year endedDecember 31, 2021. The increase in the liability was recorded to cost of goods sold.

On April 9, 2019, we entered into a Supply Agreement with Esteve Química, S.A., or Esteve, or the Esteve Agreement. The Esteve Agreement includes the terms and conditions under which Esteve will manufacture vadadustat drug substance for commercial use. Pursuant to the Esteve Agreement, we provide rolling forecasts to Esteve on a quarterly basis, or the Esteve Forecast. The Esteve Forecast reflects our needs for vadadustat drug substance produced by Esteve over a certain number of months, represented as a quantity of vadadustat drug substance per calendar quarter. The parties have agreed to a volume-based pricing structure under the Esteve Agreement. The Esteve Agreement has an initial term of four years, beginning April 9, 2019 and ending April 9, 2023. Pursuant to the Esteve Agreement, we have agreed to purchase a certain percentage of the global

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demand for vadadustat drug substance from Esteve. As of December 31, 2021, we have committed to purchase $28.9 million of vadadustat drug substance from Esteve through the fourth quarter of 2022.

On March 11, 2020, we entered into a Supply Agreement with Patheon Inc., or Patheon, or the Patheon Agreement. The Patheon Agreement includes the terms and conditions under which Patheon will manufacture vadadustat drug product for commercial use. Pursuant to the Patheon Agreement, we provide Patheon a long-term forecast on an annual basis, as well as short-term forecasts on a quarterly basis, or the Patheon Forecast. The Patheon Forecast reflects our needs for commercial supply of vadadustat drug product produced by Patheon, represented as a quantity of drug product per calendar quarter. The parties have agreed to a volume-based pricing structure under the Patheon Agreement. The Patheon Agreement has an initial term beginning March 11, 2020 and ending June 30, 2023. Pursuant to the Patheon Agreement, we have agreed to purchase a certain percentage of the global demand for vadadustat drug product from Patheon. As of December 31, 2021, we had a minimum commitment with Patheon for $4.0 million through the fourth quarter of 2022.

On April 2, 2020, we entered into a Supply Agreement with STA Pharmaceutical Hong Kong Limited, a subsidiary of WuXi AppTec, or WuXi STA, as amended on April 15, 2021, or the WuXi STA DS Agreement. The WuXi STA DS Agreement includes the terms and conditions under which WuXi STA will manufacture vadadustat drug substance for commercial use. Pursuant to the WuXi STA DS Agreement, we provide rolling forecasts to WuXi STA on a quarterly basis, or the WuXi STA DS Forecast. The WuXi STA DS Forecast reflects our needs for vadadustat drug substance produced by WuXi STA over a certain number of quarters. The parties have agreed to a volume-based pricing structure under the WuXi STA DS Agreement. The WuXi STA DS Agreement has an initial term of four years, beginning April 2, 2020 and ending April 2, 2024. Pursuant to the WuXi STA DS Agreement, we have agreed to purchase a certain percentage of the global demand for vadadustat drug substance from WuXi STA. As of December 31, 2021, we have committed to purchase $29.2 million of vadadustat drug substance from WuXi STA through the third quarter of 2022.

On February 10, 2021, we entered into a Supply Agreement with WuXi STA, or the WuXi STA DP Agreement. The WuXi STA DP Agreement includes the terms and conditions under which WuXi STA will manufacture and supply vadadustat drug product for commercial purposes. Pursuant to the WuXi STA DP Agreement, we will provide rolling forecasts to WuXi STA on a quarterly basis, or the WuXi STA DP Forecast. Each WuXi STA DP Forecast will reflect the quantities of vadadustat drug product that we expect to order from WuXi STA over a certain number of months, represented as a quantity of vadadustat drug product per calendar quarter. Pursuant to the WuXi STA DP Agreement, we have agreed to purchase a certain percentage of global demand for vadadustat drug product from WuXi STA. The parties have agreed to a volume-based pricing structure under the WuXi STA DP Agreement. The vadadustat drug product price will remain fixed for the first 12 months and thereafter shall be annually reviewed by us and WuXi STA. We will also reimburse WuXi STA for certain reasonable expenses. The WuXi STA DP Agreement has an initial term of four years, beginning February 10, 2021 and ending February 10, 2025. The WuXi STA DP Agreement may be renewed or extended by mutual agreement of us and WuXi STA with at least 18 months’ prior written notice. The WuXi STA DP Agreement allows us to terminate the relationship on 180 calendar days’ prior written notice to WuXi STA for any reason. In addition, each party has the ability to terminate the WuXi STA DP Agreement upon the occurrence of certain conditions.

Other Third Party Contracts

Under our agreement with IQVIA to provide contract research organization services for the PRO2TECT and INNO2VATE programs, the total remaining contract costs as of December 31, 2021 were approximately $5.0 million, of which Otsuka reimburses a significant portion back to us. Substantive performance for the committed work with IQVIA was completed in 2020 and close out activities were performed throughout 2021 and will continue to be performed throughout 2022. We also contract with various other organizations to conduct research and development activities with remaining contract costs to us of approximately $237.8 million as of December 31, 2021. The scope of the services under these research and development contracts can be modified and the contracts cancelled by us upon written notice, and therefore not included in the table of contractual obligations and commitments. In some instances, the contracts may be cancelled by the third party upon written notice.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue, inventory, our excess purchase commitment liability, liabilities related to sale of future royalties, impairment of intangible assets, and income

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taxes. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Product Revenue, Net

We sell Auryxia in the United States, primarily to wholesale distributors as well as certain specialty pharmacy providers, collectively, Customers. These Customers resell our product to health care providers and patients. In addition to distribution agreements with Customers, we enter into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks, and discounts with respect to the purchase of our product.

We recognize revenue on product sales when the Customer obtains control of our product, which occurs at a point in time, typically upon delivery to the Customer. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is one year or less.

Revenue from product sales is recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and are based on various incentives that are offered within contracts between us and our Customers, health care providers, payors and other indirect customers relating to sales of our products. These reserves are based on the amounts earned or to be claimed on the related sales. These reserves include:

•Trade Discounts and Allowances: Discounts that include incentive fees that are explicitly stated in our contracts. In addition, we compensate (through trade discounts and allowances) our Customers for sales order management, data, and distribution services.

•Product Returns: Consistent with industry practice, we generally offer Customers a limited right of return which allows for the product to be returned when the product expiry is within an allowable window, when the quantity delivered is different than quantity ordered, the product is damaged in transit prior to receipt by the customer, or is subject to a recall. This right of return generally lapses once the product is provided to a patient. We estimate the amount of our product sales that may be returned for credit by our Customers. We currently estimate product return reserve using available industry data and our own historical sales information, including our visibility into the inventory remaining in the distribution channel.

•Provider Chargebacks and Discounts: Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. Reserves for chargebacks consist of credits that we expect to issue for units that remain in the distribution channel at each reporting period end that we expect will be sold to qualified healthcare providers, and chargebacks that Customers have claimed but for which we have not yet issued a credit.

•Commercial and Medicare Part D Rebates: We contract with various commercial payor organizations, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of our products. We estimate the rebates for commercial and Medicare Part D payors based upon (i) our contracts with the payors and (ii) information obtained from our Customers and other third parties regarding the payor mix for Auryxia.

•Other Government Rebates: We are subject to discount obligations under state Medicaid programs and other government programs. We estimate Medicaid and other government programs rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. For Medicare, we also estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. Our liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel at the end of each reporting period.

•Other Incentives: Other incentives that we offer include voluntary patient assistance programs such as our co-pay assistance program, which are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on actual claims processed during a given period, as well as historical utilization data to estimate the amount we expect to receive associated with product that has been recognized as revenue, but remains in in the distribution channel at the end of each reporting period.

When appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying

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and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts.

The preceding estimates and judgments materially affect our recognition of net product revenues. Changes in our estimates of net product revenues could have a material effect on net product revenues recorded in the period in which we determine that change occurs.

Collaboration Revenues

We enter into out-license and collaboration agreements which are within the scope of ASC 606, under which we license certain rights to our product candidates to third parties. The terms of these arrangements typically include payment to us of one or more of the following: non-refundable, up-front license fees; development, regulatory, and commercial milestone payments; payments for manufacturing supply services we provide through our contract manufacturers; and royalties on net sales of licensed products. Each of these payments may result in license, collaboration and other revenue, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues.

For elements of our collaboration agreements that are accounted for pursuant to ASC 606, we must develop assumptions that require judgment to determine whether the individual promises should be accounted for as separate performance obligations or as a combined performance obligation, and to determine the stand-alone selling price for each performance obligation identified in the contract. We use key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates, and probabilities of technical and regulatory success. If the license to our intellectual property is determined to be distinct from the other performance obligations identified in an out-license and collaboration arrangement, we recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. With regard to the Otsuka collaboration agreements, we recognize revenue related to amounts allocated to the identified performance obligation on a proportional performance basis as the underlying services are performed.

The preceding estimates and judgments materially affect our recognition of collaboration revenues. Changes in our estimates of forecasted development costs could impact proportional performance percentages and could have a material effect on collaboration revenue recorded in the period in which we determine that change occurs.

Inventory

We value our inventories at the lower-of-cost or net realizable value. We determine the cost of our inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. We classify inventory costs as long-term, in other assets in our consolidated balance sheets, when we expect to utilize the inventory beyond our normal operating cycle.

We perform an assessment of the recoverability of capitalized inventory during each reporting period, and write down any excess and obsolete inventory to our net realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded as a component of cost of product sales in the consolidated statements of operations and comprehensive loss. The determination of whether inventory costs will be realizable requires the use of estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required. Additionally, our product is subject to strict quality control and monitoring that we perform throughout the manufacturing process. In the event that certain batches or units of product do not meet quality specifications, we will record a charge to cost of product sales, to write-down any unmarketable inventory to its estimated net realizable value. In all cases, product inventory is carried at the lower of cost or its estimated net realizable value.

Excess Purchase Commitment Liability

We identified executory contracts in the commercial supply agreements between Keryx and its contract manufacturers for Auryxia, which include future firm purchase commitments. These executory contracts were deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast and as such, we recorded a liability in purchase accounting. We re-evaluate the excess purchase commitments each reporting period to assess whether any adjustments to the excess purchase commitment liability are necessary. This evaluation includes reviewing the contractual minimums, expiration and utilization assumptions, and sales forecasts. Inventory receipts that have been previously identified as excess are recorded as a reduction to the excess purchase commitment liability.

Liability Related to Sale of Future Royalties

We treat the liability related to sale of future royalties as a debt financing, amortized under the effective interest rate method over the estimated life of the related expected royalty stream. The liability related to sale of future royalties and the debt amortization are based on our current estimates of future royalties expected to be paid over the life of the arrangement. We will

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periodically assess the expected royalty payments. To the extent our estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will adjust the effective interest rate and recognize related non-cash interest expense on a prospective basis. Changes in our estimates of future royalty payments could have a material effect on the liability related to sale of future royalties balance recorded in the period in which we determine that change occurs.

Intangible Assets

We maintain a definite-lived intangible asset related to developed product rights for Auryxia, which was acquired on December 12, 2018 as part of the Merger.

Intangible assets are initially recorded at fair value and stated net of accumulated amortization and impairments. We amortize our intangible assets that have finite lives using either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be utilized. Amortization for our intangible asset is recorded over its remaining estimated useful life, which as of December 31, 2021 is estimated to be six years.

We review intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If an impairment indicator exists, we perform a recoverability test by comparing the sum of the estimated undiscounted cash flows of the intangible asset group to its carrying value on the consolidated balance sheet. If the carrying value of the intangible asset group exceeds the undiscounted cash flows used in the recoverability test, we will write the carrying value of the intangible asset group down to the fair value in the period identified. We calculate the fair value of the intangible asset group as the present value of estimated future cash flows expected to be generated from the intangible asset group using a risk-adjusted discount rate. In determining estimated future cash flows associated with the intangible asset group, we use market participant assumptions pursuant to ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820). During the second quarter of 2020, we identified indicators of impairment related to the developed product rights for Auryxia and recorded an impairment charge of $115.5 million (see Note 9 contained in this Annual Report on Form 10-K for additional information).

Income Taxes

Income taxes are recorded in accordance with FASB Topic 740, Income Taxes, or ASC 740, which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. All deferred taxes as of December 31, 2021 and 2020 are classified as noncurrent within the income tax provision (see Note 14 to our consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data).

Recent Accounting Pronouncements

For additional discussion of recent accounting pronouncements, please refer to New Accounting Pronouncements – Recently Adopted and New Accounting Pronouncements – Not Yet Adopted included within Note 2 to our consolidated financial statements in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk related to changes in interest rates. As of December 31, 2021 and 2020, we had cash and cash equivalents and available for sale securities of $149.8 million and $268.7 million, respectively, consisting primarily of money market mutual funds consisting of U.S. government debt securities, certificates of deposit and corporate debt securities. Interest rate sensitivity is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our investments are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

In addition, we are exposed to market risk related to exchange rates. A substantial portion of our revenues for the year ended December 31, 2021 was received in U.S. dollars, including revenues we receive from royalty payments converted to U.S. dollars based on the net sales of Riona(R) and VafseoTM, in Japanese yen. Our exchange rate risk arises from such foreign currency net sales. As a result, we are exposed to movements in the exchange rates of the Japanese yen against the U.S. dollar.

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For the royalty payments we received based on net sales of Riona and Vafseo in Japan during the year ended December 31, 2021, a 5.0% appreciation or depreciation of the Japanese yen against the U.S. dollar would have increased or decreased, respectively, our revenues in the year ended December 31, 2021 by approximately $0.3 million.

We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this foreign currency risk.

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Item 8. Financial Statements and Supplementary Data

Akebia Therapeutics, Inc.

Table of Contents

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 125

Financial Statements

Consolidated Balance Sheets 127

Consolidated Statements of Operations and Comprehensive Loss 128

Consolidated Statements of Stockholders’ Equity 129

Consolidated Statements of Cash Flows 130

Notes to Consolidated Financial Statements 131

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Akebia Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Akebia Therapeutics, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2022 expressed an adverse opinion thereon.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and managements’ plans regarding these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might results from the outcome of uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Valuation of Excess Purchase Commitment Liability

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

Boston, Massachusetts

March 1, 2022

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AKEBIA THERAPEUTICS, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

Assets

Current assets:

Available for sale securities — 39,992

Prepaid expenses and other current assets 33,140 14,877

Liabilities and stockholders' equity

Current liabilities:

Accrued expenses and other current liabilities 104,456 130,624

Current portion of long-term debt 97,543 —

Deferred revenue, net of current portion 21,474 25,345

Operating lease liabilities, net of current portion 33,703 24,621

Long-term debt, net — 96,378

Liability related to sale of future royalties, net 53,079 —

Commitments and contingencies (Note 16)

Stockholders' equity:

Accumulated other comprehensive gain 6 13

Total liabilities and stockholders' equity $ 525,550 $ 644,139

See accompanying notes to consolidated financial statements.

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AKEBIA THERAPEUTICS, INC.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

Year Ended December 31,

Revenues:

Cost of goods sold:

Impairment of intangible asset — 115,527 —

Operating expenses:

Other income (expense):

Benefit from income taxes — — (6,631)

Net loss per share - basic and diluted $ (1.70) $ (2.77) $ (2.36)

Comprehensive loss:

Other comprehensive gain - unrealized gain on securities (7) 13 261

See accompanying notes to consolidated financial statements.

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Akebia Therapeutics, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share and per share data)

Number ofShares $0.00001Par Value

Share-based compensation expense — — 11,925 — — 11,925

Restricted stock unit vesting 323,136 — — — — —

Unrealized gain — — — 261 — 261

Share-based compensation expense — — 24,460 — — 24,460

Restricted stock unit vesting 1,863,878 — — — — —

Unrealized gain — — — 13 — 13

Share-based compensation expense — — 22,735 — — 22,735

Restricted stock unit vesting 2,267,342 — — — — —

Unrealized gain — — — (7) — (7)

See accompanying notes to consolidated financial statements.

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Akebia Therapeutics, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Intangible asset impairment charge — 115,527 —

Non-cash interest expense related to sale of future royalties 9,117 — —

Non-cash royalty revenue related to sale of future royalties (821) — —

Amortization of premium/discount on investments (15) (47) (819)

Write-off of property and equipment — — 2,053

Change in excess inventory purchase commitments 33,391 25,114 —

Deferred income taxes — — (6,631)

Change in fair value of derivative liability (600) 286 —

Changes in operating assets and liabilities:

Operating lease assets (13,888) — —

Other non-current liabilities (12,481) — —

Investing activities:

Purchase of property and equipment (59) (317) (6,655)

Purchase of available for sale securities — (99,932) —

Proceeds from sales of available for sale securities — — 64,721

Financing activities:

Proceeds from sale of future royalties, net 44,783 — —

Proceeds from the sale of stock under employee stock purchase plan 746 1,100 383

Proceeds from the exercise of stock options — 1,226 560

Retirement of treasury stock — — (426)

Proceeds from the issuance of debt, net — 19,975 77,668

Payments on debt — — (15,000)

Non-cash financing activities

Unpaid offering costs $ 2 $ 100 $ —

Cash paid for:

See accompanying notes to consolidated financial statements.

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Akebia Therapeutics, Inc.

Notes to Consolidated Financial Statements

1. Nature of Organization and Operations

Akebia Therapeutics, Inc., referred to as Akebia or the Company, was incorporated in the State of Delaware in 2007. Akebia is a biopharmaceutical company with the purpose of bettering the lives of people living with kidney disease. Akebia’s lead investigational product candidate, vadadustat, is an oral therapy for the treatment of anemia due to chronic kidney disease, or CKD. Vadadustat is an oral hypoxia-inducible factor prolyl hydroxylase, or HIF-PH inhibitor designed to mimic the physiologic effect of altitude on oxygen availability. At higher altitudes, the body responds to lower oxygen availability with stabilization of hypoxia-inducible factor, or HIF, which stimulates erythropoietin, or EPO, production and can lead to red blood cell, or RBC, production and improved oxygen delivery to tissues. The Company submitted a New Drug Application, or NDA, to the U.S. Food and Drug Administration, or FDA, for vadadustat in March of 2021 for the treatment of anemia due to CKD in adult patients with CKD on dialysis, or DD-CKD, and adult patients with CKD not on dialysis, or NDD-CKD. The Company's NDA submission was accepted for filing by the FDA in May 2021 and the FDA has indicated that they are not currently planning to hold an Advisory Committee meeting to discuss the application for vadadustat. The FDA also assigned the application standard review and a Prescription Drug User Fee Act, or PDUFA, target action date of March 29, 2022. The Company’s collaboration partner, Otsuka Pharmaceutical Co. Ltd., submitted a Marketing Authorization Application, or MAA, for vadadustat for the treatment of anemia due to CKD in both DD-CKD and NDD-CKD adult patients to the European Medicines Agency, or EMA, in October 2021. Vadadustat is approved and marketed in Japan as a treatment for anemia due to CKD in both dialysis-dependent and non-dialysis dependent adult patients under the trade name VafseoTM. In addition, the Company has a commercial product, Auryxia® (ferric citrate), which is currently approved by the U.S. Food and Drug Administration, or FDA, and marketed for two indications in the United States, the control of serum phosphorus levels in adult patients with CKD on dialysis, or DD-CKD, and the treatment of iron deficiency anemia, or IDA, in adult patients with CKD not on dialysis, or NDD-CKD. Ferric citrate is also approved and marketed in Japan as an oral treatment for the improvement of hyperphosphatemia in patients with DD-CKD and NDD-CKD under the trade name Riona (ferric citrate hydrate).

Since inception, the Company has devoted most of its resources to research and development, including its preclinical and clinical development activities and commercializing Auryxia, and providing general and administrative support for these operations. The Company began recording revenue from the U.S. sales of Auryxia and revenue from sublicensing rights to Auryxia in Japan to the Company’s Japanese partners Japan Tobacco, Inc. and its subsidiary Torii Pharmaceutical Co., Ltd., collectively JT and Torii, on December 12, 2018 following the consummation of the Merger with Keryx. Additionally, following regulatory approval of vadadustat in Japan, the Company began recognizing royalty revenues from Mitsubishi Tanabe Pharma Corporation, or MTPC, from the sale of Vafseo in August 2020. In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under its Collaboration Agreement with MTPC, or the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 5 for additional information). The Company has not generated a profit to date and may never generate profits from product sales. Vadadustat and the Company’s other potential product candidates are subject to long development cycles, and the Company may be unsuccessful in its efforts to develop, obtain marketing approval for or market vadadustat and its other potential product candidates. If the Company does not successfully commercialize Auryxia, vadadustat or any other potential product candidate, it may be unable to achieve profitability.

Going Concern

As of December 31, 2021, the Company had cash and cash equivalents of approximately $149.8 million. The Company expects its cash resources to fund its current operating plan for at least twelve months from the date of this filing. However, the potential timely regulatory approval of vadadustat and the receipt of associated regulatory milestones is an important source of funding of our cash runway, which is outside of the Company’s control. There can be no assurance that the current operating plan, including with respect to vadadustat, if approved, will be achieved in the time frame anticipated by the Company, or that its cash resources will fund the Company’s operating plan for the period anticipated by the Company or that additional funding will be available on terms acceptable to the Company, or at all.

In addition, on February 18, 2022, the Company and BioPharma Credit PLC, or the Collateral Agent, BPCR Limited Partnership, as a Lender, and BioPharma Credit Investments V (Master) LP. as a Lender, entered into the First Amendment and Waiver, or the First Amendment and Waiver, which amends and waives certain provisions of the Loan Agreement, dated November 11, 2019 (see Note 18). Pursuant to the Loan Agreement, as amended, the Company’s filings of Form 10-Q for fiscal quarters ending June 30, 2022 and September 30, 2022, and its future Annual Reports on Form 10-K, must not be subject to any qualification as to going concern. If the Company does not satisfy the covenant as to going concern in any of these filings, the Company will be in default under the Loan Agreement. If an event of default occurs and is continuing under the Loan

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Agreement, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement, which the Company may not have the available cash resources to repay at such time.

The Company's management completed its going concern assessment in accordance with ASC 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, or ASC 205-40. Pursuant to the requirements of ASC 205-40, the Company’s management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.

When substantial doubt exists under this methodology, the Company’s management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of the Company’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company believes that its cash resources will be sufficient to allow the Company to fund its current operating plan through at least the next twelve months from the filing of the Company’s 2021 Annual Report on Form 10-K. However, as certain elements of the Company’s operating plan are outside of the Company’s control, including the potential timely regulatory approval of vadadustat and the receipt of associated regulatory milestones, they cannot be considered probable under ASC 205-40. There also is uncertainty as to whether or not the Company will meet our quarterly and annual debt covenants.

These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued. The Company will require additional capital to fund its operating plan beyond the next twelve months, including pursuing development and commercial activities related to Auryxia and vadadustat, if approved, or any additional products and product candidates, including those that may be in-licensed or acquired. The Company expects to finance future cash needs through product revenue Management’s plans to alleviate the conditions that raise substantial doubt include raising additional funding through product revenue, earning milestone payments pursuant to the Company’s collaboration agreements, public or private equity or debt transactions, payments from its collaborators, strategic transactions, or a combination of these approaches. However, adequate additional financing may not be available to the Company on acceptable terms, or at all. If the Company is unable to raise capital in sufficient amounts when needed or on attractive terms, it may not be able to pursue development and commercial activities related to Auryxia and vadadustat or any additional products and product candidates, including those that may be in-licensed or acquired. for the Company to continue as a going concern for a period of twelve months from the date the financial statements are issued. The Company has concluded the likelihood that its plan to obtain sufficient funding from one or more of these sources will be successful, while reasonably possible, is less than probable. Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities, other than obligations under the Loan Agreement classified as current, that might result from the outcome of the uncertainties described above.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.

New Accounting Pronouncements – Recently Adopted

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In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard became effective for the Company on January 1, 2021. ASU 2019-12 requires certain amendments to be applied using a modified retrospective approach, which requires a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, while other amendments should be applied on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

New Accounting Pronouncements – Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating its contracts and the optional expedients provided by the new standard.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment, which is the business of developing and commercializing novel therapeutics for people with kidney disease.

Derivative Financial Instruments

The Company accounts for warrants and other derivative financial instruments as either equity or liabilities in accordance with ASC Topic 815, Derivatives and Hedging, or ASC 815, based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance on the Company’s consolidated balance sheets and no further adjustments to their valuation are made. Warrants classified as derivative liabilities and other derivative financial instruments that require separate accounting as liabilities are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded as other income or expense. The warrant issued by the Company in connection with the Janssen Pharmaceutica NV Research and License Agreement, the Janssen Agreement, is classified as equity in the Company’s consolidated balance sheet at December 31, 2021 (see Note 12). The derivative liability recorded in connection with the Company’s Loan Agreement with Pharmakon is classified as a liability in the Company’s consolidated balance sheet (see Note 11).

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: prepaid and accrued research and development expense, operating lease assets and liabilities, derivative liabilities, other non-current liabilities, including the excess purchase commitment liability, stock-based compensation expense, product and collaboration revenues including various rebates and reserves related to product sales, non-cash interest expense on the liability related to sale of future royalties, inventories, income taxes, intangible assets and goodwill. The Company has made estimates of the impact of COVID-19 within the consolidated financial statements and there may be changes to those estimates in future periods including changes to sales, payer mix, reserves and allowances, intangible assets and goodwill.

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Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Credit Losses

Available for sale debt securities. Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date. The Company classifies all securities as available for sale and includes them in current assets as they are intended to fund current operations. The Company's investment portfolio at any point in time contains investments in money market mutual funds, U.S. government debt securities, certificates of deposit and corporate debt securities. The Company segments its portfolio based on the underlying risk profiles of the securities and have a zero loss expectation for money market mutual funds, U.S. government debt securities and certificates of deposit. The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions. Factors considered also include whether a decline in fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors, the financial condition and near-term prospects of the issuer, and the Company's intent and ability to hold the investment to allow for an anticipated recovery in fair value. Any unrealized loss that is not credit related is recognized in other comprehensive (loss) income in the consolidated statements of operations. A credit-related unrealized loss is recognized as an allowance on the consolidated balance sheets with a corresponding adjustment to earnings in the consolidated statements of operations.

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents consist of all cash on hand, deposits and funds invested in available for sale securities with original maturities of three months or less at the time of purchase. Cash equivalents are reported at fair value. At December 31, 2021, the Company’s cash is primarily in money market funds. The Company may maintain balances with its banks in excess of federally insured limits.

Restricted cash represents amounts required for security deposits under the Company’s office and lab space lease agreements. Restricted cash is included in “prepaid expenses and other current assets” and “other assets” in the consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet that sum to the total of the amounts reported in the consolidated statement of cash flows (in thousands):

Prepaid expenses and other current assets — 395 263

Investments

Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date. Currently, the Company classifies all securities as available for sale which are included in current assets as they are intended to fund current operations. The Company carries available for sale securities at fair value. The Company conducts periodic reviews to identify and evaluate each investment that has an unrealized loss, in accordance with the meaning of other-than-temporary impairment and its application to certain investments. When assessing whether a decline in the fair value of a security is other-than-temporary, the Company considers the fair market value of the security, the duration of the security’s decline, and prospects for the underlying business. Based on these considerations, the Company did not identify any other-than-temporary unrealized losses at December 31, 2021. Unrealized losses on available for sale securities that are determined to be temporary, and not related to credit loss, are recorded in accumulated other comprehensive loss, a component of stockholders’ equity. The amortized cost of debt securities in this category reflects amortization of premiums and accretion of discounts to maturity computed under the effective interest method. The Company includes this amortization in the caption “Interest income, net” within the consolidated statements of operations and comprehensive loss. The Company also includes in net investment income, realized gains and losses and declines in value determined to be other than temporary. The Company

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bases the cost of securities sold upon the specific identification method and includes interest and dividends on securities in interest income.

Accounts Receivable

The Company’s accounts receivable represent amounts due to the Company from product sales (see Note 3) and from its collaboration agreements with MTPC and Otsuka (see Note 4). Reimbursable costs that have not been invoiced as of the balance sheet date are recorded as unbilled accounts receivable. Accounts receivable arising from product sales primarily represent amounts due from wholesale distributors as well as certain specialty pharmacy providers, or collectively, Customers. The Company deducts trade allowances for prompt payment, among other discounts, from its accounts receivable based on its experience that the Company’s Customers will earn these discounts and fees.

The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices and the overall quality and age of those invoices not specifically reviewed as well as historical payment patterns and existing economic factors. The Company believes that credit risks associated with its customers and collaboration partners are not significant. The Company did not have a material allowance for doubtful accounts as of December 31, 2021 and 2020.

Concentrations of Credit Risk and Off-Balance Sheet Risk

Cash, cash equivalents, investments, and accounts receivable are the only financial instruments that potentially subject the Company to concentrations of credit risk. The Company maintains its cash, cash equivalents, and investments with high quality, accredited financial institutions and, accordingly, such funds are subject to minimal credit risk. The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believes minimizes the exposure to concentration of credit risk. The Company has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Accounts receivable represent amounts due from the Company’s customers and collaboration partners. As part of its credit management policy, the Company performs ongoing credit evaluations of its Customers and generally does not require collateral from any customer. The Company also monitors economic conditions of its collaboration partners to identify facts or circumstances that may indicate that any of its accounts receivable are at risk of collection.

Gross revenues and accounts receivable from each of the Company’s Customers or collaboration partners who individually accounted for 10% or more of total gross revenues and/or 10% or more of total gross accounts receivable consisted of the following:

Percent of Total Gross Revenues

Years Ended December 31,

Fresenius Medical Care Rx 33 % 29 % 21 %

AmerisourceBergen Drug Corporation 16 % 12 % 10 %

Otsuka Pharmaceutical Co. Ltd. 14 % 29 % 45 %

McKesson Corporation 13 % 11 % — %

Cardinal Health, Inc. 11 % — % — %

Percent of Gross Accounts Receivable

As of December 31,

Otsuka Pharmaceutical Co. Ltd. 22 % — %

MTPC 20 % — %

Fresenius Medical Care Rx 16 % 19 %

AmerisourceBergen Drug Corporation 15 % 29 %

Cardinal Health, Inc. 10 % 14 %

McKesson Corporation — % 12 %

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Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation. Assets under capital lease are included in property and equipment. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the assets, generally three years to seven years. Such costs are periodically reviewed for recoverability when impairment indicators are present. Such indicators include, among other factors, unused capacity, market value declines and technological obsolescence. Recorded values of asset groups of equipment that are not expected to be recovered through undiscounted future net cash flows are written down to current fair value, which generally is determined from estimated discounted future net cash flows (assets held for use) or net realizable value (assets held for sale).

The following is the summary of property and equipment and related accumulated depreciation as of December 31, 2021 and 2020.

(in thousands)

Computer equipment and software 3 $ 1,010 $ 1,010

Less accumulated depreciation (7,665) (5,739)

Net property and equipment $ 6,754 $ 8,622

Depreciation expense was approximately $1.9 million, $2.1 million and $2.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires entities to recognize right-of-use assets and lease liabilities for leases with lease terms of more than 12 months on their balance sheets and provide enhanced disclosures. In 2018, the FASB issued additional ASUs related to Topic 842, or ASC 842, that clarified various aspects of the new lease guidance, including how to record certain transition adjustments, as well as other improvements and practical expedients.

The Company made an accounting policy election not to recognize leases with an initial term of 12 months or less within its consolidated balance sheets and to recognize those lease payments on a straight-line basis in its consolidated statements of operations. The Company also made the accounting policy election not to separate the non-lease components from the lease components for its building leases and, rather, account for each non-lease component and lease component as a single component.

The Company determines if an arrangement is a lease at inception. An arrangement is determined to contain a lease if the contract conveys the right to control the use of an identified property, plant, or equipment for a period of time in exchange for consideration. If the Company can benefit from the various underlying assets of a lease on their own or together with other resources that are readily available, or if the various underlying assets are neither highly dependent on nor highly interrelated with other underlying assets in the arrangement, they are considered to be a separate lease component. In the event multiple underlying assets are identified, the lease consideration is allocated to the various components based on each of the component’s relative fair value.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the leasing arrangement. Operating lease assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate when readily determinable and uses an estimate of its incremental borrowing rate when the implicit rate is not readily determinable based upon the available information at the commencement date of lease inception. The incremental borrowing rate is determined using a credit rating scoring model to estimate the Company’s credit rating, adjusted for collateralization. The calculation of the operating lease assets includes any lease payments made and excludes any lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

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The Company’s operating leases are reflected in prepaid expenses and other current assets, operating lease assets, accrued expenses and operating lease liabilities, net of current portion in its consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Inventory

The Company values its inventories at the lower-of-cost or net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The Company classifies its inventory costs as long-term, in other assets in its consolidated balance sheets, when it expects to utilize the inventory beyond their normal operating cycle.

Prior to the regulatory approval of a product candidate, the Company incurs expenses for the manufacture of material that could potentially be available to support the commercial launch of its products upon approval. Until the first reporting period when regulatory approval has been received or is otherwise considered probable and the future economic benefit is expected to be realized, the Company records all such costs as research and development expense. Inventory used in clinical trials is also expensed as research and development expense, when selected for such use. Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified for use in a clinical manufacturing campaign.

The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventory to its net realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded as a component of cost of product sales in the consolidated statements of operations and comprehensive loss. The determination of whether inventory costs will be realizable requires the use of estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required. Additionally, the Company’s product is subject to strict quality control and monitoring that it performs throughout the manufacturing process. In the event that certain batches or units of product do not meet quality specifications, the Company will record a charge to cost of product sales, to write-down any unmarketable inventory to its estimated net realizable value. In all cases, product inventory is carried at the lower of cost or its estimated net realizable value.

Debt

The Company performs an assessment of all embedded features of a debt instrument to determine if (1) such features should be bifurcated and separately accounted for, and (2) if bifurcation requirements are met, whether such features should be classified and accounted for as equity or liability instruments. If the embedded feature meets the requirements to be bifurcated and accounted for as a liability, the fair value of the embedded feature is measured initially, included as a liability on the consolidated balance sheet, and re-measured to fair value at each reporting period. Any changes in fair value are recorded in the consolidated statement of operations. The Company monitors, on an ongoing basis, whether events or circumstances could give rise to a change in the classification of embedded features.

Liability Related to Sale of Future Royalties

The Company treats the liability related to sale of future royalties (see Note 5) as a debt financing, amortized under the effective interest rate method over the estimated life of the related expected royalty stream. The liability related to sale of future royalties and the debt amortization are based on the Company’s current estimates of future royalties expected to be paid over the life of the arrangement. The Company will periodically assess the expected royalty payments. To the extent the Company’s estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, the Company will adjust the effective interest rate and recognize related non-cash interest expense on a prospective basis. Non-cash royalty revenue is reflected as royalty revenue within license, collaboration and other revenue, and non-cash amortization of debt is reflected as interest expense in the unaudited condensed consolidated statements of operations and comprehensive loss.

Excess Purchase Commitment Liability

The Company identified executory contracts in the commercial supply agreements between Keryx and its contract manufacturers for Auryxia, which include future firm purchase commitments. These executory contracts were deemed to have an off-market element related to the amount of purchase commitments that exceed the current forecast and as such, the Company recorded a liability in purchase accounting. The Company re-evaluates the excess purchase commitments each reporting period to assess whether any adjustments to the excess purchase commitment liability are necessary. This evaluation

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includes reviewing the contractual minimums, expiration and utilization assumptions, and sales forecasts. Inventory receipts that have been previously identified as excess are recorded as a reduction to the excess purchase commitment liability.

Revenue Recognition

The Company generates revenues primarily from sales of Auryxia, see Note 3, and from its collaborations with MTPC and Otsuka, see Note 4. The Company recognizes revenue in accordance with ASC 606, which applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps:

(i)identify the contract(s) with a customer;

(ii)identify the performance obligations in the contract;

(iii)determine the transaction price;

(iv)allocate the transaction price to the performance obligations in the contract; and

(v)recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company does not include a financing component to its estimated transaction price at contract inception unless it estimates that certain performance obligations will not be satisfied within one year. Additionally, the Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.

Product Revenue, Net

The Company sells Auryxia in the United States, or U.S., primarily to wholesale distributors as well as certain specialty pharmacy providers, collectively, Customers. These Customers resell the Company’s product to health care providers and patients. In addition to distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s product.

The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less.

Reserves for Variable Consideration

Revenue from product sales is recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, chargebacks, rebates, co-pay assistance and other allowances that are offered within contracts between the Company and its Customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount will be credited to the Customer) or as a current liability (if the amount is payable to a Customer or a party other than a Customer). When appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s

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estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Discounts and Allowances: The Company generally provides Customers with discounts that include incentive fees that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, the Company compensates (through trade discounts and allowances) its Customers for sales order management, data, and distribution services. However, the Company has determined such services received to date are not distinct from the Company’s sale of products to the Customer and, therefore, these payments have been recorded as a reduction of revenue within the consolidated statement of operations and comprehensive loss through December 31, 2021. The Company records a corresponding reduction to accounts receivable (if the trade discount and/or allowance will be credited to the Customer) or an increase to accrued expense (if the trade discount and/or allowance is payable to a Customer) on the consolidated balance sheets.

Product Returns: Consistent with industry practice, the Company generally offers Customers a limited right of return which allows for the product to be returned when the product expiry is within an allowable window, when the quantity delivered is different than quantity ordered, the product is damaged in transit prior to receipt by the customer, or is subject to a recall. This right of return generally lapses once the product is provided to a patient. The Company estimates the amount of its product sales that may be returned for credit by its Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return reserve using available industry data and its own historical sales information, including its visibility into the inventory remaining in the distribution channel.

Provider Chargebacks and Discounts: Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by Customers, and the Company generally issues credits for such amounts within a few weeks of the Customer’s resale of the product. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel at each reporting period end that the Company expects will be sold to qualified healthcare providers, and chargebacks that Customers have claimed but for which the Company has not yet issued a credit.

Commercial and Medicare Part D Rebates: The Company contracts with various commercial payor organizations, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products. The Company estimates the rebates for commercial and Medicare Part D payors based upon (i) its contracts with the payors and (ii) information obtained from its Customers and other third parties regarding the payor mix for Auryxia. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Other Government Rebates: The Company is subject to discount obligations under state Medicaid programs and other government programs. The Company estimates its Medicaid and other government programs rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on the consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel at the end of each reporting period.

Other Incentives: Other incentives that the Company offers include voluntary patient assistance programs such as the Company’s co-pay assistance program, which are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on actual claims processed during a given period, as well as historical utilization data to estimate the amount the Company expects to receive associated with product that has been recognized as revenue, but remains in in the distribution channel at the end of each reporting period.

Collaboration Revenues

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The Company enters into out-license and collaboration agreements which are within the scope of ASC 606, under which it licenses certain rights to its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, up-front license fees; development, regulatory, and commercial milestone payments; payments for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products. Each of these payments may result in license, collaboration and other revenue, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company implements the five-step model noted above. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine whether the individual promises should be accounted for as separate performance obligations or as a combined performance obligation, and to determine the stand-alone selling price for each performance obligation identified in the contract. A deliverable represents a separate performance obligation if both of the following criteria are met: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates, and probabilities of technical and regulatory success. With regard to the MTPC and Otsuka collaboration agreements, the Company recognizes revenue related to amounts allocated to the identified performance obligation on a proportional performance basis as the underlying services are performed.

Licenses of Intellectual Property

If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in an out-license and collaboration arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Milestone Payments

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to assess the milestone as probable of being achieved. There is considerable judgment involved in determining whether a milestone is probable of being reached at each specific reporting period. Milestone payments that are not within the control of the Company or the customer, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenues as, or when, the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenue in the period of adjustment.

Manufacturing Supply Services

Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the licensee exercises these options, any additional payments are recorded in license, collaboration and other revenues when the licensee obtains control of the goods, which is upon delivery.

Royalties

The Company will recognize sales-based royalties, including milestone payments based on the level of sales, at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has

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been satisfied (or partially satisfied). The Company receives royalty payments from JT and Torii, based on net sales of Riona, and MTPC based on net sales of Vafseo in Japan.

Collaborative Arrangements

The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements (ASC 808). Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of the activities are recorded as collaborative arrangements. The Company considers the guidance in ASC 606-10-15, Revenue from Contracts with Customers – Scope and Scope Exceptions, in determining the appropriate treatment for the transactions between the Company and its collaborative partners and the transactions between the Company and third parties. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. Therefore, the Company recognizes its allocation of the shared costs incurred with respect to the jointly conducted medical affairs and commercialization and non-promotional activities under the Otsuka U.S. Agreement, as defined below in Note 4, as a component of the related expense in the period incurred. To the extent product revenue is generated from the collaboration, the Company recognizes its share of the net sales on a gross basis if the Company is deemed to be the principal in the transactions with customers, or on a net basis if the Company is instead deemed to be the agent in the transactions with customers, consistent with the guidance in ASC 606.

Business Combinations and Asset Acquisitions

The purchase price allocation for business combinations requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Under ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business (“2017-01”), the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the single asset or group of assets, as applicable, is not a business.

The Company accounts for acquired businesses using the acquisition method of accounting, under which the total purchase price of an acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. In determining fair value, the Company uses market participant assumptions pursuant to ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820). Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.

The purchase price allocations are initially prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. Any adjustments to the purchase price allocations are made as soon as practicable but no later than one year from the acquisition date.

Acquired inventory is recorded at its fair value, which may require a step-up adjustment to recognize the inventory at its expected net realizable value. The inventory step-up is recorded to cost of product sales in the Company's consolidated statements of operations when related inventory is sold, and the Company records step-up costs associated with clinical trial material as research and development expense.

Intangible Assets

The Company maintains a definite-lived intangible asset related to developed product rights for Auryxia, which was acquired on December 12, 2018 as part of the Merger.

Intangible assets are initially recorded at fair value and stated net of accumulated amortization and impairments. The Company amortizes its intangible assets that have finite lives using either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected to be utilized. Amortization for the Company’s intangible asset is recorded over its remaining estimated useful life, which as of December 31, 2021 is estimated to be six years.

The Company reviews intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If an impairment indicator exists, the Company performs a recoverability test by comparing the sum of the estimated undiscounted cash flows of the intangible asset group to its carrying value on the consolidated balance sheet. If the carrying value of the intangible asset group exceeds the undiscounted cash flows used in the recoverability test, the Company will write the carrying value of the intangible

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asset group down to the fair value in the period identified. The Company calculates the fair value of the intangible asset group as the present value of estimated future cash flows expected to be generated from the intangible asset group using a risk-adjusted discount rate. In determining estimated future cash flows associated with its intangible asset group, the Company uses market participant assumptions pursuant to ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820). During the second quarter of 2020, the Company identified indicators of impairment related to the developed product rights for Auryxia and recorded an impairment charge of $115.5 million (see Note 9).

Goodwill

The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired in a business combination to goodwill. Goodwill is evaluated for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist.

The Company compares the fair value of its reporting unit to its carrying value. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of its reporting unit, the Company would record an impairment loss equal to the difference. As described above, the Company operates in one operating segment which the Company considers to be the only reporting unit.

Fair Value of Financial Instruments