Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2018	Mar. 15, 2019	Jun. 30, 2018
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Trading Symbol	AKBA
Entity Registrant Name	Akebia Therapeutics, Inc.
Entity Central Index Key	0001517022
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		117,122,262
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 534,415,547

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 104,644	$ 70,156
Available for sale securities	216,996	247,636
Inventory	114,245
Accounts receivable	16,666	34,216
Prepaid expenses and other current assets	15,724	6,348
Total current assets	468,275	358,356
Property and equipment, net	8,023	3,617
Goodwill	55,053
Other intangible assets, net	328,153
Other assets	137,036	2,274
Total assets	996,540	364,247
Current liabilities:
Accounts payable	42,796	6,998
Accrued expenses	150,917	52,441
Debt	15,000
Short-term deferred revenue	56,980	81,667
Total current liabilities	265,693	141,106
Deferred rent, net of current portion	3,006	2,588
Deferred revenue, net of current portion	55,709	97,957
Deferred tax liabilities	6,631
Other non-current liabilities	29,573	22
Total liabilities	360,612	241,673
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock $0.00001 par value, 25,000,000 shares authorized at December 31, 2018 and 2017; 0 shares issued and outstanding at December 31, 2018 and 2017
Common stock: $0.00001 par value; 175,000,000 shares authorized at December 31, 2018 and 2017; 116,887,518 and 47,612,619 shares issued and outstanding at December 31, 2018 and 2017, respectively	1	0
Additional paid-in capital	1,150,583	493,823
Accumulated other comprehensive loss	(261)	(442)
Accumulated deficit	(514,395)	(370,807)
Total stockholders' equity	635,928	122,574
Total liabilities and stockholders' equity	$ 996,540	$ 364,247

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.00001	$ 0.00001
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, shares authorized	175,000,000	175,000,000
Common stock, shares issued	116,887,518	47,612,619
Common stock, shares outstanding	116,887,518	47,612,619

Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Revenues:
Total revenues	$ 207,742	$ 181,227	$ 1,535
Cost of goods sold:
Product	$ 6,251
Type of Cost, Good or Service [Extensible List]	us-gaap:ProductMember	us-gaap:ProductMember	us-gaap:ProductMember
Amortization of intangibles	$ 1,517
Total cost of goods sold	7,768
Operating expenses:
Research and development	291,007	$ 230,893	$ 115,785
Selling, general and administrative	87,061	27,008	22,210
License expense	67
Total operating expenses	378,135	257,901	137,995
Operating loss	(178,161)	(76,674)	(136,460)
Other income (expense):
Interest income	6,154	2,799	901
Other income/(expense)	81	204	(188)
Net loss before income taxes	(171,926)	(73,671)	(135,747)
Benefit for income taxes	(28,338)
Net loss	$ (143,588)	$ (73,671)	$ (135,747)
Net loss per share - basic and diluted	$ (2.47)	$ (1.69)	$ (3.60)
Weighted-average number of common shares - basic and diluted	58,038,252	43,500,795	37,716,949
Comprehensive loss:
Net loss	$ (143,588)	$ (73,671)	$ (135,747)
Other comprehensive gain (loss) - unrealized gain (loss) on securities	181	(400)	(42)
Total comprehensive loss	(143,407)	(74,071)	(135,789)
Product Revenue, Net
Revenues:
Total revenues	6,824
License, Collaboration and Other Revenue
Revenues:
Total revenues	$ 200,918	$ 181,227	$ 1,535

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Treasury Stock	Unrealized Gain/Loss	Accumulated Deficit
Balance at Dec. 31, 2015	$ 130,998		$ 292,783	$ (162)	$ (234)	$ (161,389)
Balance, shares at Dec. 31, 2015		30,662,218
Issuance of common stock, net of issuance costs	66,623		66,623
Issuance of common stock, net of issuance costs, shares		7,865,293
Proceeds from sale of stock under employee stock purchase plan	105		105
Proceeds from sale of stock under employee stock purchase plan, shares		16,629
Forfeitures of restricted common stock, shares		(15,056)
Exercise of options	124		124
Exercise of options, shares		86,625
Share-based compensation expense	5,825		5,825
Unrealized gain/loss	192				192
Treasury shares retired (8,643)			(162)	$ 162
Net loss	(135,747)					(135,747)
Balance at Dec. 31, 2016	68,120		365,298		(42)	(297,136)
Balance, shares at Dec. 31, 2016		38,615,709
Issuance of common stock, net of issuance costs	114,580		114,580
Issuance of common stock, net of issuance costs, shares		8,672,270
Proceeds from sale of stock under employee stock purchase plan	353		353
Proceeds from sale of stock under employee stock purchase plan, shares		44,833
Forfeitures of restricted common stock, shares		(2,406)
Exercise of options	1,312		1,312
Exercise of options, shares		256,213
Share-based compensation expense	8,867		8,867
Restricted stock unit vesting, shares		26,000
Issuance of common stock warrants	3,413		3,413
Unrealized gain/loss	(400)				(400)
Net loss	(73,671)					(73,671)
Balance at Dec. 31, 2017	$ 122,574		493,823		(442)	(370,807)
Balance, shares at Dec. 31, 2017	47,612,619	47,612,619
Keryx Merger	$ 527,754	$ 1	527,753
Keryx Merger, shares		57,773,090
Issuance of Baupost Additional Shares	13,386		13,386
Issuance of Baupost Additional Shares, shares		1,497,320
Issuance of common stock, net of issuance costs	95,452		95,452
Issuance of common stock, net of issuance costs, shares		9,194,306
Proceeds from sale of stock under employee stock purchase plan	482		482
Proceeds from sale of stock under employee stock purchase plan, shares		48,768
Exercise of options	647		647
Exercise of options, shares		178,382
Share-based compensation expense	19,040		19,040
Restricted stock unit vesting, shares		583,033
Unrealized gain/loss	181				181
Net loss	(143,588)					(143,588)
Balance at Dec. 31, 2018	$ 635,928	$ 1	$ 1,150,583		$ (261)	$ (514,395)
Balance, shares at Dec. 31, 2018	116,887,518	116,887,518

Consolidated Statements of Cash Flows - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Operating activities:

Net loss

$ (143,588)

$ (73,671)

$ (135,747)

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

Depreciation and amortization

899

617

296

Amortization of intangibles

1,522

Amortization of premium/discount on investments

(1,232)

610

494

Non-cash interest expense

Non-cash merger expense

^[1]

13,386

Loss on disposal of property and equipment

306

Fair value write-up of inventory sold

4,771

Stock-based compensation

19,040

8,867

5,825

Deferred income taxes

(28,338)

Fair value of warrants issued for license

3,413

Changes in operating assets and liabilities:

Accounts receivable

33,384

(393)

(33,823)

Inventory

Prepaid expenses and other current assets

(977)

(4,193)

428

Other long-term assets

903

(991)

(2)

Accounts payable

13,717

4,959

(274)

Accrued expense

55,482

21,974

20,703

Deferred revenue

(66,935)

(17,665)

197,289

Deferred rent

418

314

2,411

Net cash provided by (used in) operating activities

(97,494)

(56,159)

57,906

Investing activities:

Acquisition of business, net of acquired cash and restricted cash

6,147

Purchase of equipment

(1,606)

(1,622)

(2,662)

Proceeds from the maturities of available for sale securities

243,269

149,998

162,376

Proceeds from sales of available for sale securities

13,000

5,000

Purchase of available for sale securities

(224,216)

(330,636)

(147,009)

Net cash provided by (used in) investing activities

36,594

(177,260)

12,705

Financing activities:

Proceeds from the issuance of common stock, net of issuance costs

95,452

114,580

66,736

Proceeds from the sale of stock under employee stock purchase plan

482

353

106

Proceeds from the exercise of stock options

647

1,312

124

Payments on capital lease obligations

(19)

(5)

(20)

Net cash provided by financing activities

96,562

116,240

66,946

Increase (decrease) in cash, cash equivalents, and restricted cash

35,662

(117,179)

137,557

Cash, cash equivalents, and restricted cash at beginning of the period

71,437

188,616

51,059

Cash, cash equivalents, and restricted cash at end of the period

107,099

$ 71,437

188,616

Non-cash financing activities

Fair value of shares and equity awards issued in acquisition

$ 527,754

Unpaid follow-on offering costs

$ 12

[1]	Relates to non-cash expense associated with the fair value of the Baupost additional shares (see Note 5).

Nature of Organization and Operations

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Nature of Organization and Operations

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 focused on the development and commercialization of therapeutics for patients with kidney disease. Akebia’s commercial product, Auryxia^® (ferric citrate) is currently approved by the United States 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 chronic kidney disease, or 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^® and approved, but not currently marketed, in the European Union as an oral treatment for the control of hyperphosphatemia in adult patients with DD-CKD and NDD-CKD under the trade name Fexeric^®. The Company’s lead investigational product candidate, vadadustat, is an oral therapy in Phase 3 development. The Company believes vadadustat has the potential to set a new standard of care in the treatment of anemia due to CKD, acting via a novel hypoxia inducible factor, or HIF, pathway. HIF is the primary regulator of the production of red blood cells, or RBCs, in the body, as well as other important metabolic functions.

On December 12, 2018, the Company completed a merger with Keryx Biopharmaceuticals, Inc., or Keryx, or the Merger. Pursuant to the terms and conditions of the Agreement and Plan of Merger, or the Merger Agreement, each share of Keryx common stock, or Keryx Share, issued and outstanding immediately prior to the effective time of the Merger, or the Effective Time, was cancelled and converted into 0.37433, or the Exchange Multiplier, fully paid and non-assessable shares of Akebia common stock, or Akebia Shares, resulting in the issuance of an aggregate of 59,270,410 Akebia Shares. The Merger Agreement also provided that at the Effective Time, each Keryx restricted share award, to the extent outstanding, other than those Keryx restricted share awards that accelerated or lapsed as a result of the completion of the Merger, converted into an Akebia restricted stock unit, or RSU, award covering the number of Akebia Shares determined in accordance with the Exchange Multiplier, resulting in the issuance of Akebia RSUs covering an aggregate of 602,752 Akebia Shares. In addition, each outstanding and unexercised option to acquire Keryx Shares converted into an option to acquire Akebia Shares, with the number of shares and exercise price adjusted by the Exchange Multiplier, resulting in the assumption by Akebia of options to acquire an aggregate 3,967,290 Akebia Shares. Refer to Note 5 for additional details on the Merger.

Since inception, the Company has devoted most of its resources to research and development, including its preclinical and clinical development activities, raising capital, and providing general and administrative support for these operations. The Company began recording revenue from the U.S. sales of Auryxia on December 12, 2018 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. Ferric citrate is approved in Japan under the trade name Riona and in Europe under the trade name Fexeric. The Company has not generated a profit to date and may never generate profits from product sales. The Company’s 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 its product candidates.

The Company is subject to a number of risks including, but not limited to, risks relating to integration following the Merger, the need to obtain adequate additional funding, including the resources necessary to fund commercialization of Auryxia, the global Phase 3 program for vadadustat in NDD-CKD, called PRO₂TECT, and DD-CKD, called INNO₂VATE, and post-approval studies with respect to Auryxia, risks relating to market acceptance, coverage and reimbursement of Auryxia, risks related to maintaining the Company’s commercial organization and capabilities, risks relating to potential generic entrants, risks of clinical trial failures, the risk of relying on third parties, the risk that the Company never achieves profitability, protection of proprietary technology, compliance with governmental regulations, and dependence on key personnel, and the impact of legal, regulatory and administrative proceedings. Overall, the PRO₂TECT and INNO₂VATE Phase 3 programs are designed to enroll up to approximately 7,600 patients. In August 2016, the first patient was dosed in INNO₂VATE. The Company completed enrollment in the larger of the two INNO₂VATE studies, which enrolled 3,554 subjects, in February 2019, and it expects to complete enrollment in the smaller INNO₂VATE study, enrolling approximately 350 subjects, by April 2019. The Company anticipates completing the larger of the two INNO₂VATE studies in the first quarter of 2020, with completion of the smaller INNO₂VATE study and availability of top-line data expected in the second quarter of 2020, subject to the accrual of major adverse cardiovascular events, or MACE. The first patient was dosed in PRO₂TECT in December 2015. The Company expects full enrollment of PRO₂TECT in 2019. The Company anticipates reporting top-line clinical data for the PRO₂TECT studies in mid-2020, subject to the accrual of MACE.

In December 2015, the Company entered into a collaboration agreement with Mitsubishi Tanabe Pharma Corporation, or MTPC, to develop and commercialize vadadustat in Japan and certain other countries in Asia, collectively, the MTPC Territory, for total payments of up to $245.0 million, comprised of a $20.0 million upfront payment, up to $50.0 million in specified development and regulatory milestones, and up to $175.0 million in specified commercial milestones, as well as tiered double-digit royalty payments up to 20% on sales of vadadustat in the MTPC Territory, subject to a reduction upon launch of a generic product on a country-by-country basis (Note 4).

In December 2016, the Company entered into a collaboration and license agreement with Otsuka Pharmaceutical Co. Ltd., or Otsuka to develop and commercialize vadadustat in the United States. In December 2016, the Company received $125.0 million upfront payment, and in March 2017, Otsuka reimbursed the Company approximately $33.8 million for global expenses previously incurred by us for its ongoing global development program for vadadustat in DD-CKD and NDD-CKD patients. The agreement also provides for additional funding for the global development program for vadadustat, totaling $167.5 million or more, depending on the actual global development costs incurred. In addition, Akebia is eligible to receive from Otsuka up to $190.0 million in specified development and regulatory milestones and up to $575.0 million in specified commercial milestones. The Company will share with Otsuka the costs of developing and commercializing vadadustat in the United States and the profits from sales of vadadustat in the United after approval by the FDA and commercial launch (Note 4).

In April 2017, the Company entered into a collaboration and license agreement with Otsuka to develop and commercialize vadadustat in Europe, Russia, China, Canada, Australia, the Middle East and certain other territories. In April 2017, the Company received a $73.0 million upfront payment and $0.2 million for global expenses previously incurred by the Company in implementing the current global Phase 3 development plan for vadadustat in DD-CKD and NDD-CKD patients in excess of a specified threshold during the quarter-ended March 31, 2017. The agreement also provides for additional funding for the global development program for vadadustat, totaling $176.1 million or more, depending on the actual global development costs incurred. In addition, Akebia is eligible to receive from Otsuka up to $132.0 million in specified development and regulatory milestones and up to $525.0 million in specified commercial milestones (Note 4).

From inception through December 31, 2018 the Company has raised approximately $468.4 million of net proceeds, including $377.4 million from several underwritten public offerings, $41.0 million from an at-the-market offering, or ATM, 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 (International) Ltd., or Vifor Pharma. At inception of the Company’s collaboration agreements with Otsuka and MTPC, they committed to approximately $573.0 million or more in cost-share funding, which the Company generally continues to receive on a quarterly prepaid basis, and license payments. Of these commitments, the Company received approximately $272.0 million at the onset of the collaboration agreements.

Management of the Company completed its going concern assessment in accordance with ASC 205-40. 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 2018 Annual Report on Form 10-K, as required by ASC 205-40. There can be no assurance, however, that the current operating plan 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. The Company will require additional capital for the further commercialization of Auryxia and continued development and potential commercialization of the Company’s existing product candidates and would need to raise additional funds to pursue development activities related to any additional product candidates. If and until the Company can generate a sufficient amount of product revenue, the Company expects to finance future cash needs through public or private equity or debt offerings, payments from its collaborators, strategic transactions, or a combination of these approaches.

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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 (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).

As discussed more fully below, as prescribed by the required adoption of ASC 606 on January 1, 2018, the Company revised its comparative financial statements for the year ended December 31, 2017 to give effect to ASC 606 as if it had been effective for that period. No changes for the adoption of ASC 606 were deemed necessary for the year ended December 31, 2016 and applicable interim periods within the year.

New Accounting Pronouncements – Recently Adopted

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), a new revenue recognition standard which amends revenue recognition principles and provides a single, comprehensive set of criteria for revenue recognition within and across all industries. This ASU supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. In 2015 and 2016, the FASB issued additional ASUs related to Topic 606, or ASC 606, that delayed the effective date of the guidance and clarified various aspects of the new revenue guidance, including principal versus agent considerations, identifying performance obligations, and licensing, and they include other improvements and practical expedients. The Company adopted this new standard on January 1, 2018 using the full retrospective transition method, and has elected to use the following practical expedients that are permitted under the rules of the adoption, which have been applied consistently to all contracts within all reporting periods presented:

•

For all reporting periods presented before January 1, 2018, the Company has not disclosed the amount of the transaction price allocated to the remaining performance obligations or an explanation of when the Company expects to recognize the amount as revenue.

•

The Company has not adjusted the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between when the entity transfers a promised good or a service to a customer and when the customer pays for that good or service will be one year or less.

•

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.

As a result of adopting ASC 606 on January 1, 2018, the Company has revised its comparative financial statements for the year ended December 31, 2017 as if ASC 606 had been effective for that period, as set forth below. No changes for the adoption of ASC 606 were deemed necessary for the year ended December 31, 2016 and applicable interim periods within the year.

With respect to the collaboration agreements with Otsuka, the Company concluded that there was no impact to revenue for the year ended December 31, 2017 after the adoption of ASC 606.

The changes shown in the table below relate to the Company’s collaboration agreement with MTPC and the impact of when milestone payments can be recognized under the new standard as well as the period over which this revenue is recognized. Under ASC 605-28, Revenue Recognition-Milestone Method, the Company evaluated at contract inception whether each milestone was substantive. Substantive milestones are recognized as revenue in their entirety upon achievement, assuming all other revenue recognition criteria are met. Therefore, a $4.0 million MTPC development milestone, which was deemed to be substantive, would have been recognized in its entirety in the first quarter of 2018, when the milestone event occurred. Under ASC 606, these substantive milestone payments would be classified as variable consideration and included in the allocable transaction price over the remaining period of performance when it is probable that a significant reversal in the cumulative amount of revenue recognized would not occur. Under ASC 606, this resulted in the $4.0 million MTPC development milestone being included in the allocable consideration, of which $3.2 million was recognized as revenue in 2017 under the proportional performance method utilized for revenue recognition of the MTPC allocable consideration. As a result, the following financial statement line items for the year ended December 31, 2017 were affected.

Consolidated Statement of Operations and Comprehensive Loss

	For the Year Ended December 31, 2017
	(in thousands, except per share data)
	As revised under ASC 606			As originally reported under ASC 605			Effect of change
Collaboration revenue	$	181,227		$	177,984		$	3,243
Operating loss		(76,674	)		(79,917	)		3,243
Net loss		(73,671	)		(76,914	)		3,243
Net loss per share - basic and diluted	$	(1.69	)	$	(1.77	)	$	0.08

Consolidated Balance Sheets

	December 31, 2017 (in thousands)
	As revised under ASC 606			As originally reported under ASC 605			Effect of change
Short-term deferred revenue	$	81,667		$	84,910		$	(3,243	)
Accumulated deficit	$	(370,807	)	$	(374,050	)	$	3,243

Consolidated Statement of Cash Flows

	For the Year Ended December 31, 2017 (in thousands)
	As revised under ASC 606			As originally reported under ASC 605			Effect of change
Net loss	$	(73,671	)	$	(76,914	)	$	3,243
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred revenue		(17,665	)		(14,422	)		(3,243	)
Cash, cash equivalents, and restricted cash at beginning of the period		188,616			188,616			—
Cash, cash equivalents, and restricted cash at end of the period	$	71,437		$	71,437		$	—

In October 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 (fiscal year 2018 for the Company), and interim periods within those years, using a retrospective transition method to each period presented, with early adoption permitted. The Company elected to adopt this ASU effective January 1, 2018. The adoption of this guidance resulted in $1.3 million in restricted cash to be included with cash and cash equivalents at the beginning of the period in the consolidated statement of cash flows for each of the years ended December 31, 2018, 2017 and 2016.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based award require an entity to apply modification accounting under ASC 718, Compensation – Stock Compensation. Specifically, awards will require modification accounting if the fair value, vesting condition or classification of the award is not the same immediately before and after a change to the terms and conditions of the award. This ASU is effective on a prospective basis beginning on January 1, 2018, with early adoption permitted. The Company adopted this ASU effective January 1, 2018, and since the Company did not have any modifications in fiscal 2018, the adoption of this ASU did not have an impact on the Company’s consolidated financial statements and disclosures.

New Accounting Pronouncements – Not Yet Adopted

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 July 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. ASC 842 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities; however, the Company has elected not to early adopt. ASC 842 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures; however, it expects the adoption of this new guidance will result in the Company recording additional assets and corresponding liabilities on its consolidated balance sheets, primarily relating to leases of office and lab space. The Company plans to adopt ASC 842 using the modified retrospective approach with the cumulative effect of adoption recognized to retained earnings on January 1, 2019. The Company also expects to elect the practical expedients upon transition that will retain the lease classification and initial direct costs for any leases that existed prior to the adoption of this new standard. The Company will not reassess whether any contracts entered into prior to the adoption are leases. The Company is also in the process of implementing appropriate changes to its controls to support lease accounting and related disclosures under the new standard.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. Currently, U.S. GAAP delays recognition of the full amount of credit losses until the loss is probable of occurring. Under this ASU, the income statement will reflect an entity’s current estimate of all expected credit losses. The measurement of expected credit losses will be based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down of the security. This ASU is effective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal year 2020. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial position and results of operations.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how companies calculate goodwill impairments by eliminating Step 2 of the impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 requires companies to compare the fair value of a reporting unit to its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to the related reporting unit. This ASU is effective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal year 2020. Early adoption is allowed, and the Company expects to early adopt ASU 2017-04 for annual and interim goodwill impairment tests conducted after January 1, 2019.

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 patients 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. (See Note 12).

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, stock-based compensation expense, product and collaboration revenues including various rebates and reserves related to product sales, inventories, income taxes, purchase price allocations related to business combinations, intangible assets and goodwill.

Cash and Cash Equivalents

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, 2018, the Company’s cash equivalents are primarily in money market funds. The Company may maintain balances with its banks in excess of federally insured limits.

Restricted cash is included in “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 subsequent to the adoption of ASU 2016-18 (in thousands):

	December 31, 2018		December 31, 2017		December 31, 2016		December 31, 2015
Cash and cash equivalents	$	104,644	$	70,156	$	187,335	$	49,778
Other assets		2,455		1,281		1,281		1,281
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	107,099	$	71,437	$	188,616	$	51,059

Restricted cash represents amounts required for security deposits under the Company’s office and lab space lease agreements and cash balances held as collateral for the Company’s employee credit card program.

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, 2018. 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” 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 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 represents 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 an allowance for doubtful accounts as of December 31, 2018 and 2017.

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,
	2018			2017			2016
				(as revised)
Otsuka Pharmaceutical Co. Ltd.		90	%		76	%		100	%

	Percent of Gross Accounts Receivable
	As of December 31,
	2018			2017
Fresenius Medical Care Rx		42	%		—
McKesson Corporation		22	%		—
Cardinal Health, Inc.		13	%		—
AmerisourceBergen Drug Corporation		11	%		—
Otsuka Pharmaceutical Co. Ltd.		—			96	%

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 to seven years. Such costs are periodically reviewed for recoverability when impairment indicators are present. Such indicators include, among other factors, operating losses, 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, 2018 and 2017.

	Useful Life	December 31, 2018			December 31, 2017
		(in thousands)
Computer equipment and software	3	$	1,593		$	630
Furniture and fixtures	5-7		1,170			800
Equipment	7		1,780			628
Leasehold improvements	Shorter of the useful life or remaining lease term (10 years)		5,324			2,582
Office equipment under capital lease	3		114			36
			9,981			4,676
Less accumulated depreciation			(1,958	)		(1,059	)
Net property and equipment		$	8,023		$	3,617

Depreciation expense, including expense associated with assets under capital leases, was approximately $0.9 million, $0.6 million and $0.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Inventories

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 its product candidates, the Company incurs expenses for the manufacture of material that could potentially be available to support the commercial launch of its products. 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 no longer 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.

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.

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. 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 are 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 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 statement of operations and comprehensive loss through December 31, 2018. The Company records a corresponding reduction of accounts receivable (if the trade discount and/or allowance will be credited to the Customer) or an increase in 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. This right of return lapses once the product is provided to a patient. The Company estimates the amount of its product sales that may be returned 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

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 deliverables 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 the 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 will evaluate 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 will re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust 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 been satisfied (or partially satisfied). The Company receives royalty payments from JT and Torii, based on net sales of Riona 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 partner 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 U.S. collaboration with Otsuka as a component of the related expense in the period incurred. During the year ended December 31, 2018, the Company incurred approximately $1.2 million of costs related to the cost-sharing provisions of the Otsuka U.S. Agreement, as defined below in Note 4, of which approximately $0.5 million are reimbursable by Otsuka and recorded as a reduction to research and development expense. During the year ended December 31, 2018, Otsuka incurred approximately $1.1 million of costs related to the cost-sharing provisions of the Otsuka U.S. Agreement, of which approximately $0.5 million are reimbursable by the Company and recorded as an increase to research and development expense. To the extent product revenue is generated from the collaboration, the Company will recognize its share of the net sales on a gross basis if it is deemed to be the principal in the transactions with customers, or on a net basis if it is instead deemed to be the agent in the transactions with customers, consistent with the guidance in ASC 606.

Business Combinations

The Company accounts for the acquisition of a business in accordance with ASC Topic 805, Business Combinations, or ASC 805. Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The Company determines the fair value of acquired intangible assets based on detailed valuations that use certain information and assumptions provided by management, which is considered management’s best estimate of inputs and assumptions that a market participant would use. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill.

Under ASC 805, transaction costs are not included as a component of consideration transferred and are expensed as incurred. Additionally, in accordance with ASC 805, a transaction entered into by or on behalf of the acquirer or primarily for the benefit of the acquirer or the combined entity, rather than primarily for the benefit of the acquiree (before the combination), is treated as separate transaction.

Intangible Assets

The Company maintains definite-lived intangible assets related to developed product rights for Auryxia and a favorable contract, which were 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 assets are recorded over their estimated useful live of 4 - 9 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 to its carrying value on the consolidated balance sheet. If the carrying value of the intangible asset exceeds the undiscounted cash flows used in the recoverability test, the Company will write the carrying value down to the fair value in the period identified. The Company calculates the fair value of intangible assets as the present value of estimated future cash flows expected to be generated from the intangible asset using a risk-adjusted discount rate. In determining estimated future cash flows associated with its intangible assets, the Company uses market participant assumptions pursuant to ASC 820.

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

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820, establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available.

Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments, and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

•

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•

Level 2 – Valuations based on quoted prices for similar assets or liabilities in markets that are not active, or for which all significant inputs are observable, either directly or indirectly.

•

Level 3 – Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Items measured at fair value on a recurring basis include available for sale securities (see Note 7). The carrying amounts of prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to their short-term maturities. The rate implicit within the Company’s capital lease obligation approximates market interest rates.

Items measured at fair value on a nonrecurring basis include property and equipment, intangible assets and goodwill. The Company remeasures the fair value of these assets upon the occurrence of certain events. There were no such remeasurements to property and equipment for the year ended December 31, 2018. There were no impairments to assets measured using level 3 inputs in fiscal year 2018 or 2017.

The Company’s other financial instruments mainly consists of debt (see Note 11). The carrying amounts for the amount drawn on the Company’s line of credit facility with Silicon Valley Bank approximates fair value because the interest rate is variable and reflects current market rates.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in providing research and development activities, including salaries and benefits, facilities costs, overhead costs, contract research and development services, and other outside costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

External research and development expenses associated with the Company’s programs include clinical trial site costs, research compounds and clinical manufacturing costs, costs incurred for consultants and other outside services, such as data management and statistical analysis support, and materials and supplies used in support of the clinical and preclinical programs. Internal costs of the Company’s clinical program include salaries, benefits, stock-based compensation, and an allocation of the Company’s facility costs. When third-party service providers’ billing terms do not coincide with the Company’s period-end, the Company is required to make estimates of its obligations to those third parties, including clinical trial and pharmaceutical development costs, contractual services costs and costs for supply of its drug candidates, incurred in a given accounting period and record accruals at the end of the period. The Company bases its estimates on its knowledge of the research and development programs, services performed for the period, past history for related activities and the expected duration of the third-party service contract, where applicable.

Advertising Expenses

The costs of advertising are expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. For the year ended December 31, 2018, advertising expenses totaled $0.5 million. The Company did not incur any advertising expenses for the years ended December 31, 2017 and 2016.

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. The Company recognizes 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, 2018 and 2017 are classified as noncurrent within the income tax provision (see Note 14).

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position, as well as consideration of the available facts and circumstances. As of December 31, 2018 and 2017, the Company does not have any significant uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.

Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees, including grants of employee stock options, restricted stock, restricted stock units, or RSUs, and modifications to existing stock awards, to be recognized in the statements of operations and comprehensive loss based on their fair values. The Company accounts for stock-based awards to non-employees in accordance with ASC Topic 505-50, Equity-Based Payments to Non-Employees, or ASC 505-50, which requires the fair value of the award to be re-measured at fair value until a performance commitment is reached or counterparty performance is complete. The Company’s stock-based awards are comprised of stock options, shares of restricted stock, shares of common stock and warrants. The Company estimates the fair value of options granted using the Black-Scholes option pricing model. The Company uses a blend of its stock price and the quoted market price of comparable public companies to determine the fair value of restricted stock awards and common stock awards.

The Black-Scholes option pricing model requires the input of certain subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of expected term of the award, (c) the risk-free interest rate and (d) expected dividends. Due to the lack of company-specific historical and implied volatility data for trading the Company’s stock in the public market, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The computation of expected volatility is based on the historical volatility of a representative group of companies with similar characteristics to the Company, including stage of product development and life science industry focus. During 2017, the Company began to estimate its volatility by using a blend of its stock price history for the length of time it has market data for its stock and the historical volatility of similar public companies for the expected term of each grant. The Company is a commercial-stage biopharmaceutical company and the representative group of companies has certain similar characteristics to the Company. The Company believes the group selected has sufficient similar economic and industry characteristics and includes companies that are most representative of the Company. The Company uses the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The expected term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population. For options granted to non-employees, the Company utilizes the contractual term of the arrangement as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock, which is similar to the Company’s peer group.

The Company’s stock-based awards are subject to either service- or performance-based vesting conditions. Compensation expense related to awards to employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term, and is adjusted for pre-vesting forfeitures in the period in which the forfeitures occur. Consistent with the guidance in ASC 505- 50, compensation expense related to awards to non-employees with service-based vesting conditions is recognized on a straight-line basis based on the then-current fair value at each financial reporting date prior to the measurement date over the associated service period of the award, which is generally the vesting term. Compensation expense related to awards to employees with performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable. Consistent with the guidance in ASC 505-50, compensation expense related to awards to non-employees with performance-based vesting conditions is recognized based on the then-current fair value at each financial reporting date prior to the measurement date over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable.

For awards with performance conditions in which the award does not vest unless the performance condition is met, the Company recognizes expense if, and to the extent that, the Company estimates that achievement of the performance condition is probable. If the Company concludes that vesting is probable, it recognizes expense from the date it reaches this conclusion through the estimated vesting date.

Net Loss per Share

Basic net loss per share is calculated by dividing net loss by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, preferred stock, stock options, warrants, restricted stock and RSUs are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for all periods presented. Diluted net income per share is calculated by dividing the net income by the weighted-average common shares outstanding for the period, including any dilutive effect from outstanding options, warrants, restricted stock and RSUs using the treasury stock method.

Product Revenue, Net

12 Months Ended

Dec. 31, 2018

Revenue From Contract With Customer [Abstract]

Product Revenue, Net

3. Product Revenue, Net

The Company began recording product revenue from the U.S. sales of Auryxia on December 12, 2018 following the consummation of the Merger. Total net product revenue was $6.8 million for the period from December 12, 2018 to December 31, 2018. The following table summarizes activity in each of the product revenue allowance and reserve categories for the period from December 12, 2018 to December 31, 2018 (in thousands):

	Chargebacks and Discounts			Rebates, Fees and other Deductions			Returns			Total
Balance at December 12, 2018	$	466		$	21,247		$	418		$	22,131
Provisions related to sales		415			3,869			(58	)		4,226
Credits/payments made relating to sales		(365	)		(2,255	)		—			(2,620	)
Balance at December 31, 2018	$	516		$	22,861		$	360		$	23,737

Chargebacks, discounts and returns are recorded as a direct reduction of revenue on the consolidated statement of operations with a corresponding reduction to accounts receivable on the consolidated balance sheets. Rebates, distribution-related fees, and other sales-related deductions are recorded as a reduction in revenue on the consolidated statement of operations with a corresponding increase to accrued liabilities or accounts payable on the consolidated balance sheets.

License, Collaboration and Other Significant Agreements

12 Months Ended

Dec. 31, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

License, Collaboration and Other Significant Agreements

4. License, Collaboration and Other Significant Agreements

The Company recognized $200.9 million, $181.2 million and $1.5 million in license, collaboration and other revenue for the years ended December 31, 2018, 2017 and 2016, respectively. The $200.9 million in license, collaboration and other revenue for the year ended December 31, 2018 included $200.5 million of the transaction price for the Company’s collaboration agreements with MTPC and Otsuka (discussed below), all of which are recognized based on a proportional performance method, approximately $0.3 million for other services related to clinical and regulatory related activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement, and $0.1 million for license revenue related to royalties received from JT and Torii based on their sales of Riona in Japan. The $181.2 million in license, collaboration and other revenue for the year ended December 31, 2017 included $181.2 million of the transaction price for the MTPC Agreement and the Company’s collaboration agreements with Otsuka and approximately $31,000 for other services related to clinical and regulatory related activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement. The $1.5 million in license and collaboration revenue for the year ended December 31, 2016 related to the transaction price for the Company’s collaboration agreement with Otsuka in the U.S.

During the years ended December 31, 2018, 2017 and 2016, the Company recognized the following revenues from its license, collaboration and other significant agreements and had the following deferred revenue balances as of December 31, 2018:

	For the Year Ended December 31,
	2018		2017		2016
License, Collaboration and Other Revenue:	(in thousands)
MTPC Agreement	$	9,281	$	42,918	$	—
Otsuka U.S. Agreement		103,870		85,971		1,535
Otsuka International Agreement		87,320		52,307		—
Total Proportional Performance Revenue	$	200,471	$	181,196	$	1,535
JT and Torii		112		—		—
MTPC Stability Studies		335		31		—
Total License, Collaboration and Other Revenue	$	200,918	$	181,227	$	1,535

	December 31, 2018
	Short-Term		Long-Term		Total
Deferred Revenue:	(in thousands)
Otsuka U.S. Agreement	$	33,451	$	29,909	$	63,360
Otsuka International Agreement		23,529		21,121		44,650
Vifor Agreement		—		4,679		4,679
Total	$	56,980	$	55,709	$	112,689

The following table presents changes in the Company’s contract assets and liabilities during the years ended December 31, 2018 and 2017 (in thousands):

	Balance at Beginning of Period		Additions		Deductions			Balance at End of Period
Twelve Months Ended December 31, 2018
Contract assets:
Other current assets	$	—	$	531	$	(531	)	$	—
Accounts receivable⁽¹⁾	$	34,186	$	146,267	$	(178,866	)	$	1,587
Contract liabilities:
Deferred revenue	$	179,624	$	133,537	$	(200,472	)	$	112,689
Accounts payable	$	—	$	17,919	$	(4,427	)	$	13,492

Twelve Months Ended December 31, 2017
Contract assets - Accounts receivable⁽¹⁾	$	33,823	$	43,324	$	(42,961	)	$	34,186
Contract liabilities - Deferred revenue	$	197,289	$	163,562	$	(181,227	)	$	179,624

⁽¹⁾

Excludes accounts receivable from other services related to clinical and regulatory activities performed by the Company on behalf of MTPC that are not included in the performance obligations identified under the MTPC Agreement. These receivables represented approximately $5,000 and $30,000 of accounts receivables in the accompanying consolidated balance sheets as of December 31, 2018 and 2017, respectively. Also excludes approximately $15.1 million in accounts receivable related to amounts due to the Company from product sales which are included in the accompanying consolidated balance sheet as of December 31, 2018.

During the years ended December 31, 2018 and 2017, the Company recognized the following revenues as a result of changes in the contract asset and contract liability balances in the respective periods (in thousands):

	For the Year Ended December 31,
Revenue Recognized in the Period from:	2018		2017
Amounts included in deferred revenue at the beginning of the period	$	137,726	$	125,454
Performance obligations satisfied in previous periods	$	6,659	$	275

The Company did not recognize revenues as a result of changes in contract assets or contract liabilities during the year ended December 31, 2016.

Mitsubishi Tanabe Pharma Corporation Collaboration Agreement

Summary of Agreement

On December 11, 2015, the Company and MTPC entered into a collaboration agreement, or the MTPC Agreement, providing MTPC with exclusive development and commercialization rights to vadadustat in Japan and certain other Asian countries, collectively, the MTPC Territory. In addition, the Company will supply vadadustat for both clinical and commercial use in the MTPC Territory, subject to MTPC’s option to manufacture commercial drug product in the MTPC Territory.

The Company and MTPC agreed that, instead of including Japanese patients in the Company’s global Phase 3 program for vadadustat, MTPC would be the sponsor of a Phase 3 program for vadadustat in Japan. Following consultation with the Japanese Pharmaceuticals and Medical Devices Agency, or the PMDA, MTPC initiated its Phase 3 development program for vadadustat in Japanese patients in Japan in the fourth quarter of 2017, and reported top-line data for the two Phase 3 pivotal trials and data from the two supportive Phase 3 studies in March 2019. MTPC is responsible for the costs of the Phase 3 program in Japan and other studies required there, and will make no funding payments for the global Phase 3 program.

In consideration for the exclusive license and other rights contained in the MTPC Agreement, MTPC is obligated to make payments totaling up to $265.0 million, comprised of a $20.0 million upfront payment, up to $50.0 million in specified development and regulatory milestones, up to $175.0 million in specified commercial milestones, and a $20.0 million advance payment for Phase 2 studies in Japanese patients completed by the Company and reimbursable by MTPC, as well as tiered double-digit royalty payments of up to 20% on sales of vadadustat in the MTPC Territory, subject to reduction upon launch of a generic product on a country-by-country basis.

The Company completed its Phase 2 study of vadadustat in non-dialysis dependent, or NDD, Japanese patients in Japan and reported top-line data in the third quarter of 2017. The Company also announced top-line data of its Phase 2 study of vadadustat in dialysis-dependent, or DD, Japanese patients in Japan in the first quarter of 2018. The costs of these Phase 2 studies are reimbursable by MTPC. MTPC was obligated to reimburse the Company for costs to complete the Phase 2 studies in excess of the $20.0 million advance payment. The Company incurred approximately $20.5 million in Phase 2 costs through June 30, 2018 and did not incur any additional costs subsequent to June 30, 2018 as the studies have been completed. As a result, MTPC reimbursed the Company an additional approximately $0.5 million related to the two Phase 2 studies which was collected in the fourth quarter of 2018.

MTPC has sole responsibility for the commercialization of vadadustat in the MTPC Territory as well as for Medical Affairs (as defined in the MTPC Agreement) in the MTPC Territory. Akebia is responsible for manufacturing and supplying vadadustat for clinical use in the MTPC Territory. Akebia will enter into a supply agreement with MTPC for the commercial supply of vadadustat prior to commercial launch.

The Company and MTPC have established a joint steering committee pursuant to the MTPC Agreement to oversee development and commercialization of vadadustat in the MTPC Territory, including approval of any development or commercialization plans. Unless earlier terminated, the MTPC Agreement will continue in effect on a country-by-country basis until the later of the following: expiration of the last-to-expire patent covering vadadustat in such country in the MTPC Territory; expiration of marketing or regulatory exclusivity in such country in the MTPC Territory; or ten years after the first commercial sale of vadadustat in such country in the MTPC Territory. MTPC may terminate the MTPC Agreement upon twelve months’ notice at any time after the second anniversary of the effective date of the MTPC Agreement. Either party may terminate the MTPC Agreement upon the material breach of the other party that is not cured within a specified time period or upon the insolvency of the other party.

MTPC is required to make certain milestone payments to the Company aggregating up to approximately $225.0 million upon the achievement of specified development, regulatory and commercial events. More specifically, the Company received $10.0 million in development milestone payments and is eligible to receive up to $40.0 million in regulatory milestone payments and up to $175.0 million in commercial milestone payments associated with aggregate sales of all products. Additionally, if vadadustat is commercialized, the Company would be entitled to receive tiered royalty payments in the low double digits based on a percentage of net sales. Royalty payments are subject to certain reductions, including upon the introduction of competitive products in certain instances. Royalties are due on a country-by-country basis from the date of first commercial sale of a licensed product in a country until the last to occur of: (i) the expiration of the last to expire valid claim within the intellectual property covering the licensed product, (ii) the expiration of marketing or regulatory exclusivity in such country, or (iii) the tenth anniversary of the first commercial sale of such licensed product in such country. Due to the uncertainty of pharmaceutical development and the high historical failure rates associated with drug development, although the Company has received $10.0 million in development milestones, no additional milestone or royalty payments may ever be received from MTPC.

In September 2017, the Company provided MTPC with an option to access data from the Company’s global Phase 3 vadadustat program for payments to the Company of up to $25.0 million, which is in addition to the milestone payments described above.

Revenue Recognition

The Company evaluated the elements of the MTPC Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, MTPC, is a customer. The Company’s arrangement with MTPC contains the following material promises under the contract at inception: (i) license under certain of the Company’s intellectual property to develop and commercialize vadadustat (the License Deliverable) in the MTPC Territory, (ii) clinical supply of vadadustat (the Clinical Supply Deliverable), (iii) knowledge transfer, (iv) Phase 2 dosing study research services (the Research Deliverable), and (v) rights to future know-how.

The Company has identified two performance obligations in connection with its material promises under the MTPC Agreement. Factors considered in making the assessment of which material promises will be accounted for as separate performance obligations included, among other things, the capabilities of the collaboration partner, whether any other vendor sells the item separately, whether the good or service is highly interdependent or highly interrelated to the other elements in the arrangement, and whether there are other vendors that can provide the items. Additionally, the MTPC Agreement does not include a general right of return. The two performance obligations identified in connection with the Company’s obligations under the MTPC Agreement are as follows:

(i)

License, Research and Clinical Supply Performance Obligation

The License Deliverable is not distinct from the Clinical Supply Deliverable. More specifically, the license delivered to MTPC does not provide the right to manufacture vadadustat. MTPC therefore, is prohibited from manufacturing any licensed product during clinical trials. Accordingly, MTPC must obtain the clinical trial products from the Company, which significantly limits the ability for MTPC to use the license for their intended use in a way that generates economic benefits.

The License Deliverable is not distinct from the knowledge transfer because MTPC cannot fully utilize the license for its intended purpose without the corresponding information regarding know-how, development data and regulatory materials possessed by the Company.

The License Deliverable is not distinct from the Research Deliverable because MTPC cannot fully utilize the license for its intended purpose without the performance of the Phase 2 dosing studies. The Phase 2 dosing studies needed to be performed prior to the PMDA approving any Phase 3 study to be performed in the MTPC Territory. Furthermore, MTPC cannot benefit from the Phase 2 dosing studies without the license and the undelivered Phase 3 clinical supply.

The License Deliverable is not distinct from the clinical supply, knowledge transfer or Phase 2 studies. As a result, the License Deliverable, clinical supply, knowledge transfer and Phase 2 studies do not qualify for separation and have been combined as a single performance obligation (the License, Research and Clinical Supply Performance Obligation).

(ii)

Rights to Future Know-How Performance Obligation

The License, Research and Clinical Supply Deliverables combined are distinct from the rights to future know-how because MTPC can obtain the value of the License, Research and Clinical Supply Deliverables without receipt of any rights to future know-how that may be discovered or developed in the future. As a result, the rights to future know-how qualify for separation from the License, Research and Clinical Supply Performance Obligation.

The Company allocates the transaction price to each performance obligation based on the Company’s best estimate of the relative standalone selling price. The Company developed a best estimate of the standalone selling price for the Rights to Future Know-How Performance Obligation primarily based on the likelihood that additional intellectual property covered by the license conveyed will be developed during the term of the arrangement. The Company did not develop a best estimate of standalone selling price for the License, Research and Clinical Supply Performance Obligation because the estimate of standalone selling price associated with the Rights to Future Know-How Performance Obligation was determined to be immaterial. The Company has concluded that a change in the key assumptions used to determine the best estimate of standalone selling price for each performance obligation would not have a significant impact on the allocation of arrangement consideration.

The transaction price at inception was comprised of: (i) the up-front payment, (ii) the estimated cost for the Phase 2 studies, (iii) a non-substantive milestone associated with the first patient enrolled in the NDD-CKD Phase 3 study, and (iv) the cost of all clinical supply provided to MTPC for the Phase 3 studies. No other development and no regulatory milestones have been included in the transaction price at inception, as all other milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. The total aggregate amount of development milestones is $10.0 million and the total aggregate amount of the regulatory milestones is up to $40.0 million. The total aggregate amount of sales milestones is up to $175.0 million. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to MTPC and therefore have also been excluded from the transaction price. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

No amounts were allocated to the Rights to Future Know-How Performance Obligation because the associated best estimate of standalone selling price was determined to be immaterial; therefore the arrangement consideration will be allocated to the License, Research and Clinical Supply Performance Obligation.

As of December 31, 2018, the transaction price is comprised of: (i) the up-front payment of $20.0 million, (ii) the cost for the Phase 2 studies of $20.5 million, (iii) the cost of all clinical supply provided to MTPC for the Phase 3 studies, and (iv) $10.0 million in development milestones received, comprised of a $6.0 million and a $4.0 million development milestone. All development milestones have been reached as of December 31, 2018. No regulatory milestones have been assessed as probable of being reached as of December 31, 2018 and thus have been fully constrained. Revenue for the License, Research and Clinical Supply Performance Obligation for the MTPC Agreement is being recognized using a proportional performance method using the Company’s delivery of clinical supply of vadadustat to MTPC for the Phase 3 study as the basis for recognition. The Company recognized $9.3 million in revenue during the year ended December 31, 2018, with respect to the MTPC Agreement, and approximately $42.9 million during the year ended December 31, 2017. The revenue is classified as collaboration revenue in the accompanying consolidated statements of operations. No revenue was recognized in 2016 with respect to the MTPC Agreement as the applicable revenue recognition criteria was not satisfied until 2017. As of December 31, 2018, there is no deferred revenue and no accounts receivable.

U.S. Collaboration and License Agreement with Otsuka Pharmaceutical Co. Ltd.

Summary of Agreement

On December 18, 2016, the Company entered into a collaboration and license agreement with Otsuka, or the Otsuka U.S. Agreement. The collaboration is focused on the development and commercialization of vadadustat in the United States. Under the terms of the Otsuka U.S. Agreement, the Company is responsible for leading the development of vadadustat, including the ongoing Phase 3 development program. The Company and Otsuka will co-commercialize vadadustat in the United States, subject to the approval of vadadustat by the FDA.

Under the terms of the Otsuka U.S. Agreement, the Company granted to Otsuka a co-exclusive, non-sublicensable license under certain intellectual property controlled by the Company solely to perform medical affairs activities and to conduct non-promotional and commercialization activities related to vadadustat in accordance with the associated plans. The co-exclusive license relates to activities that will be jointly conducted by the Company and Otsuka pursuant to the terms of the Otsuka U.S. Agreement. Additionally, the parties agreed not to promote, market or sell any competing product in the territory covered by the agreement.

Pursuant to the terms of the Otsuka U.S. Agreement, the Company is responsible for performing all activities related to the development of vadadustat as outlined in the current global development plan. The current global development plan encompasses all activities with respect to the ongoing PRO₂TECT and INNO₂VATE clinical programs through the filing for marketing approval, as well as certain other studies. Under the Otsuka U.S. Agreement, subject to the terms of the Otsuka Funding Option, as described below, the Company controls and retains final decision‑making authority with respect to, among other things, the development of vadadustat. The Company’s obligations related to the conduct of the current global development plan include the associated manufacturing and supply services for vadadustat.

Under the Otsuka U.S. Agreement, the parties jointly conduct, and have equal responsibility for, all medical affairs, commercialization and non-promotional activities pursuant to underlying plans as agreed to by the parties. If approved by the FDA, the Company will provide vadadustat to Otsuka for commercialization pursuant to a separate supply agreement to be negotiated.

The activities under the Otsuka U.S. Agreement are governed by a joint steering committee, or JSC, formed by an equal number of representatives from the Company and Otsuka. The JSC coordinates and monitors the parties’ activities under the collaboration. Among other responsibilities, the JSC manages the overall strategic alignment between the parties, oversees the current global development plan and reviews other detailed plans setting forth the parties’ activities under the arrangement, including the medical affairs plan and commercialization and non-promotional activities plan. Additionally, the parties established a joint development committee, or JDC, which is comprised of an equal number of representatives from the Company and Otsuka. Among other responsibilities, the JDC shares information related to, and reviews and discusses activities and progress under, the current global development plan and any other development that may be conducted pursuant to the collaboration. The Company and Otsuka also established a joint manufacturing committee, or JMC, which is comprised of an equal number of representatives from each of the parties. Among other responsibilities, the JMC oversees the manufacturing plan and related manufacturing activities. In support of the potential commercialization of vadadustat, the parties established a joint commercialization committee, or JCC, which is comprised of an equal number of representatives from the Company and Otsuka. Among other responsibilities, the JCC oversees the activities and progress under the commercialization and non-promotional activities plan and all other sales and marketing activities. Subject to the terms of the Otsuka Funding Option, as described below, the Company has retained final decision‑making authority with respect to all development matters, U.S. pricing strategy and certain other key commercialization matters.

Under the terms of the Otsuka U.S. Agreement, the Company received a $125.0 million up-front, non-refundable, non-creditable cash payment in December 2016. In March 2017, the Company received a payment of approximately $33.8 million, which represents reimbursement for Otsuka’s share of costs previously incurred by the Company in implementing the current global development plan through December 31, 2016. Commencing in the third quarter of 2017, whereupon the Company had incurred a specified amount of incremental costs, Otsuka began to contribute, as required by the Otsuka U.S. Agreement, a percentage of the remaining costs incurred under the current global development plan. The Company estimates that Otsuka’s funding of the current global development plan costs subsequent to December 31, 2016 will total $167.5 million or more, depending on the actual costs incurred toward the current global development plan. The costs associated with the performance of any development activities in addition to those outlined in the current global development plan will be subject to a cost sharing or reimbursement mechanism to be determined by the parties. Costs incurred with respect to medical affairs and commercialization and non-promotional activities will generally be shared equally by the parties. In addition, if the costs incurred in completing the activities under the current global development plan exceed a certain threshold, or the Cost Threshold, then the Company may elect to require Otsuka to increase the aggregate percentage of current global development costs it funds under the Otsuka U.S. Agreement and the Otsuka International Agreement, as defined below, from 52.5% to 80%, or the Otsuka Funding Option. In such event, the excess of the payments made under such election and Otsuka’s allocated share of the current global development costs is fully creditable against future payments due to the Company under the arrangement, provided that future payments due to the Company may not be reduced by more than 50% in any calendar year and any remaining creditable amount above 50% in any calendar year will be applie

Consolidated Statements of Stockholders' Equity (Parenthetical)	12 Months Ended
	Dec. 31, 2016 shares
Statement Of Stockholders Equity [Abstract]
Treasury shares retired	(8,643)