COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Cambridge Leases

The Company leases approximately 65,167 square feet of office and lab space in Cambridge, Massachusetts under a lease which was most recently amended in November 2020 (collectively, the Cambridge Lease). Under the Third Amendment to the Cambridge Lease (Third Amendment), executed in July 2016, total monthly lease payments under the initial base rent were approximately $0.2 million and are subject to annual rent escalations. In addition to such annual rent escalations, base rent payments for a portion of said premises commenced on January 1, 2017 in the monthly amount of approximately $22,000. The Fourth Amendment to the Cambridge Lease, executed in May 2017, provided additional storage space to the Company and did not impact rent payments. In April 2018, the Company entered into a Fifth Amendment to the Cambridge Lease (Fifth Amendment) for an additional 19,805 square feet of office space on the 12th floor. Monthly lease payments for the existing 45,362 square feet of office and lab space, under the Third Amendment, remain unchanged. The new space leased by the Company was delivered in September 2018 and additional monthly lease payments of approximately $0.1 million commenced in February 2019 and are subject to annual rent escalations, which commenced in September 2019. In November 2020, the Company entered into a Sixth Amendment to the Cambridge Lease (Sixth Amendment) to extend the term of the Cambridge Lease with respect to the lab space from November 30, 2021 to January 31, 2025. The Sixth Amendment includes two months of free rent starting in December 2020 and additional monthly lease payments of approximately $48,000, which commenced in December 2021, and is subject to annual rent escalations, which commenced in December 2022.

The term of the Cambridge Lease with respect to the office space expires on September 11, 2026, with one five-year extension option available. The renewal option in this real estate lease was not included in the calculation of the right-of-use asset and operating lease liability as the renewal is not reasonably certain. The term of the Cambridge Lease with respect to the lab space expires on January 31, 2025, with an extension option for one additional period through September 11, 2026. The renewal option in this real estate lease was included in the calculation of the right-of-use assets and operating lease liabilities as the renewal is reasonably certain. The lease agreements do not contain residual value guarantees. Operating lease costs were $1.4 million and $1.8 million for the three months ended June 30, 2023 and 2022, respectively, and $3.2 million and $3.6 million for the six months ended June 30, 2023 and 2022, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $1.4 million and $1.8 million for the three months ended June 30, 2023 and 2022, respectively, and $3.1 million and $3.7 million for the six months ended June 30, 2023 and 2022, respectively. The security deposit in connection with the Cambridge Lease is $1.7 million in the form of a letter of credit, which is included as restricted cash in prepaid expenses and other current assets in the Company’s unaudited condensed consolidated balance sheets as of June 30, 2023.

The Company has not entered into any material short-term leases or financing leases as of June 30, 2023.

Former Boston Lease

Previously, the Company leased 27,924 square feet of office space in Boston, Massachusetts (Boston Lease). In February 2022, the Company entered into the First Amendment to the Boston Lease (First Lease Amendment) to extend the term of the Boston Lease from February 2023 to July 2031. The First Lease Amendment included five months of free rent starting in March 2023 and monthly lease payments of $0.2 million commencing on August 1, 2023, with an annual rent escalation of approximately 2% commencing on August 1, 2024. In May 2023, the Company entered into an Assignment and Assumption of Lease Agreement (Lease Assignment Agreement) with LG Chem Life Sciences Innovation Center, Inc. (LG Chem), pursuant to which the Company assigned all of its rights, title, and interest in, to, and under the Boston Lease to LG Chem, or the Assignment. As part of the Lease Assignment Agreement, the Company made a payment to LG Chem of $1.3 million (Lease Assignment Amount) and LG Chem assumed all of the rights and obligations of the Company under the Boston Lease. Subsequent to the Assignment, the Company has no further obligations for rent or other payments under the Boston Lease. In accordance with ASC 842, Leases, the Company wrote off the right-of-use asset and lease liability associated with the Boston Lease, and recognized the difference between the right-of-use asset and the lease liability offset by the Assignment Amount as a loss on lease termination in the condensed consolidated statement of operations and comprehensive income (loss) of $0.5 million during the three and six months ended June 30, 2023. Under the terms of the Lease Assignment Agreement the Company was entitled to, and received back, its security deposit of $1.0 million as of June 30, 2023, which had been recorded as restricted cash in prepaid expenses and other current assets in the Company's condensed consolidated balance sheet as of December 31, 2022.

In September 2019, the Company entered into an agreement to sublease the Boston office space to Foundation Medicine, Inc.(Foundation). The sublease was subject and subordinate to the Boston Lease between the Company and the landlord. The term of the sublease commenced on October 16, 2019, upon receipt of the required consent from the landlord for the sublease

agreement, and expired on February 27, 2023. Foundation was obligated to pay the Company rent that approximated the rent due from the Company to its landlord with respect to the Boston Lease. Sublease rental income is recorded to other income in the condensed consolidated statement of operations and other comprehensive income (loss). The Company was obligated for all payment terms pursuant to the Boston Lease, and the Company guaranteed the obligations under the sublease. The Company did not record any sublease rental income for the three months ended June 30, 2023 and recorded $0.3 million in sublease rental income from Foundation during the six months ended June 30, 2023. The Company recorded sublease rental income of $0.4 million and $0.9 million during the three and six months ended June 30, 2022, respectively.

Future Lease Commitments

Future commitments under non-cancelable lease agreements are as follows:


Years ending December 31,	Operating Lease Commitments
Remainder of 2023	$	2,835
2024	5,740
2025	5,818
2026	3,613
Total lease commitments	$	18,006
Less: present value adjustment	(1,769)
Current and long-term operating lease liabilities	$	16,237

In arriving at the operating lease liabilities, the Company applied incremental borrowing rates ranging from 6.65% to 6.94%, which were based on the remaining lease term at either the date of adoption of ASC 842 or the effective date of any subsequent lease term extensions. As of June 30, 2023, the remaining lease term for the Cambridge Lease was 3.20 years.

Manufacturing and Unconditional Purchase Commitment Agreements

The Company's contractual obligations include a commercial supply agreement with Siegfried Evionnaz SA (Siegfried) to supply commercial drug substance for Auryxia.

Pursuant to the Master Manufacturing Services and Supply Agreement between the Company and Siegfried, as amended (the most recent amendment having been executed on February 28, 2023) (Siegfried Agreement), the Company has agreed to purchase a minimum quantity of drug substance of Auryxia at a predetermined price. The term of the Siegfried Agreement expires on December 31, 2024, unless otherwise agreed by the parties and subject to the Company's option to extend the term through December 31, 2026 by providing 12 months’ prior written notice to Siegfried. The Siegfried Agreement provides the Company and Siegfried with certain early termination rights. As of June 30, 2023, the Company is required to purchase a minimum quantity of drug substance for Auryxia annually at a total cost of approximately $20.8 million through the end of 2024.

On April 9, 2019, the Company and Esteve entered into the Esteve Agreement, which included the terms and conditions under which Esteve would manufacture vadadustat drug substance for commercial use. Pursuant to the Esteve Agreement, the Company provided rolling forecasts to Esteve on a quarterly basis, or the Esteve Forecast. The Esteve Forecast reflected the Company’s needs for vadadustat drug substance produced by Esteve over a certain number of months, represented as a quantity of vadadustat drug substance per calendar quarter. The parties agreed to a volume-based pricing structure under the Esteve Agreement. On December 16, 2022, the Company, MTPC, and Esteve executed the Esteve Assignment Agreement, pursuant to which the Supply Agreement between the Company and Esteve was assigned to MTPC. The Esteve Assignment Agreement transferred the rights and obligations of the Supply Agreement to MTPC, specifically including the obligations under certain purchase orders issued by the Company and accepted by Esteve. As such, the Company will have no further obligation to take delivery of or pay for product delivered by Esteve under the transferred Esteve Agreement and the purchase orders.

On March 11, 2020, the Company entered into a Supply Agreement with Patheon Inc. (Patheon) or the Patheon Agreement. The Patheon Agreement includes the terms and conditions under which Patheon will manufacture vadadustat drug product for commercial use. Pursuant to the Patheon Agreement, the Company provides Patheon a long-term forecast on an annual basis, as well as short-term forecasts on a quarterly basis, or the Patheon Forecast. The Patheon Forecast reflects the Company’s needs for commercial supply of vadadustat drug product produced by Patheon, represented as a quantity of drug product per calendar quarter. The parties have agreed to a volume-based pricing structure under the Patheon Agreement. The Patheon Agreement has an initial term beginning March 11, 2020 and ending June 30, 2023 and automatically renews for successive one-year terms unless either party gives the other party eighteen months' prior written notice. The current term of the Patheon Agreement ends

June 30, 2025. Pursuant to the Patheon Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug product from Patheon. As of June 30, 2023, the Company had a minimum commitment with Patheon for $1.9 million through the third quarter of 2023.

On April 2, 2020, the Company entered into a Supply Agreement with STA Pharmaceutical Hong Kong Limited, a subsidiary of WuXi AppTec (WuXi STA), as amended on April 15, 2021 (WuXi STA DS Agreement). The WuXi STA DS Agreement includes the terms and conditions under which WuXi STA will manufacture vadadustat drug substance for commercial use. Pursuant to the WuXi STA DS Agreement, the Company provides rolling forecasts to WuXi STA on a quarterly basis, or the WuXi STA DS Forecast. The WuXi STA DS Forecast reflects the Company’s needs for vadadustat drug substance produced by WuXi STA over a certain number of quarters. The parties have agreed to a volume-based pricing structure under the WuXi STA DS Agreement. The WuXi STA DS Agreement has an initial term of four years, beginning April 2, 2020 and ending April 2, 2024. Pursuant to the WuXi STA DS Agreement, the Company has agreed to purchase a certain percentage of the global demand for vadadustat drug substance from WuXi STA. As of June 30, 2023, the Company has committed to purchase $15.3 million of vadadustat drug substance from WuXi STA through the end of 2023.

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

Former Manufacturing and Unconditional Purchase Commitments

Pursuant to the Manufacture and Supply Agreement with BioVectra and the Amended and Restated Product Manufacture and Supply and Facility Construction Agreement with BioVectra, the Company agreed to purchase minimum quantities of Auryxia drug substance annually at predetermined prices as well as reimburse BioVectra for certain costs in connection with construction of a new facility for the manufacture and supply of Auryxia drug substance.

On December 22, 2022, the Company and BioVectra entered into a termination agreement (BioVectra Termination Agreement), pursuant to which the parties agreed, among other things, to terminate, effective immediately, any and all existing agreements entered into between the parties in connection with the manufacture and supply, by BioVectra to the Company, of Auryxia drug substance. Under the terms of the BioVectra Termination Agreement, each of the Company and BioVectra have released one another from all existing and future claims and liabilities and the return of certain materials and documents. Furthermore, as it relates to all open purchase orders, BioVectra is relieved from any obligations to manufacture any product or perform services under any such open purchase orders, and the Company is relieved from any obligations to purchase any product under such open purchase orders. The Company is also relieved from any obligations to pay any outstanding invoices related to performance by BioVectra of services and all other obligations under the agreements. In addition, the Company agreed to pay BioVectra a total of $32.5 million consisting of (i) an upfront payment of $17.5 million and (ii) six quarterly payments of $2.5 million commencing in April 2024, totaling $15.0 million. The upfront payment of $17.5 million was made during the quarter ended December 31, 2022 and was recognized to cost of goods sold. In accordance with ASC 420, Exit or Disposal Cost Obligations, the Company recognized a liability and corresponding expense for the remaining termination fees based on estimated fair value as of December 22, 2022 (BioVectra Effective Date). The Company imputed interest on the liability for the remaining termination fees at a rate of 17.0% per annum, which was determined based on certain factors, including the Company's credit rating, comparable securities yield, and expected repayment period of the remaining termination fees. The Company recorded an initial discount on the remaining termination fees on the consolidated balance sheet as of the BioVectra Effective Date. This resulted in the recording of a liability and corresponding charge to cost of goods sold of $11.2 million during the quarter ended December 31, 2022. The discount on the liability balance is being amortized to interest expense using the effective interest rate method over the term of the liability. The amortization of the discount was $0.5 million and $0.9 million for the three and six months ended June 30, 2023, respectively.

Other Third-Party Contracts

The Company contracts with various organizations to conduct research and development activities with remaining contract costs to the Company of approximately $54.9 million at June 30, 2023. The scope of the services under these research and

development contracts can be modified and the contracts cancelled by the Company upon written notice. In some instances, the contracts may be cancelled by the third party upon written notice.

Litigation and Related Matters

The Company is involved from time to time in various legal proceedings arising in the normal course of business. The Company provides disclosure when a loss in excess of any reserve is reasonably possible, and if estimable, the Company discloses the potential loss or range of possible loss. Significant judgment is required to assess the likelihood of various potential outcomes and the quantification of loss in those scenarios. Changes in the Company’s estimates could have a material impact and are recorded as litigation progresses and new information comes to light. Although the outcomes of potential legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations or cash flows.

Guarantees and Indemnifications

As permitted under Delaware law, the Company may indemnify its officers, directors and employees for certain events or occurrences that happen by reason of their relationship with, or position held at, the Company. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions. The Company maintains director and officer liability insurance coverage that is intended to cover a portion of amounts that may be due with respect to indemnification after a deductible is met. Further, the Company is a party to a variety of agreements in the ordinary course of business under which it may be obligated to indemnify third parties with respect to certain matters. For the three and six months ended June 30, 2023 and 2022, the Company did not experience any losses related to these indemnification obligations, and no claims were outstanding as of June 30, 2023. The Company does not have any claims related to these indemnification obligations and consequently concluded that the fair value of these obligations is negligible and no related accruals were recorded.