Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

Concentration of Credit Risk

Concentration of Credit Risk

The Company invests in a variety of financial instruments and, by its policy, limits the amount of credit exposure with any one issuer, industry or geographic area.

For the three and six months ended June 30, 2022 and 2021, total revenue derived from the Company’s collaboration with Vifor (International) Ltd., and/or its affiliates, or collectively, Vifor, was 22.7%, 93.7%, 16.1% and 98.0%, respectively. Accounts receivable are typically unsecured and are concentrated within a few customers in the pharmaceutical industry and government sector. Accordingly, the Company may be exposed to credit risk generally associated with pharmaceutical companies and government funded entities. The Company has not historically experienced any significant losses due to concentration of credit risk. Two customers represented 99% and 100% of the Company's accounts receivable at June 30, 2022 and December 31, 2021, respectively, and each of these customers represented 10% or greater of the Company's accounts receivable. For each of the three and six months ended June 30, 2022, these two customers represented 99% of the Company's product sales, net. The Company began commercializing TAVNEOS in the U.S. in October 2021 and had no product sales, net prior to October 2021.

Net Loss Per Share

Net Loss Per Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents.

Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the sum of the weighted-average number of common shares outstanding and dilutive common stock equivalent shares outstanding for the period. The Company’s potentially dilutive common stock equivalent shares, which include incremental common shares issuable upon (i) the exercise of outstanding stock options and warrants, (ii) vesting of restricted stock units (RSUs) and restricted stock awards (RSAs),

and (iii) the purchase from contributions to the amended and restated 2012 Employee Stock Purchase Plan (the Restated ESPP) (calculated based on the treasury stock method), are only included in the calculation of diluted net loss per share when their effect is dilutive.

For the three and six months ended June 30, 2022 and 2021, the following potentially dilutive securities were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect (in thousands):

	Three and Six Months Ended
	June 30,
	2022		2021
Options to purchase common stock, including     purchases from contributions to ESPP		7,227		7,404
Restricted stock units		599		432
Restricted stock awards		33		15
Warrant to purchase common stock(1)		—		150
		7,859		8,001

(1)In 2012, the Company issued a warrant with a ten-year term to purchase 150,000 shares of its common stock at an exercise price of $20.00 per share. The warrant was exercised in January 2022.

Product Sales, net

Product Sales, net

The Company sells TAVNEOS to a limited number of specialty pharmacies and a specialty distributor. These customers subsequently dispense TAVNEOS directly to patients or resell it to hospitals and certain pharmacies. The Company recognizes product sales when the customer obtains control of the Company’s product, which occurs typically upon delivery to the customer. Product sales to these customers are recorded net of reserves established for distributor service fees and prompt payment discounts as stated in agreements, estimates for product returns, government rebates, chargebacks and the Company’s co-pay assistance program for patients. The Company estimates these reserves using the expected value approach. The Company believes its estimated reserves require significant judgment and may adjust these estimates as it accumulates historical data and assesses other quantitative and qualitative factors. Differences from actual results and changes to these estimates will be reported in the period that the differences become known.

Cost of Sales

Cost of Sales

Cost of sales for product sales and product supply consists primarily of direct and indirect costs related to the manufacturing of TAVNEOS products sold, including third-party manufacturing costs, packaging services, freight, storage costs, allocation of overhead costs of employees involved with production and net sales-based royalties expense. The Company began capitalizing costs related to inventory in October 2021 upon the U.S. Food and Drug Administration (FDA) approval of TAVNEOS. Manufacturing costs associated with campaigns initiated prior to FDA approval were recorded as research and development expense. Accordingly, cost of sales in the near term will likely be lower than in later periods given the sales of pre-approval inventory will carry little to no manufacturing costs given such costs were previously expensed to research and development expense.

Inventory

Inventory

The Company values its inventories at the lower-of-cost or net realizable value on a first-in, first-out (FIFO) basis. Inventories include the cost for raw materials, third party contract manufacturing and packaging services, and indirect personnel and overhead associated with production. The Company performs an assessment of the recoverability of inventory during each reporting period, and writes down any excess and obsolete inventories to their net realizable value in the period in which the impairment is first identified. If they occur, such impairment charges are recorded as a component of cost of sales in the consolidated statements of operations. The Company capitalizes inventory costs associated with products when future commercialization is considered probable and the future economic benefit is expected to be realized, which is typically when regulatory approval is obtained for a drug candidate. As such, the Company begins capitalizing costs as inventory when a drug candidate receives regulatory approval. Prior to regulatory approval, the Company recorded inventory costs related to drug candidates as research and development expense.

Comprehensive Income (Loss)

Comprehensive Loss

Comprehensive loss comprises net loss and other comprehensive loss. For the periods presented, other comprehensive loss consists of unrealized losses on the Company’s available-for-sale securities. For the three and six months ended June 30, 2022 and 2021, there were no sales of investments and therefore there were no reclassifications of comprehensive loss.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company has reviewed recent accounting pronouncements and concluded they are either not applicable to the business or that no material effect is expected on the consolidated financial statements as a result of future adoption.