Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and GoodwillIntangible Assets

The following table presents the Company’s intangible assets (in thousands):


	December 31, 2021
	Gross Carrying Value		Accumulated Amortization		ASC 842 Adjustment		Total
Acquired intangible assets:
Developed product rights for Auryxia	213,603		(105,476)		—		108,127
Total	$	213,603	$	(105,476)	$	—	$	108,127


	December 31, 2020
	Gross Carrying Value		Accumulated Amortization		ASC 842 Adjustment		Total
Acquired intangible assets:
Developed product rights for Auryxia	$	213,603	$	(69,433)	$	—	$	144,170
Favorable lease	545		(5)		(540)		—
Total	$	214,148	$	(69,438)	$	(540)	$	144,170

On December 12, 2018, the Company completed the Merger, whereby it acquired certain definite-lived intangible assets, including the developed product rights for Auryxia and a favorable lease. The Company amortizes its definite-lived intangible assets acquired as part of the Merger using the straight-line method, which is considered the best estimate of economic benefit, over its estimated useful life of six years. As a result of the adoption of ASC 842 on January 1, 2019, the Company reclassed the remaining balance of the favorable lease intangible asset into the operating lease asset. The Company recorded $36.0 million, $31.5 million and $36.4 million in amortization expense related to the developed product rights for Auryxia during the years ended December 31, 2021, 2020 and 2019, respectively. Estimated future amortization expense for the intangible asset as of December 31, 2021 is as follows (in thousands):


	Total
2022	$	36,043
2023	36,042
2024	36,042
2025	—
2026	—
Thereafter	—
	$	108,127

Auryxia Intangible Asset Impairment

In the second quarter of 2020, in connection with a routine business review, the Company reduced its short-term and long-term Auryxia revenue forecast. This reduction was primarily driven by the compounding impact of the September 2018 CMS decision that rescinded Medicare Part D coverage of Auryxia for the IDA Indication and the related imposition by CMS of a prior authorization requirement for Auryxia for the Hyperphosphatemia Indication. As a result, the Company determined indicators of impairment existed for the developed product rights for Auryxia and performed an undiscounted cash flow analysis pursuant to ASC 360-10, Impairment or Disposal of Long-lived Assets, to determine if the cash flows expected to be generated by the Auryxia asset group over the estimated remaining useful life of the primary assets were sufficient to recover the carrying value of the Auryxia asset group. Based on this analysis, the undiscounted cash flows were not sufficient to recover the carrying value of the Auryxia asset group. As a result, the Company was required to perform Step 3 of the impairment test to determine the fair value of the Auryxia asset group.

To estimate the fair value, the Company performed a business enterprise valuation for the Auryxia asset group using the income approach, which is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to the asset group and then discounting the after-tax cash flows to present value using a risk-adjusted discount rate. Key estimates and assumptions used in the valuations included projected revenues and expenses related to the asset, estimated contributory asset charges, and a risk-adjusted discount rate of 9.5% to calculate the present value of the future expected cash inflows. The Company believes its assumptions are consistent with the plans and estimates that a market participant would use

to manage the business. The discount rates used are intended to reflect the risks inherent in future cash flow projections and were based on an estimate of the weighted average cost of capital, or WACC, of market participants relative to the Auryxia asset group.

As a result of this analysis, the fair value of the Auryxia asset group was below its carrying value, and the Company recorded an impairment charge of $115.5 million during the three months ended June 30, 2020 and made a corresponding adjustment to the estimated useful life of the developed product rights for Auryxia from nine years to seven years. The impairment charge has been entirely allocated to the Company’s only intangible asset, the developed product rights for Auryxia, as all other long-lived assets had fair values that were either equal to or greater than their carrying value. Per ASC 360-10, the carrying amount of a long-lived asset of the group would not be reduced below its fair value. The Company believes its assumptions used to determine the fair value of the Auryxia asset group are reasonable. In the event the estimates and assumptions used in the valuation of the Auryxia asset group, including the forecasted projections, change in the future, additional impairment charges could be recorded in the future.

In the fourth quarter of 2020, as part of the Company's routine forecasting process, the Company reassessed and prospectively adjusted the estimated useful life of the developed product rights for Auryxia from seven years to six years. This was not deemed an impairment indicator as of December 31, 2020.

Goodwill

Goodwill was $55.1 million as of December 31, 2021 and 2020, derived as follows (in thousands):


Total Merger consideration	$	527,754
Less: Fair value of identified acquired assets and liabilities, net	(472,701)
Goodwill	$	55,053

The Company operates in one operating segment which the Company considers to be the only reporting unit. Goodwill is evaluated for impairment at the reporting unit level on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that an impairment may exist. There were no impairments of goodwill during the years ended December 31, 2021, 2020 and 2019.