Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2022

Business.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. The more significant estimates include the fair value of marketable securities that are classified as level 2 of the fair value hierarchy, revenue recognition associated with profit-sharing arrangements, the amount and periods over which certain revenues will be recognized, including licensing and collaborative revenue recognized from non-refundable up-front and milestone payments, accounts receivable, net – related party, inventory valuation and related reserves, the determination of prepaid research and development, or R&D, clinical costs and accrued research projects, the amount of non-cash compensation costs related to share-based payments to employees and non-employees, the incremental borrowing rate used in lease calculations and the likelihood of realization of deferred tax assets.

The COVID-19 pandemic and geopolitical tensions, such as Russia’s incursion into Ukraine, resulted in a global slowdown of economic activity, decades-high inflation, rising interest rates, and a potential recession in the U.S. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these condensed financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the reported amounts of assets and liabilities or the disclosure of contingent assets and liabilities. These estimates, however, may change as new events occur and additional information is obtained, and are recognized in the condensed financial statements as soon as they become known.

Actual results could differ materially from the Company’s estimates and assumptions.

Significant Accounting Policies

Significant Accounting Policies

There have been no material changes to the significant accounting policies previously disclosed in Note 2 to the Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, except as disclosed below.

Accounts Receivable, net - Related Party

Accounts Receivable, Net – Related Party

Accounts receivable, net – related party consists of amounts due from sales of KORSUVA injection under the Company’s supply agreements with Vifor, as well as revenues earned from its profit-sharing agreement from sales of KORSUVA injection in the U.S. under the licensing agreements with Vifor. The Company does not obtain collateral for its accounts receivable.

The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for credit losses when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices and the overall quality and age of those invoices not specifically reviewed. The Company believes that credit risk associated with its licensing partner, Vifor, is not significant. The Company reviews the need for an

allowance for credit losses for any receivable based on various factors including payment history and historical bad debt experience. The Company had an insignificant allowance for credit losses as of September 30, 2022.

Revenue Recognition - Profit Sharing Arrangement

Revenue Recognition – Profit-Sharing Arrangement

The Company receives its share of the net profits from Vifor’s sale of KORSUVA injection to third parties in the U.S. under its existing license agreements. The Company has adopted a policy to recognize revenue net of tax withholdings, as applicable.

The Company determined that Vifor is a customer under Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers (Topic 606), as amended by ASU 2016-08, 2016-10, 2016-12 and 2016-20, or ASC 606, in relation to its profit share arrangement with Vifor. The Company sells commercial product to Vifor, who ultimately sells the commercial product to third parties. The Company’s profit share arrangement revenues generated from sales of KORSUVA injection in the U.S. are considered akin to sales-based royalties. In accordance with the sales-based royalty exception, the Company recognizes its share of the pre-tax commercial net profit generated from the sales of KORSUVA injection in the U.S. in the period the product sales are earned, as reported by Vifor. The related COGS for Vifor associated with the net profit share arrangement as well as the marketing and distribution fee for the applicable period reduces the Company’s profit share revenue for the period. The net sales amounts are determined based on amounts provided by Vifor and involve the use of estimates and judgments, such as product sales allowances and accruals related to prompt payment discounts, chargebacks, governmental and contractual rebates, wholesaler fees, product returns, and co-payment assistance costs, which could be adjusted based on actual results in the future. The Company is dependent on Vifor for timely and accurate information regarding the net revenues from sales of KORSUVA injection in the U.S. in accordance with ASC 606 to accurately report its results of operations. If the Company does not receive timely and accurate information or incorrectly estimates activity levels associated with the profit share arrangement at a given point in time, the Company could be required to record adjustments in future periods.

In accordance with ASC 606-10-55, Principal Agent Considerations, the Company records revenue transactions as net product revenue if it is deemed the principal in the transaction, which includes being the primary obligor, retaining inventory risk, and control over pricing. Given that the Company is not the primary obligor and does not have the inventory risks in the license agreement with Vifor, it records its share of the net profits from the sales of KORSUVA injection in the U.S. on a net basis and presents the settlement payments from Vifor as Collaborative revenue. The Company and Vifor settle the profit sharing quarterly (see Note 11, Collaboration and Licensing Agreements).