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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________

Commission File Number 001-36352
AKEBIA THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-8756903
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
   
 245 First Street, Cambridge, MA
 02142
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (617871-2098
n/a
(Former name, former address and formal fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.00001 per shareAKBAThe Nasdaq Global Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
ý
Accelerated filer
    
Non-accelerated filer¨Smaller reporting company
    
  Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Outstanding at October 31, 2021
174,960,413



NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that are being made pursuant to the provisions of the U.S. Private Securities Litigation Reform Act of 1995 with the intention of obtaining the benefits of the “safe harbor” provisions of that Act. All statements contained in this Quarterly Report on Form 10‑Q other than statements of historical fact are forward-looking statements. These forward-looking statements may be accompanied by words such as “anticipate,” “believe,” “build,” “can,” “contemplate,” “continue,” “could,” “should,” “designed,” “estimate,” “project,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “plan,” “possible,” “potential,” “predict,” “strategy,” “seek,” “target,” “will,” “would,” and other words and terms of similar meaning, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, statements about:
the potential therapeutic benefits, safety profile, and effectiveness of vadadustat; 
establishing vadadustat as a new oral standard of care for treatment of adult patients with anemia due to chronic kidney disease;
the timing, investment and associated activities involved in the continued commercialization of Auryxia® (ferric citrate), its growth opportunities and Akebia's ability to execute thereon;
the potential indications, demand and market opportunity, potential and acceptance of Auryxia and vadadustat, if approved, including the size of eligible patient populations; 
the timing of or likelihood of regulatory filings and approvals, including labeling or other restrictions, such as the anticipated timing of a response by the U.S. Food and Drug Administration, or FDA, to our New Drug Application for vadadustat and our planned filing of a E.U. Marketing Authorization Application for vadadustat with the European Medicines Agency, the likelihood of approval of vadadustat and our outlook related thereto, and potential indications for vadadustat; 
the potential therapeutic applications of the hypoxia inducible factor pathway; 
our pipeline and portfolio, including its potential, and our related research and development activities; 
our competitive position, including estimates, developments and projections relating to our competitors and their products and product candidates, and our industry; 
our expectations with respect to (i) the ongoing anticipated financial impact and potential benefits to us related to our merger with Keryx Biopharmaceuticals, Inc., or Keryx, that was completed on December 12, 2018, (ii) integration of the businesses subsequent to the merger, and (iii) other matters related to the merger;
our expectations, projections and estimates regarding our capital requirements, need for additional capital, financing our future cash needs, costs, expenses, revenues, capital resources, cash flows, financial performance, profitability, tax obligations, liquidity, growth, contractual obligations, the period of time our cash resources and collaboration funding will fund our current operating plan, our internal control over financial reporting and disclosure controls and procedures, and remediation of the material weakness we have identified in our internal control over financial reporting relating to our inventory process or any future deficiencies or material weaknesses in our internal controls and procedures;
the direct or indirect impacts of the coronavirus 2 (SARS-CoV-2) pandemic on our business, operations and the markets and communities in which we and our partners, collaborators, vendors, and customers operate;
our manufacturing, supply and quality matters and any recalls, write-downs, impairments or other related consequences or potential consequences; 
estimates, beliefs and judgments related to the valuation of intangible assets, goodwill, contingent consideration, debt and other assets and liabilities, including our impairment analysis and our methodology and assumptions regarding fair value measurements;

the timing of the availability and disclosure of clinical trial data and results;
our and our collaborators’ strategy, plans and expectations with respect to the development, manufacturing, supply, commercialization, launch, marketing and sale of Auryxia and vadadustat, if approved, and the associated timing thereof; 



the designs of our studies, and the type of information and data expected from our studies and the expected benefits thereof; 
our ability to maintain any marketing authorizations we currently hold or will obtain, including our marketing authorizations for Auryxia and our ability to complete post-marketing requirements with respect thereto;
our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms and processes on a timely basis, or at all, with third-party payors for Auryxia and vadadustat, if approved;
the targeted timing of enrollment of our clinical trials; 
the timing of initiation of our clinical trials and plans to conduct preclinical and clinical studies in the future; 
the timing and amounts of payments from or to our collaborators and licensees, and the anticipated arrangements and benefits under our collaboration and license agreements, including with respect to milestones and royalties; 
our intellectual property position, including obtaining and maintaining patents, and the timing, outcome and impact of administrative, regulatory, legal and other proceedings relating to our patents and other proprietary and intellectual property rights, as well as Abbreviated New Drug Applications filed by generic drug manufacturers and potential FDA approval thereof, and associated patent infringement suits that we have filed or may file, or other actions that we may take against such companies, and the timing and resolution thereof;
expected ongoing reliance on third parties, including with respect to the development, manufacturing, supply and commercialization of Auryxia and vadadustat, if approved;
accounting standards and estimates, their impact, and their expected timing of completion;
estimated periods of performance of key contracts;
our facilities, lease commitments, and future availability of facilities;
cybersecurity;
insurance coverage;
management of our key personnel, including our management team, and our employees, including employee compensation, employee relations, and our ability to attract, train and retain high quality employees;
the implementation of our business model, current operating plan, and strategic plans for our business, product candidates and technology, and business development opportunities including potential collaborations, alliances, mergers, acquisitions or licensing of assets; and
the timing, outcome and impact of current and any future legal proceedings.

Any or all of these forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. These forward-looking statements involve risks and uncertainties, including those that are discussed below under the heading "Risk Factor Summary", and the risk factors identified further in Part II, Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q and elsewhere in this Quarterly Report on Form 10-Q, that could cause our actual results, financial condition, performance or achievements to be materially different from those indicated in these forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason. Unless otherwise stated, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

This Quarterly Report on Form 10-Q also contains estimates and other information concerning our industry and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Unless otherwise expressly stated, we obtained this industry, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.




In this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise requires, references to “Akebia,” “we,” “us,” “our,” “the Company,” and similar references refer to Akebia Therapeutics, Inc. and, where appropriate, its subsidiaries, including Keryx.

AURYXIA®, AKEBIA Therapeutics®, VafseoTM and their associated logos are trademarks of Akebia and/or its affiliates. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. All website addresses given in this Quarterly Report on Form 10-Q are for information only and are not intended to be an active link or to incorporate any website information into this document.



RISK FACTORS SUMMARY

Investing in our common stock involves numerous risks, including the risks summarized below and described in further detail in “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects. These risks include, but are not limited to, the following:
We have incurred significant losses since our inception, and anticipate that we will continue to incur significant losses and cannot guarantee when, if ever, we will become profitable or attain positive cash flows;
We will require substantial additional financing to achieve our goals. A failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts;
Our obligations in connection with the Loan Agreement with BioPharma Credit PLC, BioPharma Credit Investments V (Master) LP and BPCR Limited Partnership could adversely affect our financial condition and restrict our operations;
Our Royalty Interest Acquisition Agreement with HealthCare Royalty Partners IV, L.P. contains various covenants and other provisions, which, if violated, could materially adversely affect our financial condition;
Royalties from commercial sales of vadadustat under our Collaboration Agreement with Mitsubishi Tanabe Pharma Corporation will likely fluctuate and could impact our rights to receive future payments from our Royalty Interest Acquisition Agreement with HealthCare Royalty Partners IV, L.P.;
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product and product candidates on unfavorable terms to us;
We may engage in strategic transactions to acquire assets, businesses, or rights to products, product candidates or technologies or form collaborations or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense;
We may fail to realize the anticipated benefits of our merger with Keryx, those benefits may take longer to realize than expected, and we may encounter significant integration difficulties and liabilities, which may have a material adverse effect on our business and financial position;
Our business has been and may continue to be, directly or indirectly, adversely affected by the COVID-19 pandemic;
Our ability to successfully commercialize any approved product, including our ability to achieve their widespread market acceptance, is critical to the success of our business;
If we are unable to maintain sales and marketing capabilities or to enter into additional agreements with third parties, we may not be successful in commercializing Auryxia, vadadustat, if approved, and any other product candidate that may be approved;
If we are unable to obtain or maintain contracts with key distribution partners, or adequate or favorable reimbursement for our products, our business could be materially harmed;
We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully than, we do;
The commercialization of Riona and VafseoTM in Japan and our current and potential future efforts with respect to the development and commercialization of our products and product candidates outside of the United States subject us to a variety of risks associated with international operations, which could materially adversely affect our business;
In addition to Auryxia, we will continue to depend heavily on the success of our product candidate, vadadustat, for which we submitted an NDA to the FDA, which was accepted for filing in May 2021. Clinical drug development involves a lengthy and expensive process with an uncertain outcome. We will incur additional costs in connection with, and may experience delays in completing, or ultimately be unable to complete, the development and commercialization of vadadustat and any other product candidates;
We may find it difficult to enroll patients in our clinical studies, which could delay or prevent clinical studies of Auryxia, vadadustat or any other product or product candidate, including those that may be in-licensed or acquired;
Conducting clinical trials outside of the United States makes us subject to additional risks and complexities and we may not complete such trials successfully, in a timely manner, or at all, which could affect our ability to obtain regulatory approvals;
Auryxia, vadadustat or any other product and product candidate, including those that may be in-licensed or acquired, may cause undesirable side effects or have other properties that delay or limit their commercial potential, or in the case of vadadustat, prevent its marketing approval;
We may not be successful in our efforts to identify, acquire, discover, develop and commercialize additional products or product candidates, which could impair our ability to grow our business;
We may not be able to obtain marketing approval for, or successfully commercialize, vadadustat, or we may experience significant delays in doing so, any of which would materially harm our business;



Products approved for marketing are subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, or product candidates, when and if any of them is approved;
We are subject to a complex regulatory scheme that requires significant resources to ensure compliance. Failure to comply with applicable laws could subject us to government scrutiny or government enforcement, potentially resulting in costly investigations and/or fines or sanctions, or impacting our relationships with key regulatory agencies such as the U.S. Food and Drug Administration, the U.S. Securities and Exchange Commission or the European Medicines Agency;
Our relationships with healthcare providers, physicians and third party payors are subject to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security, and other healthcare laws and regulations, which, in the event of a violation, could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings;
If the licensor of certain intellectual property relating to Auryxia terminates, modifies or threatens to terminate existing contracts or relationships with us, our business may be materially harmed;
We rely on third parties to conduct our clinical studies and certain of our preclinical studies for our product and product candidates. If they do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to optimize the commercialization of Auryxia or obtain marketing approval for or commercialize vadadustat or any other product candidates, and our business could be substantially harmed;
We rely on third parties to conduct all aspects of our product manufacturing. The loss of these manufacturers, their failure to supply us on a timely basis, or their failure to successfully carry out their contractual duties or comply with regulatory requirements or guidance could cause delays in or disruptions to our supply chain and substantially harm our business;
We may seek to establish additional collaborations and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans;
If we are unable to adequately protect our intellectual property, third parties may be able to use our intellectual property or develop similar intellectual property, which could adversely affect our ability to compete in the market;
We may not be able to protect our intellectual property rights throughout the world;
If we fail to attract, keep and motivate senior management and key personnel, we may be unable to successfully develop and commercialize any product candidates and approved product(s);
Our employees, independent contractors, principal investigators, contract research organizations, contract manufacturing organizations, consultants and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading laws and regulations;
We may encounter difficulties in managing our growth and expanding our operations successfully;
Our stock price has been and may continue to be volatile, which could result in substantial losses for purchasers of our common stock and lawsuits against us and our officers and directors;
We have identified a material weakness in our internal control over financial reporting relating to our inventory process. If we are not able to remediate this material weakness, or if we experience additional material weaknesses or other deficiencies in the future or otherwise fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting which would harm our business and the trading price of our common stock; and
We will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance initiatives and corporate governance practices.



Akebia Therapeutics, Inc.

Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I—FINANCIAL INFORMATION
Item 1.  Financial Statements.

AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
September 30,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents$207,204 $228,698 
Available for sale securities 39,992 
Inventory33,688 61,017 
Accounts receivable, net49,690 26,853 
Prepaid expenses and other current assets39,502 14,877 
Total current assets330,084 371,437 
Property and equipment, net7,196 8,622 
Operating lease assets23,192 26,876 
Goodwill55,053 55,053 
Other intangible assets, net117,138 144,170 
Other assets69,604 37,981 
Total assets$602,267 $644,139 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$28,809 $41,308 
Accrued expenses and other current liabilities144,704 130,624 
Short-term deferred revenue15,692 15,214 
Total current liabilities189,205 187,146 
Deferred revenue, net of current portion27,965 25,345 
Operating lease liabilities, net of current portion20,257 24,621 
Derivative liability1,930 2,420 
Long-term debt, net97,230 96,378 
Liability related to sale of future royalties, net51,137  
Other non-current liabilities77,393 60,611 
Total liabilities465,117 396,521 
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock $0.00001 par value, 25,000,000 shares authorized; 0 shares issued and
   outstanding at September 30, 2021 and December 31, 2020
  
Common stock $0.00001 par value; 350,000,000 shares authorized at September 30, 2021 and December 31, 2020; 174,551,989 and 148,074,085 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
2 1 
Additional paid-in capital1,526,815 1,425,115 
Accumulated other comprehensive loss6 13 
Accumulated deficit(1,389,673)(1,177,511)
Total stockholders' equity137,150 247,618 
Total liabilities and stockholders' equity$602,267 $644,139 
 
See accompanying notes to unaudited condensed consolidated financial statements.
8


AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in thousands, except share and per share data)
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2021202020212020
Revenues:
Product revenue, net$36,753 $34,392 $100,120 $94,297 
License, collaboration and other revenue12,003 25,596 53,853 144,311 
Total revenues48,756 59,988 153,973 238,608 
Cost of goods sold:
Product6,933 24,239 76,012 92,840 
Amortization of intangibles9,011 6,106 27,032 24,307 
Impairment of intangible asset   115,527 
Total cost of goods sold15,944 30,345 103,044 232,674 
Operating expenses:
Research and development40,471 46,857 118,296 180,907 
Selling, general and administrative46,357 40,171 129,336 113,636 
License expense870 710 2,460 2,430 
Total operating expenses87,698 87,738 250,092 296,973 
Operating loss(54,886)(58,095)(199,163)(291,039)
Other income (expense):
Interest expense(5,085)(2,274)(14,853)(6,554)
Other income427 410 1,854 1,136 
Net loss$(59,544)$(59,959)$(212,162)$(296,457)
Net loss per share - basic and diluted$(0.34)$(0.42)$(1.30)$(2.18)
Weighted-average number of common shares - basic and diluted173,782,151 143,314,729 163,050,769 136,230,889 
Comprehensive loss:
Net loss$(59,544)$(59,959)$(212,162)$(296,457)
Other comprehensive gain (loss) - unrealized gain (loss) on debt securities 15 (7)6 
Total comprehensive loss$(59,544)$(59,944)$(212,169)$(296,451)
 
See accompanying notes to unaudited condensed consolidated financial statements.


9


AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share data)
 Common Stock  
 Number of
Shares
$0.00001
Par Value
Additional Paid-In
Capital
Unrealized
Gain/(Loss)
Accumulated
Deficit
Total Stockholders'
Equity
Balance at December 31, 2019121,674,568 $1 $1,188,810 $ $(794,054)$394,757 
Issuance of common stock, net of
   issuance costs
7,973,967 — 56,575 — — 56,575 
Proceeds from sale of stock under
   employee stock purchase plan
115,024 — 451 — — 451 
Share-based compensation expense— — 4,916 — — 4,916 
Exercise of options64,126 — 412 — — 412 
Restricted stock unit vesting423,755 — — — — — 
Net loss— — — — (60,747)(60,747)
Balance at March 31, 2020130,251,440 $1 $1,251,164 $ $(854,801)$396,364 
Issuance of common stock, net of
   issuance costs
12,650,000 — 142,383 — — 142,383 
Share-based compensation expense— — 6,864 — — 6,864 
Exercise of options48,103 — 409 — — 409 
Restricted stock unit vesting179,866 — — — — — 
Unrealized loss— — — (9)— (9)
Net loss— — — — (175,751)(175,751)
Balance at June 30, 2020143,129,409 $1 $1,400,820 $(9)$(1,030,552)$370,260 
Proceeds from sale of stock under
employee stock purchase plan
120,634 — 649 — — 649 
Share-based compensation expense— — 6,592 — — 6,592 
Exercise of options54,404 — 405 — — 405 
Restricted stock unit vesting24,205 — — — — — 
Unrealized gain— — — 15 — 15 
Net loss— — — — (59,959)(59,959)
Balance at September 30, 2020143,328,652 $1 $1,408,466 $6 $(1,090,511)$317,962 
Balance at December 31, 2020148,074,085 $1 $1,425,115 $13 $(1,177,511)$247,618 
Issuance of common stock, net of
   issuance costs
9,228,017 1 29,497 — — 29,498 
Proceeds from sale of stock under
   employee stock purchase plan
154,276 — 367 — — 367 
Share-based compensation expense— — 5,992 — — 5,992 
Restricted stock unit vesting1,063,711 — — — — — 
Unrealized loss— — — (4)— (4)
Net loss— — — — (69,580)(69,580)
Balance at March 31, 2021158,520,089 $2 $1,460,971 $9 $(1,247,091)$213,891 
Issuance of common stock, net of
   issuance costs
10,446,160 — 37,266 — — 37,266 
Share-based compensation expense— — 6,515 — — 6,515 
Restricted stock unit vesting685,174 — — — — — 
Unrealized loss— — — (3)— (3)
Net loss— — — — (83,038)(83,038)
Balance at June 30, 2021169,651,423 $2 $1,504,752 $6 $(1,330,129)$174,631 
Issuance of common stock, net of
   issuance costs
4,730,466 — 16,092 — — 16,092 
Proceeds from sale of stock under
   employee stock purchase plan
152,917 — 379 — — 379 
Share-based compensation expense— — 5,592 — — 5,592 
Restricted stock unit vesting17,183 — — — — — 
Net loss— — — — (59,544)(59,544)
Balance at September 30, 2021174,551,989 $2 $1,526,815 $6 $(1,389,673)$137,150 
 
See accompanying notes to unaudited condensed consolidated financial statements
10


AKEBIA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
 Nine Months Ended
 September 30, 2021September 30, 2020
Operating activities:
Net loss$(212,162)$(296,457)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,485 1,559 
Amortization of intangibles27,032 24,307 
     Intangible asset impairment charge 115,527 
Amortization of premium/discount on investments(15)(31)
Non-cash interest expense related to sale of future royalties6,779  
Non-cash royalty revenue related to sale of future royalties(425) 
Non-cash interest expense852 1,255 
Non-cash operating lease expense(1,415)(1,660)
Fair value step-up of inventory sold or written off21,575 39,522 
Write-down of inventory7,126 18,608 
Change in excess inventory purchase commitments15,376 10,304 
Stock-based compensation18,099 18,372 
Change in fair value of derivative liability(490)340 
Changes in operating assets and liabilities:
Accounts receivable(22,837)14,398 
Inventory(35,282)6,415 
Prepaid expenses and other current assets(25,020)(2,279)
Other long-term assets4,728 (6,518)
Accounts payable(14,933)3,028 
Accrued expense15,099 (6,072)
Operating lease liabilities1,173 1,032 
Deferred revenue3,098 (21,256)
Net cash used in operating activities(190,157)(79,606)
Investing activities:
Purchase of equipment(59) 
Purchase of available for sale securities (99,932)
Proceeds from the maturities of available for sale securities40,000 245 
Net cash provided by (used in) investing activities39,941 (99,687)
Financing activities:
Proceeds from sale of future royalties, net44,783  
Proceeds from the issuance of common stock, net of issuance costs82,799 198,883 
Proceeds from the sale of stock under employee stock purchase plan746 1,100 
Proceeds from the exercise of stock options 1,226 
Net cash provided by financing activities128,328 201,209 
Increase (decrease) in cash, cash equivalents, and restricted cash(21,888)21,916 
Cash, cash equivalents, and restricted cash at beginning of the period231,132 149,804 
Cash, cash equivalents, and restricted cash at end of the period$209,244 $171,720 
Non-cash financing activities
Unpaid offering costs$57 $75 
 
See accompanying notes to unaudited condensed consolidated financial statements
11


Akebia Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.Nature of Organization and Operations

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

Since inception, the Company has devoted most of its resources to research and development, including its preclinical and clinical development activities, and providing general and administrative support for these operations. The Company began recording revenue from the U.S. sales of Auryxia and revenue from sublicensing rights to Auryxia in Japan from the Company’s Japanese partners, Japan Tobacco, Inc. and its subsidiary Torii Pharmaceutical Co., Ltd., collectively JT and Torii, on December 12, 2018 following the consummation of a merger with Keryx Biopharmaceuticals, Inc., or Keryx, or the Merger. Additionally, following regulatory approval of vadadustat in Japan, the Company began recognizing royalty revenues from Mitsubishi Tanabe Pharma Corporation, or MTPC, from the sale of Vafseo in August 2020. In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under its Collaboration Agreement with MTPC, or the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 5 for additional information). The Company has not generated a profit to date and may never generate profits from product sales. Vadadustat and the Company’s other potential product candidates are subject to long development cycles, and the Company may be unsuccessful in its efforts to develop, obtain marketing approval for or market vadadustat and its other potential product candidates. If the Company does not successfully commercialize Auryxia, vadadustat or any other potential product candidate, if approved, it may be unable to achieve profitability.
 
The Company’s management completed its going concern assessment in accordance with Accounting Standards Codification, or ASC, 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, or 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 this Quarterly Report on Form 10-Q. If the Company receives regulatory approval of vadadustat in the U.S., the Company expects to incur significant incremental costs to its current operating plan to commercialize vadadustat, including costs of marketing, manufacturing and distribution. The potential timely regulatory approval of vadadustat and the receipt of associated regulatory milestones is an important source of funding of the Company's cash runway. However, the Company will require additional funding to fund its operating plan beyond the next twelve months. There are numerous risks and uncertainties associated with research, development and commercialization activities, and actual results could vary materially as a result of a number of factors, many of which are outside of the Company's control. 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 to pursue development and commercial activities related to Auryxia and vadadustat or any additional products and product candidates, including those that may be in-licensed or acquired. The Company expects to finance future cash needs through product
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revenue, public or private equity or debt transactions, payments from its collaborators, strategic transactions, or a combination of these approaches. However, additional financing may not be available to the Company on acceptable terms, or at all. If the Company is unable to raise capital in sufficient amounts when needed or on attractive terms, it may not be able to pursue development and commercial activities related to Auryxia and vadadustat or any additional products and product candidates, including those that may be in-licensed or acquired.

2.Summary of Significant Accounting Policies

Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S., or GAAP, for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.

In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. Interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021 or any other future period.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Management has determined that the Company operates in one segment, which is the business of developing and commercializing novel therapeutics for people with kidney disease. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission on February 25, 2021, or the 2020 Annual Report on Form 10-K.

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2021 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K and are updated below as necessary.

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

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

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

3.Product Revenue and Reserves for Variable Consideration
To date, the Company’s only source of product revenue has been from the U.S. sales of Auryxia. Total net product revenue was $36.8 million and $34.4 million for the three months ended September 30, 2021 and 2020, respectively, and $100.1 million and $94.3 million for the nine months ended September 30, 2021 and 2020, respectively. The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2021 and 2020 (in thousands):
 
 Chargebacks
and Discounts
Rebates, Fees
and other
Deductions
ReturnsTotal
Balance at December 31, 2020$802 $39,912 $649 $41,363 
Current provisions related to sales in current year8,911 105,432 4,866 119,209 
Adjustments related to prior year sales(1)(1,590) (1,591)
Credits/payments made(8,593)(99,518)(4,979)(113,090)
Balance at September 30, 2021$1,119 $44,236 $536 $45,891 
Balance at December 31, 2019$738 $30,552 $253 $31,543 
Current provisions related to sales in current year7,833 107,421 4,184 119,438 
Adjustments related to prior year sales(85)703 2,328 2,946 
Credits/payments made(7,701)(96,807)(5,991)(110,499)
Balance at September 30, 2020$785 $41,869 $774 $43,428 
 
Chargebacks, discounts and returns are recorded as a direct reduction of revenue on the unaudited condensed consolidated statement of operations with a corresponding reduction to accounts receivable on the unaudited condensed consolidated balance sheets. Rebates, distribution-related fees, and other sales-related deductions are recorded as a reduction in revenue on the unaudited condensed consolidated statement of operations with a corresponding increase to accrued liabilities or accounts payable on the unaudited condensed consolidated balance sheets.

Accounts receivable, net related to product sales was approximately $22.2 million and $21.9 million as of September 30, 2021 and December 31, 2020, respectively.

4.License, Collaboration and Other Significant Agreements
During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following revenues from its license, collaboration and other significant agreements and had the following deferred revenue balances as of September 30, 2021:
 
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 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
License, Collaboration and Other Revenue:(in thousands)(in thousands)
MTPC Agreement$2,555 $373 $7,167 $15,373 
Otsuka U.S. Agreement6,144 16,256 28,988 80,721 
Otsuka International Agreement1,860 7,243 13,532 39,445 
Total Proportional Performance Revenue$10,559 $23,872 $49,687 $135,539 
JT and Torii1,444 1,183 4,093 4,049 
MTPC Other Revenue 541 73 4,723 
Total License, Collaboration and Other Revenue$12,003 $25,596 $53,853 $144,311 
 
 September 30, 2021
 Short-TermLong-TermTotal
Deferred Revenue:(in thousands)
MTPC Agreement$4,883 $ $4,883 
Otsuka U.S. Agreement$6,308 $16,664 $22,972 
Otsuka International Agreement4,501 6,623 11,124 
Vifor Agreement 4,678 4,678 
Total$15,692 $27,965 $43,657 

The following table presents changes in the Company’s contract assets and liabilities during the nine months ended September 30, 2021 and 2020 (in thousands):
Nine Months Ended September 30, 2021Balance at
Beginning of
Period
AdditionsDeductionsBalance at End
of Period
Contract assets:    
Accounts receivable(1)$3,045 $38,795 $(20,427)$21,413 
Prepaid expenses and other current assets$1,722 $1,725 $(5)$3,442 
Contract liabilities:
Deferred revenue$40,559 $65,890 $(62,792)$43,657 
Accounts payable$7,227 $ $(7,227)$ 
Accrued expenses and other current liabilities$10,000 $ $ $10,000 
Nine Months Ended September 30, 2020
Contract assets:
Accounts receivable(1)$15,822 $143,148 $(156,209)$2,761 
Prepaid expenses and other current assets$ $1,248 $ $1,248 
Contract liabilities:
Deferred revenue$72,950 $110,295 $(131,551)$51,694 
Accounts payable$ $10,097 $(5,651)$4,446 
Accrued expenses and other current liabilities$ $615 $(615)$ 
 
(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 as of September 30, 2021 and 2020 and December 31, 2020 and 2019. Also excludes accounts receivable related to amounts due to the Company from product sales which are included in the accompanying unaudited condensed consolidated balance sheet as of September 30, 2021 and December 31, 2020.

During the three and nine months ended September 30, 2021 and 2020, 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):
 
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 Three Months Ended September 30,Nine Months Ended September 30,
Revenue Recognized in the Period from:2021202020212020
Amounts included in deferred revenue at the beginning of the period$9,159 $6,537 $20,363 $29,203 
Performance obligations satisfied in previous periods$ $20,648 $ $21,346 
 
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. A more detailed description of this collaboration agreement can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2020 Annual Report on Form 10-K. In February 2021, the Company entered into a royalty interest acquisition agreement with HealthCare Royalty Partners IV, L.P., or the Royalty Agreement, whereby the Company sold its right to receive royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 5 for additional information).
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 in the MTPC Territory, (ii) clinical supply of vadadustat, (iii) knowledge transfer, (iv) Phase 2 dosing study research services, and (v) rights to future know-how.
The Company identified two performance obligations in connection with its material promises under the MTPC Agreement as follows: (i) License, Research and Clinical Supply Performance Obligation and (ii) Rights to Future Know-How Performance Obligation. 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 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 and determined it is immaterial. As such, the Company did not develop a best estimate of standalone selling price for the License, Research and Clinical Supply Performance Obligation and allocated the entire transaction price to this performance obligation. The deliverables associated with the License, Research and Clinical Supply Performance Obligation were satisfied as of June 30, 2018.
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 were included in the transaction price at inception, as all other milestone amounts were fully constrained. Subsequent to inception, the transaction price also included certain development and regulatory milestones, as described below. As part of its evaluation of the constraint, the Company considers 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. 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 re-evaluates the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company determined that the remaining consideration that may be payable to the Company subsequent to MTPC's commercial launch of VafseoTM in the third quarter of 2020 is quarterly royalties on net sales, sales milestones, and certain regulatory milestones.
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As of September 30, 2021, the transaction price was 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, (iv) $10.0 million in development milestones received, (v) $25.0 million in regulatory milestones received, comprised of $10.0 million relating to the NDA filing in Japan and $15.0 million relating to regulatory approval of vadadustat in Japan, and (vi) $0.9 million in royalties from net sales of Vafseo. As of September 30, 2021, all development milestones and $25.0 million in regulatory milestones have been achieved. No other regulatory milestones have been assessed as probable of being achieved and as a result 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, for which all deliverables have been completed. The Company recognized $0.3 million and $0.4 million of revenue from MTPC royalties for the three and nine months ended September 30, 2021, respectively. The Company recognized a $15.0 million regulatory milestone relating to regulatory approval of vadadustat in Japan as revenue during the nine months ended September 30, 2020. As noted above, in February 2021, the Company entered into the Royalty Agreement, whereby the Company sold its right to receive these royalties and sales milestones under the MTPC Agreement, subject to certain caps and other terms and conditions (see Note 5 for additional information). The revenue is classified as collaboration revenue in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. As of September 30, 2021, the Company recorded $0.2 million in accounts receivable, no deferred revenue, and no contract assets. There were no asset or liability balances classified as long-term in the unaudited condensed consolidated balance sheet as of September 30, 2021.
Supply of Drug Product to MTPC
In March 2020, in connection with the MTPC Agreement, the Company and MTPC entered into a letter agreement, pursuant to which the Company agreed to supply MTPC with certain vadadustat process validation drug product for commercial use and MTPC agreed to reimburse the Company for certain manufacturing-related expenses. In connection with this arrangement, the Company invoiced the upfront payment of $10.4 million, which it received during the three months ended June 30, 2020. The Company does not recognize revenue under this arrangement until delivery has occurred and risk of loss passes to MTPC. No revenues were recognized during the three and nine months ended September 30, 2021 and approximately $0.5 million and $4.5 million of revenue was recognized during the three and nine months ended September 30, 2020, respectively, for drug product that was delivered during the applicable period. As of September 30, 2021, the Company recorded no accounts receivable, no deferred revenue, $3.0 million in other current liabilities and $0.4 million in other non-current liabilities for drug product that was subject to return by MTPC.
On July 15, 2020, the Company and its collaboration partner MTPC entered into a supply agreement, or the MTPC Supply Agreement. The MTPC Supply Agreement includes the terms and conditions under which the Company will supply vadadustat drug product to MTPC for commercial use in Japan and certain other Asian countries, as contemplated by the MTPC Agreement. A more detailed description of this supply agreement can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2020 Annual Report on Form 10-K.

The Company recognized $2.2 million and $6.7 million of revenue under the MTPC Supply Agreement during the three and nine months ended September 30, 2021, respectively. During the nine months ended September 30, 2021, the Company invoiced MTPC for $13.4 million in payments for vadadustat drug product ordered by MTPC. As of September 30, 2021, the Company recorded $4.5 million in accounts receivable, $4.9 million in deferred revenue, $16.3 million in other current liabilities and $5.8 million in other non-current liabilities.
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 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 the United States 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 Otsuka U.S. Agreement. A more detailed description of this collaboration agreement can be found in Note 4 of the Notes to the Consolidated Financial Statements in the 2020 Annual Report on Form 10-K.

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Revenue Recognition
The Company evaluated the elements of the Otsuka U.S. Agreement in accordance with the provisions of ASC 606 and concluded that the contract counterparty, Otsuka, is a customer. The Company’s arrangement with Otsuka contains the following material promises under the contract at inception: (i) license under certain of the Company’s intellectual property to develop, perform medical affairs activities with respect to and conduct non-promotional and commercialization activities related to vadadustat and products containing or comprising vadadustat, (ii) development services to be performed pursuant to the current global development plan, (iii) rights to future intellectual property, and (iv) joint committee services.

The Company has identified