x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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13-4087132
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Page
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PART I
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Item 1
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Item 2
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Item 3
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Item 4
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PART II
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Item 1
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Item 1A
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Item 6
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•
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estimates regarding market size and projected growth, as well as our expectation of market acceptance of Auryxia
®
(ferric citrate), market share and product sales guidance;
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•
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expectations regarding the commercialization of Auryxia;
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•
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expectations regarding our ability to successfully launch and then effectively continue to commercialize Auryxia for the treatment of iron deficiency anemia in adults with chronic kidney disease, not on dialysis in the United States;
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•
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expectations regarding our commercialization of Fexeric
®
(ferric citrate coordination complex) in the European market or otherwise create value from our European rights as well as with respect to the European approval of Fexeric;
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•
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expectations for generating revenue, producing positive cash flow or becoming profitable on a sustained basis;
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•
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expectations for our mix of business between private commercial payers and government-sponsored plans;
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•
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estimates of the sufficiency of our existing cash and cash equivalents to finance our operating requirements;
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•
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expectations regarding future financing needs and financing sources, including regarding asset-based credit facilities;
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•
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expected losses;
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•
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expectations for future capital requirements;
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•
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expectations for increases or decreases in expenses;
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•
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expectations for clinical development and regulatory progress, including manufacturing, commercialization and reimbursement (including market acceptance) of ferric citrate or any other products that we may acquire or in-license;
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•
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expectations for incurring capital expenditures to expand our development and manufacturing capabilities;
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•
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expectations regarding our ability to successfully market Riona
®
through our Japanese partner, Japan Tobacco, Inc. and its subsidiary Torii Pharmaceutical Co., Ltd.;
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•
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expectations of the scope of patent protection with respect to Auryxia, Fexeric and Riona;
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•
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expectations or ability to enter into marketing and other partnership agreements;
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•
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expectations or ability to enter into product acquisition and in-licensing transactions; and
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•
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expectations about our proposed strategic merger with Akebia Therapeutics, Inc.
|
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June 30, 2018
|
|
December 31, 2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
49,458
|
|
|
$
|
93,526
|
|
Inventory
|
48,584
|
|
|
28,695
|
|
||
Accounts receivable, net
|
15,430
|
|
|
8,146
|
|
||
Other current assets
|
12,142
|
|
|
11,199
|
|
||
Total current assets
|
125,614
|
|
|
141,566
|
|
||
Property, plant and equipment, net
|
4,097
|
|
|
4,521
|
|
||
Goodwill
|
3,208
|
|
|
3,208
|
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Other assets, net
|
12,732
|
|
|
9,577
|
|
||
Total assets
|
$
|
145,651
|
|
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$
|
158,872
|
|
Liabilities and stockholders’ (deficit) equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
54,647
|
|
|
$
|
45,031
|
|
Deferred lease incentive, current portion
|
244
|
|
|
244
|
|
||
Other current liabilities
|
158
|
|
|
145
|
|
||
Total current liabilities
|
55,049
|
|
|
45,420
|
|
||
Convertible senior notes
|
130,088
|
|
|
125,000
|
|
||
Deferred lease incentive, net of current portion
|
895
|
|
|
1,018
|
|
||
Deferred tax liability
|
—
|
|
|
635
|
|
||
Other liabilities
|
811
|
|
|
894
|
|
||
Total liabilities
|
186,843
|
|
|
172,967
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders’ (deficit) equity:
|
|
|
|
||||
Preferred stock, $0.001 par value per share (5,000,000 shares authorized, no shares issued and outstanding)
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value per share (230,000,000 shares authorized, 120,513,208 and 119,272,304 shares issued, 120,433,260 and 119,192,356 shares outstanding at June 30, 2018 and December 31, 2017, respectively)
|
120
|
|
|
119
|
|
||
Additional paid-in capital
|
1,000,381
|
|
|
984,681
|
|
||
Treasury stock, at cost, 79,948 shares
|
(357
|
)
|
|
(357
|
)
|
||
Accumulated deficit
|
(1,041,336
|
)
|
|
(998,538
|
)
|
||
Total stockholders’ deficit
|
(41,192
|
)
|
|
(14,095
|
)
|
||
Total liabilities and stockholders’ deficit
|
$
|
145,651
|
|
|
$
|
158,872
|
|
|
Three months ended
June 30, |
|
Six months ended
June 30, |
||||||||||||
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2018
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2017
|
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2018
|
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2017
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||||||||
Revenues:
|
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|
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||||||||
Net U.S. Auryxia product sales
|
$
|
24,105
|
|
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$
|
14,116
|
|
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$
|
44,727
|
|
|
$
|
24,621
|
|
License revenue
|
1,644
|
|
|
1,028
|
|
|
2,773
|
|
|
2,343
|
|
||||
Total revenues
|
25,749
|
|
|
15,144
|
|
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47,500
|
|
|
26,964
|
|
||||
Costs and expenses:
|
|
|
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|
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|
|
||||||||
Cost of goods sold
|
7,428
|
|
|
4,379
|
|
|
17,029
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|
|
8,653
|
|
||||
License expense
|
987
|
|
|
617
|
|
|
1,664
|
|
|
1,406
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||||
Research and development
|
8,774
|
|
|
9,012
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|
|
17,162
|
|
|
15,776
|
|
||||
Selling, general and administrative
|
28,711
|
|
|
24,986
|
|
|
54,548
|
|
|
48,089
|
|
||||
Total costs and expenses
|
45,900
|
|
|
38,994
|
|
|
90,403
|
|
|
73,924
|
|
||||
Operating loss
|
(20,151
|
)
|
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(23,850
|
)
|
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(42,903
|
)
|
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(46,960
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Amortization of debt discount
|
(1,316
|
)
|
|
(62,965
|
)
|
|
(1,316
|
)
|
|
(62,965
|
)
|
||||
Other income (expense), net
|
(51
|
)
|
|
338
|
|
|
171
|
|
|
452
|
|
||||
Total other income (expense)
|
(1,367
|
)
|
|
(62,627
|
)
|
|
(1,145
|
)
|
|
(62,513
|
)
|
||||
Loss before income taxes
|
(21,518
|
)
|
|
(86,477
|
)
|
|
(44,048
|
)
|
|
(109,473
|
)
|
||||
Income tax (benefit) expense
|
—
|
|
|
20
|
|
|
(634
|
)
|
|
40
|
|
||||
Net loss
|
$
|
(21,518
|
)
|
|
$
|
(86,497
|
)
|
|
$
|
(43,414
|
)
|
|
$
|
(109,513
|
)
|
Basic and diluted net loss per common share
|
$
|
(0.18
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(1.00
|
)
|
Weighted average shares used in computing basic and diluted net loss per common share
|
120,451,534
|
|
|
112,590,188
|
|
|
120,149,604
|
|
|
109,846,152
|
|
|
Six months ended
June 30, |
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net loss
|
$
|
(43,414
|
)
|
|
$
|
(109,513
|
)
|
Adjustments to reconcile net loss to cash flows used in operating activities:
|
|
|
|
||||
Stock-based compensation expense
|
8,653
|
|
|
7,336
|
|
||
Amortization of debt discount
|
1,316
|
|
|
62,965
|
|
||
Change in fair value of derivative liability
|
—
|
|
|
(225
|
)
|
||
Depreciation and amortization
|
476
|
|
|
459
|
|
||
Amortization of deferred lease incentive
|
(123
|
)
|
|
(122
|
)
|
||
Write-down of inventory to net realizable value
|
5,288
|
|
|
335
|
|
||
Deferred income taxes
|
(635
|
)
|
|
39
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Other current assets
|
598
|
|
|
(5,466
|
)
|
||
Accounts receivable, net
|
(7,284
|
)
|
|
(3,223
|
)
|
||
Inventory
|
(24,516
|
)
|
|
(4,683
|
)
|
||
Other assets
|
(3,155
|
)
|
|
9
|
|
||
Other current liabilities
|
13
|
|
|
14
|
|
||
Accounts payable and accrued expenses
|
8,073
|
|
|
7,988
|
|
||
Other liabilities
|
(83
|
)
|
|
(70
|
)
|
||
Net cash used in operating activities
|
(54,793
|
)
|
|
(44,157
|
)
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchases of property, plant and equipment
|
(52
|
)
|
|
(420
|
)
|
||
Net cash used in investing activities
|
(52
|
)
|
|
(420
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from issuance of common stock, net of commission
|
—
|
|
|
73,125
|
|
||
Proceeds from issuance of convertible senior notes
|
10,000
|
|
|
—
|
|
||
Payments for common stock issuance costs
|
—
|
|
|
(88
|
)
|
||
Proceeds from exercise of stock options
|
777
|
|
|
257
|
|
||
Net cash provided by financing activities
|
10,777
|
|
|
73,294
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(44,068
|
)
|
|
28,717
|
|
||
Cash and cash equivalents at beginning of the period
|
93,526
|
|
|
111,810
|
|
||
Cash and cash equivalents at end of the period
|
$
|
49,458
|
|
|
$
|
140,527
|
|
Non-cash financing activities:
|
|
|
|
||||
Change in fair value of conversion feature recorded as debt discount
|
$
|
6,228
|
|
|
$
|
—
|
|
Reclassification of derivative liability to equity
|
$
|
—
|
|
|
$
|
62,735
|
|
|
(in thousands)
|
Three months ended
June 30, 2018 |
|
Percent of gross
Auryxia
product sales
|
|
Three months ended
June 30, 2017 |
|
Percent of gross
Auryxia
product sales
|
||||
Gross Auryxia product sales
|
$
|
46,821
|
|
|
|
|
$
|
26,029
|
|
|
|
Less provision for product sales allowances and accruals:
|
|
|
|
|
|
|
|
||||
Trade allowances
|
4,957
|
|
|
11%
|
|
2,463
|
|
|
9%
|
||
Rebates, chargebacks and discounts
|
16,135
|
|
|
35%
|
|
8,784
|
|
|
34%
|
||
Product returns
|
572
|
|
|
1%
|
|
346
|
|
|
2%
|
||
Other incentives
(1)
|
1,052
|
|
|
2%
|
|
320
|
|
|
1%
|
||
Total
|
22,716
|
|
|
49%
|
|
11,913
|
|
|
46%
|
||
Net U.S. Auryxia product sales
|
$
|
24,105
|
|
|
|
|
$
|
14,116
|
|
|
|
(1)
|
Includes co-pay assistance and voucher rebates.
|
(in thousands)
|
Six months ended June 30, 2018
|
|
Percent of gross
Auryxia product sales |
|
Six months ended June 30, 2017
|
|
Percent of gross
Auryxia product sales |
||||
Gross Auryxia product sales
|
$
|
87,960
|
|
|
|
|
$
|
43,983
|
|
|
|
Less provision for product sales allowances and accruals:
|
|
|
|
|
|
|
|
||||
Trade allowances
|
9,140
|
|
|
10%
|
|
4,228
|
|
|
9%
|
||
Rebates, chargebacks and discounts
|
30,928
|
|
|
35%
|
|
14,114
|
|
|
32%
|
||
Product returns
|
736
|
|
|
1%
|
|
278
|
|
|
1%
|
||
Other incentives
(1)
|
2,429
|
|
|
3%
|
|
742
|
|
|
2%
|
||
Total
|
43,233
|
|
|
49%
|
|
19,362
|
|
|
44%
|
||
Net U.S. Auryxia product sales
|
$
|
44,727
|
|
|
|
|
$
|
24,621
|
|
|
|
(1)
|
Includes co-pay assistance and voucher rebates.
|
(in thousands)
|
June 30, 2018
|
|
June 30, 2017
|
||
Options to purchase common stock
|
11,044
|
|
|
12,469
|
|
Shares issuable upon conversion of convertible senior notes
|
35,582
|
|
|
33,422
|
|
Shares issuable under Notes Conversion Agreement
(1)
|
4,000
|
|
|
—
|
|
|
50,626
|
|
|
45,891
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||
Fresenius Medical Care Rx
|
29
|
%
|
|
34
|
%
|
AmerisourceBergen Drug Corporation
|
20
|
%
|
|
20
|
%
|
Cardinal Health, Inc.
|
17
|
%
|
|
25
|
%
|
DaVita Rx
|
16
|
%
|
|
—
|
%
|
McKesson Corporation
|
14
|
%
|
|
17
|
%
|
|
Financial assets at fair value
as of June 30, 2018 |
|
Financial assets at fair value
as of December 31, 2017 |
||||||||||||||||||||
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash equivalents
(1)
|
$
|
2,010
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,895
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total assets
|
$
|
2,010
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,895
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
Cash equivalents as of
June 30, 2018
and
December 31, 2017
consisted of institutional money market funds. The carrying value of our money market funds approximates fair value due to their short-term maturities.
|
(in thousands)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Raw materials
|
$
|
1,493
|
|
|
$
|
469
|
|
Work in process
|
43,761
|
|
|
25,160
|
|
||
Finished goods
|
3,330
|
|
|
3,066
|
|
||
Total inventory
|
$
|
48,584
|
|
|
$
|
28,695
|
|
(in thousands)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Prepaid manufacturing costs
|
$
|
7,121
|
|
|
$
|
7,646
|
|
Prepaid selling, general and administrative expenses
|
3,616
|
|
|
2,265
|
|
||
Prepaid research and development expenses
|
1,405
|
|
|
1,288
|
|
||
Total other current assets
|
$
|
12,142
|
|
|
$
|
11,199
|
|
(in thousands)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Deferred manufacturing costs
|
$
|
10,433
|
|
|
$
|
7,338
|
|
Deposits
|
1,159
|
|
|
1,099
|
|
||
Long-term prepaid manufacturing costs
|
1,000
|
|
|
1,000
|
|
||
Deferred registration fees
|
140
|
|
|
140
|
|
||
Total other long-term assets
|
$
|
12,732
|
|
|
$
|
9,577
|
|
|
Number of shares
|
|
Weighted average exercise price
|
|||
Outstanding at December 31, 2017
|
11,967,815
|
|
|
$
|
6.73
|
|
Granted
|
980,000
|
|
|
4.11
|
|
|
Exercised
|
(204,521
|
)
|
|
3.80
|
|
|
Forfeited or Expired
|
(1,699,249
|
)
|
|
5.85
|
|
|
Outstanding at June 30, 2018
|
11,044,045
|
|
|
$
|
6.68
|
|
Vested and expected to vest at June 30, 2018
|
8,917,383
|
|
|
$
|
6.93
|
|
Exercisable at June 30, 2018
|
5,809,968
|
|
|
$
|
8.00
|
|
|
Number of shares
|
|
Weighted average grant date fair value
|
|||
Outstanding at December 31, 2017
|
1,884,297
|
|
|
$
|
6.39
|
|
Granted
|
1,523,650
|
|
|
4.45
|
|
|
Vested
|
(598,170
|
)
|
|
5.62
|
|
|
Forfeited
|
(487,267
|
)
|
|
4.90
|
|
|
Outstanding at June 30, 2018
|
2,322,510
|
|
|
$
|
5.63
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cost of goods sold
|
$
|
25
|
|
|
$
|
28
|
|
|
$
|
43
|
|
|
$
|
88
|
|
Research and development
|
570
|
|
|
483
|
|
|
1,312
|
|
|
1,061
|
|
||||
Selling, general and administrative
|
4,377
|
|
|
3,161
|
|
|
7,298
|
|
|
6,187
|
|
||||
Total stock-based compensation expense
|
$
|
4,972
|
|
|
$
|
3,672
|
|
|
$
|
8,653
|
|
|
$
|
7,336
|
|
(in thousands)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Commercial rebates and fees
|
$
|
21,056
|
|
|
$
|
16,362
|
|
Accounts payable
|
17,582
|
|
|
6,474
|
|
||
Professional, license, and other fees and expenses
|
9,252
|
|
|
5,257
|
|
||
Accrued compensation and related liabilities
|
5,994
|
|
|
7,504
|
|
||
Accrued manufacturing expenses
|
763
|
|
|
9,434
|
|
||
Total accounts payable and accrued expenses
|
$
|
54,647
|
|
|
$
|
45,031
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Interest income
|
$
|
179
|
|
|
$
|
118
|
|
|
$
|
380
|
|
|
$
|
235
|
|
Other income (expense)
|
(230
|
)
|
|
(5
|
)
|
|
(209
|
)
|
|
(8
|
)
|
||||
Fair value adjustment to derivative liability
|
—
|
|
|
225
|
|
|
—
|
|
|
225
|
|
||||
Total other income (expense), net
|
$
|
(51
|
)
|
|
$
|
338
|
|
|
$
|
171
|
|
|
$
|
452
|
|
(in thousands)
|
Three months ended
June 30, 2018 |
|
Percent of gross
Auryxia
product sales
|
|
Three months ended
June 30, 2017 |
|
Percent of gross
Auryxia
product sales
|
||||
Gross Auryxia product sales
|
$
|
46,821
|
|
|
|
|
$
|
26,029
|
|
|
|
Less provision for product sales allowances and accruals:
|
|
|
|
|
|
|
|
||||
Trade allowances
|
4,957
|
|
|
11%
|
|
2,463
|
|
|
9%
|
||
Rebates, chargebacks and discounts
|
16,135
|
|
|
35%
|
|
8,784
|
|
|
34%
|
||
Product returns
|
572
|
|
|
1%
|
|
346
|
|
|
2%
|
||
Other incentives
(1)
|
1,052
|
|
|
2%
|
|
320
|
|
|
1%
|
||
Total
|
22,716
|
|
|
49%
|
|
11,913
|
|
|
46%
|
||
Net U.S. Auryxia product sales
|
$
|
24,105
|
|
|
|
|
$
|
14,116
|
|
|
|
(1)
|
Includes co-pay assistance and voucher rebates.
|
(in thousands)
|
Six months ended June 30, 2018
|
|
Percent of gross
Auryxia product sales |
|
Six months ended June 30, 2017
|
|
Percent of gross
Auryxia product sales |
||||
Gross Auryxia product sales
|
$
|
87,960
|
|
|
|
|
$
|
43,983
|
|
|
|
Less provision for product sales allowances and accruals:
|
|
|
|
|
|
|
|
||||
Trade allowances
|
9,140
|
|
|
10%
|
|
4,228
|
|
|
9%
|
||
Rebates, chargebacks and discounts
|
30,928
|
|
|
35%
|
|
14,114
|
|
|
32%
|
||
Product returns
|
736
|
|
|
1%
|
|
278
|
|
|
1%
|
||
Other incentives
(1)
|
2,429
|
|
|
3%
|
|
742
|
|
|
2%
|
||
Total
|
43,233
|
|
|
49%
|
|
19,362
|
|
|
44%
|
||
Net U.S. Auryxia product sales
|
$
|
44,727
|
|
|
|
|
$
|
24,621
|
|
|
|
(1)
|
Includes co-pay assistance and voucher rebates.
|
(in thousands)
|
Payment due by period
|
||||||||||||||
Contractual obligations
|
Total
|
|
Less than
1 year
|
|
1-3
years
|
|
3-5
years
|
||||||||
Convertible senior notes
|
130,088
|
|
|
—
|
|
|
130,088
|
|
|
—
|
|
||||
Facility lease
|
7,892
|
|
|
1,642
|
|
|
3,365
|
|
|
2,885
|
|
||||
Purchase commitments
|
124,775
|
|
|
$
|
39,556
|
|
|
64,213
|
|
|
21,006
|
|
|||
Total
|
$
|
262,755
|
|
|
$
|
41,198
|
|
|
$
|
197,666
|
|
|
$
|
23,891
|
|
•
|
manufacture our drug;
|
•
|
assist us in developing, testing and obtaining and maintaining regulatory approval for and commercializing our compound and technologies; and
|
•
|
market and distribute our drug.
|
•
|
the effectiveness of Auryxia as a treatment for adult patients with CKD on dialysis and for iron deficiency anemia in adults with CKD, not on dialysis;
|
•
|
the adoption of Auryxia by physicians, which depends on whether physicians view it as a safe and effective treatment for their patients;
|
•
|
our ability to successfully launch and then effectively continue to commercialize Auryxia in the newly approved indication of iron deficiency anemia in adults with CKD, not on dialysis;
|
•
|
the effectiveness of the sales, managed markets and marketing efforts by us and our competitors;
|
•
|
our ability to continue to supply Auryxia to the market without interruption;
|
•
|
our ability to identify reliable suppliers and successfully manufacture Auryxia;
|
•
|
our ability to continue to grow Auryxia product sales following the resupply of Auryxia to the market following the 2016 interruption in its supply;
|
•
|
the size of the treatable patient population;
|
•
|
our ability to both secure and maintain adequate reimbursement for, and optimize patient access to Auryxia by providing third-party payers with a strong value proposition and the benefits of Auryxia to patients;
|
•
|
our mix of business between private commercial payers and government-sponsored plans;
|
•
|
the occurrence of any side effects, adverse reactions or misuse, or any unfavorable publicity in these areas, associated with Auryxia;
|
•
|
our ability to obtain and maintain strong intellectual property protection for Auryxia; and
|
•
|
the development or commercialization of competing products, including generic versions of our drug.
|
•
|
sales of Auryxia may be impaired;
|
•
|
regulatory approvals for Auryxia may be restricted or withdrawn;
|
•
|
we may decide to, or be required to, send drug warnings or safety alerts to physicians, pharmacists and hospitals (or FDA or other government agency may choose to issue such alerts), or we may decide to conduct a product recall or be requested to do so by FDA or other government agency;
|
•
|
reformulation of the product, additional nonclinical or clinical studies, changes in labeling or changes to or re-approvals of manufacturing facilities may be required;
|
•
|
we may be precluded from pursuing additional development opportunities to enhance the clinical profile of Auryxia within its indicated populations, as well as be precluded from studying Auryxia in additional indications and populations or in new formulations; and
|
•
|
government investigations or lawsuits, including class action suits, may be brought against us.
|
•
|
government and health administration authorities;
|
•
|
private health insurers;
|
•
|
managed care programs; and
|
•
|
other third-party payers.
|
•
|
federal healthcare program anti-kickback laws, which prohibit, among other things, persons from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;
|
•
|
federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent, and which may apply to entities like us which provide coding and billing advice to customers;
|
•
|
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;
|
•
|
the Federal Food, Drug, and Cosmetic Act, or FDCA, which among other things, strictly regulates drug product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples;
|
•
|
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts;
|
•
|
the federal Foreign Corrupt Practices Act which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity; and
|
•
|
the federal Physician Payments Sunshine Act, which was passed as part of the PPACA, and similar state laws in certain states, that require pharmaceutical and medical device companies to monitor and report certain payments and transfers of value made to physicians and teaching hospitals.
|
•
|
difficulty and expense of assimilating the operations, technology and personnel of the acquired business;
|
•
|
our inability to retain the management, key personnel and other employees of the acquired business;
|
•
|
our inability to maintain the acquired company’s relationship with key third parties, such as alliance partners;
|
•
|
exposure to legal claims for activities of the acquired business prior to the acquisition;
|
•
|
the diversion of our management’s attention from our core business; and
|
•
|
the potential impairment of goodwill and write-off of in-process research and development costs, adversely affecting our reported results of operations.
|
•
|
decreased demand for a product;
|
•
|
injury to our reputation;
|
•
|
our inability to continue to develop a drug candidate;
|
•
|
withdrawal of clinical trial volunteers; and
|
•
|
loss of revenues.
|
•
|
our ability to successfully market Auryxia as a drug for adults with CKD on dialysis and for the treatment of iron deficiency anemia in adults with CKD, not on dialysis;
|
•
|
the timing and expenditures associated with commercial activities related to Auryxia and the timing and magnitude of cash received from product sales;
|
•
|
the timing and expenditures associated with the build-up of inventory and capacity expansion;
|
•
|
our ability to continue to supply Auryxia to the market without interruption;
|
•
|
our ability to continue to grow Auryxia product sales following the resupply of Auryxia to the market following the 2016 interruption in its supply;
|
•
|
the timing, design and conduct of, and results from, clinical trials that we may conduct;
|
•
|
the timing of expenses associated with manufacturing and product development of Auryxia and those proprietary drug candidates that may be in-licensed, partnered or acquired;
|
•
|
the timing of the in-licensing, partnering and acquisition of new product opportunities;
|
•
|
the timing and expenditures associated with commercial activities, if any. related to Fexeric in Europe and other expenses incurred in connection with our Fexeric marketing rights in Europe;
|
•
|
the progress of the development efforts of parties with whom we have entered, or may enter, into research and development agreements;
|
•
|
our ability to achieve our milestones under our licensing arrangement;
|
•
|
the timing and expenses associated with capital expenditures to expand our manufacturing capabilities;
|
•
|
the timing and expenses associated with building our own commercial infrastructure to manufacture, market and sell our drug and those that may be in-licensed, partnered or acquired; and
|
•
|
the costs involved in prosecuting and enforcing patent claims and other intellectual property rights, defending against post-grant proceedings initiated by third parties attempting to limit or cancel our intellectual property rights in the United States and elsewhere, such as U.S. inter partes review proceedings and/or European oppositions, or defending against claims of infringement initiated by third parties in respect of their intellectual property rights.
|
•
|
election of directors;
|
•
|
timing and manner in which we raise additional funds;
|
•
|
timing and manner of dividend distributions;
|
•
|
approval of contracts between us and Baupost or its respective affiliates, which could involve conflicts of interest;
|
•
|
open market purchase programs or other purchases of our common shares;
|
•
|
delay, defer or prevent a change in who controls us;
|
•
|
discourage bids for our shares at a premium over the market price; and
|
•
|
adversely affect the market price of our common shares.
|
•
|
actual or anticipated variations in quarterly or annual operating results, including, in particular with respect to net U.S. Auryxia product sales;
|
•
|
announcements of technological innovations by us or our competitors;
|
•
|
introductions or announcements of new products by us or our competitors;
|
•
|
announcements of significant acquisitions, strategic partnerships, joint ventures, capital commitments or other strategic transactions involving us or our competitors;
|
•
|
changes in financial estimates by securities analysts;
|
•
|
developments relating to the marketing, safety and efficacy of our drug product, and regulatory filing and approvals for us or our competitors;
|
•
|
expectations regarding our financial condition;
|
•
|
expiration or termination of licenses, research contracts or other collaboration agreements;
|
•
|
expectations or investor speculation regarding the strength of our intellectual property position, or the availability of other forms of regulatory exclusivity;
|
•
|
conditions or trends in the regulatory climate and the biotechnology and pharmaceutical industries;
|
•
|
changes in the market valuations of similar companies;
|
•
|
negative comments and sentiment in the media; and
|
•
|
additions or departures of key personnel.
|
Exhibit
Number
|
|
Exhibit Description
|
|
|
|
2.1*
|
|
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5†
|
|
|
|
|
|
10.6!
|
|
|
|
|
|
10.7†
|
|
|
|
|
|
10.8†
|
|
|
|
|
|
10.9†
|
|
|
|
|
|
10.10†
|
|
|
|
|
|
10.11†
|
|
|
|
|
|
10.12!
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
|
KERYX BIOPHARMACEUTICALS, INC.
|
||
|
|
|
|
Date: August 9, 2018
|
By:
|
|
/s/ Scott A. Holmes
|
|
|
|
Scott A. Holmes
Chief Financial Officer
Principal Financial and Accounting Officer
|
1.
|
Capitalized terms under herein that are not otherwise defined shall have the meanings set forth in the Agreement.
|
2.
|
The definition of Facility Reimbursement Fee in Section 1.o of the Agreement is deleted and replaced with the following:
|
3.
|
The Estimated Facility Cost figure set forth in Section 2.e of the Agreement is deleted and replaced with “[***].”
|
4.
|
The reference in Section 4.i of the Agreement to “[***]” is deleted and replaced with “[***]”.
|
5.
|
Except as set forth in this Amendment No. 1, in all other respects the Agreement remains unchanged and in full force and effect in accordance with its terms. From and after the Amendment No. 1 Effective Date, any reference to the Agreement shall mean the Agreement as modified by this Amendment No. 1.
|
6.
|
This Amendment No. 1 may be executed in counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Executed signatures pages to this Amendment No. 1 (which may be accomplished using industry standard signature software, such as DocuSign
®
) may be delivered by facsimile or a portable document format (PDF) copy sent by e-mail and such facsimiles or PDFs shall be deemed as if actual signature pages had been delivered.
|
1.
|
Retention Bonus Award
. Subject to Employee’s continued employment with the Company, the Company shall pay Employee a retention award in the amount of Two Hundred Thousand Dollars ($200,000) (the “
Retention Award
”) on March 1, 2019 (the “
Payment Date
”), subject to any and all applicable federal, state, local, foreign and/or other withholding taxes and all other authorized payroll deductions. Employee shall no longer be eligible for the Retention Award if Employee’s employment is terminated for any reason prior to the Payment Date. Notwithstanding the foregoing: (a) in the event that the Company terminates Employee’s employment without Cause (as defined in the Employment Agreement) or Employee resigns from employment with Good Reason (as defined in the Employment Agreement) prior to the Payment Date, then the Company shall pay Employee the Retention Award on the Payment Date; and (b) in the event that a Change in Control (as defined in the Employment Agreement) occurs prior to the Payment Date, then Employee shall become eligible for the Retention Award, and the Retention Award will be paid to Employee on the day immediately preceding the occurrence of a Change in Control.
|
2.
|
Change in Control Bonus Payment
. In the event that a Change in Control (as defined in the Employment Agreement) occurs prior to the Payment Date and the Company terminates Employee’s employment without Cause (as defined in the Employment Agreement) or Employee resigns from employment with Good Reason (as defined in the Employment Agreement) within twelve (12) months following the Change in Control, then provided that Executive shall have executed and not revoked a general release of claims in a form satisfactory to the Company in
|
3.
|
No Effect on Severance and Other Benefits
. Other than as described in Section 2 above, this Agreement shall not affect Employee’s eligibility or entitlement to receive any benefits payable to Employee under any severance, change of control or similar plan, policy or agreement with the Company.
|
4.
|
Other Rights and Agreements
. This Agreement does not create any employment rights not specifically set forth herein with respect to Employee. Employee’s employment remains at-will and can be terminated by the Company at any time and for any reason, with or without Cause. This Agreement contains the entire understanding of the Company and Employee with respect to the subject matter hereof.
|
5.
|
Confidentiality
. Employee agrees that the matters described in this Agreement are highly confidential. Accordingly, Employee agrees and covenants that, except as required by applicable law, he or she shall not disclose the terms of this Agreement other than to his or her immediate family, lawyer and tax advisor, and that any such disclosure, revelation, publication, dissemination or discussion shall result in the immediate forfeiture of the Retention Award or Change in Control Bonus Payment, as applicable.
|
6.
|
Amendment
. This Agreement may be amended or revised only by written agreement signed by the Company and Employee.
|
7.
|
Binding Effect
. This Agreement shall be binding on the Employee and Employee’s executor, administrator and heirs, but may not be assigned by Employee. This Agreement may be transferred or assigned by the Company and shall be binding on the transferee or assignee. This Agreement shall automatically be transferred or assigned to and be binding upon any successor in interest to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise.
|
8.
|
Applicable Law
. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflict of laws thereof.
|
1.
|
Retention Bonus Award
. Subject to Employee’s continued employment with the Company, the Company shall pay Employee a retention award in the amount of One Hundred Thousand Dollars ($100,000) (the “
Retention Award
”) on March 1, 2019 (the “
Payment Date
”), subject to any and all applicable federal, state, local, foreign and/or other withholding taxes and all other authorized payroll deductions. Employee shall no longer be eligible for the Retention Award if Employee’s employment is terminated for any reason prior to the Payment Date. Notwithstanding the foregoing: (a) in the event that the Company terminates Employee’s employment without Cause (as defined in the Employment Agreement) or Employee resigns from employment with Good Reason (as defined in the Employment Agreement) prior to the Payment Date, then the Company shall pay Employee the Retention Award on the Payment Date; and (b) in the event that a Change in Control (as defined in the Employment Agreement) occurs prior to the Payment Date, then Employee shall become eligible for the Retention Award, and the Retention Award will be paid to Employee on the day immediately preceding the occurrence of a Change in Control.
|
2.
|
Change in Control Bonus Payment
. In the event that a Change in Control (as defined in the Employment Agreement) occurs prior to the Payment Date and the Company terminates Employee’s employment without Cause (as defined in the Employment Agreement) or Employee resigns from employment with Good Reason (as defined in the Employment Agreement) within twelve (12) months following the Change in Control, then provided that Executive shall have executed and not revoked a general release of claims in a form satisfactory to the Company in
|
3.
|
No Effect on Severance and Other Benefits
. Other than as described in Section 2 above, this Agreement shall not affect Employee’s eligibility or entitlement to receive any benefits payable to Employee under any severance, change of control or similar plan, policy or agreement with the Company.
|
4.
|
Other Rights and Agreements
. This Agreement does not create any employment rights not specifically set forth herein with respect to Employee. Employee’s employment remains at-will and can be terminated by the Company at any time and for any reason, with or without Cause. This Agreement contains the entire understanding of the Company and Employee with respect to the subject matter hereof.
|
5.
|
Confidentiality
. Employee agrees that the matters described in this Agreement are highly confidential. Accordingly, Employee agrees and covenants that, except as required by applicable law, he or she shall not disclose the terms of this Agreement other than to his or her immediate family, lawyer and tax advisor, and that any such disclosure, revelation, publication, dissemination or discussion shall result in the immediate forfeiture of the Retention Award or Change in Control Bonus Payment, as applicable.
|
6.
|
Amendment
. This Agreement may be amended or revised only by written agreement signed by the Company and Employee.
|
7.
|
Binding Effect
. This Agreement shall be binding on the Employee and Employee’s executor, administrator and heirs, but may not be assigned by Employee. This Agreement may be transferred or assigned by the Company and shall be binding on the transferee or assignee. This Agreement shall automatically be transferred or assigned to and be binding upon any successor in interest to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise.
|
8.
|
Applicable Law
. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflict of laws thereof.
|
1.
|
Retention Bonus Award
. Subject to Employee’s continued employment with the Company, the Company shall pay Employee a retention award in the amount of One Hundred and Fifty Thousand Dollars ($150,000) (the “
Retention Award
”) on March 1, 2019 (the “
Payment Date
”), subject to any and all applicable federal, state, local, foreign and/or other withholding taxes and all other authorized payroll deductions. Employee shall no longer be eligible for the Retention Award if Employee’s employment is terminated for any reason prior to the Payment Date. Notwithstanding the foregoing: (a) in the event that the Company terminates Employee’s employment without Cause (as defined in the Employment Agreement) or Employee resigns from employment with Good Reason (as defined in the Employment Agreement) prior to the Payment Date, then the Company shall pay Employee the Retention Award on the Payment Date; and (b) in the event that a Change in Control (as defined in the Employment Agreement) occurs prior to the Payment Date, then Employee shall become eligible for the Retention Award, and the Retention Award will be paid to Employee on the day immediately preceding the occurrence of a Change in Control.
|
2.
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Change in Control Bonus Payment
. In the event that a Change in Control (as defined in the Employment Agreement) occurs prior to the Payment Date and the Company terminates Employee’s employment without Cause (as defined in the Employment Agreement) or Employee resigns from employment with Good Reason (as defined in the Employment Agreement) within twelve (12) months following the Change in Control, then provided that Executive shall have
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3.
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No Effect on Severance and Other Benefits
. Other than as described in Section 2 above, this Agreement shall not affect Employee’s eligibility or entitlement to receive any benefits payable to Employee under any severance, change of control or similar plan, policy or agreement with the Company.
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4.
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Other Rights and Agreements
. This Agreement does not create any employment rights not specifically set forth herein with respect to Employee. Employee’s employment remains at-will and can be terminated by the Company at any time and for any reason, with or without Cause. This Agreement contains the entire understanding of the Company and Employee with respect to the subject matter hereof.
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5.
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Confidentiality
. Employee agrees that the matters described in this Agreement are highly confidential. Accordingly, Employee agrees and covenants that, except as required by applicable law, he or she shall not disclose the terms of this Agreement other than to his or her immediate family, lawyer and tax advisor, and that any such disclosure, revelation, publication, dissemination or discussion shall result in the immediate forfeiture of the Retention Award or Change in Control Bonus Payment, as applicable.
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6.
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Amendment
. This Agreement may be amended or revised only by written agreement signed by the Company and Employee.
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7.
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Binding Effect
. This Agreement shall be binding on the Employee and Employee’s executor, administrator and heirs, but may not be assigned by Employee. This Agreement may be transferred or assigned by the Company and shall be binding on the transferee or assignee. This Agreement shall automatically be transferred or assigned to and be binding upon any successor in interest to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise.
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8.
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Applicable Law
. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflict of laws thereof.
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1.
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I have reviewed this quarterly report on Form 10-Q of Keryx Biopharmaceuticals, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 9, 2018
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/s/ Jodie P. Morrison
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|
Jodie P. Morrison
|
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Interim Chief Executive Officer
|
|
Principal Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Keryx Biopharmaceuticals, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 9, 2018
|
/s/ Scott A. Holmes
|
|
Scott A. Holmes
|
|
Chief Financial Officer
|
|
Principal Financial and Accounting Officer
|
Date: August 9, 2018
|
/s/ Jodie P. Morrison
|
|
Jodie P. Morrison
|
|
Interim Chief Executive Officer
|
|
Principal Executive Officer
|
Date: August 9, 2018
|
/s/ Scott A. Holmes
|
|
Scott A. Holmes
|
|
Chief Financial Officer
|
|
Principal Financial and Accounting Officer
|