| Basis of Presentation and Summary of Significant Accounting Policies | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments that are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of these interim financial statements have been included. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2016 . The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period. Principles of Consolidation The condensed consolidated financial statements include our financial statements and those of our wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of these condensed consolidated financial statements and the reported amounts of revenues and expenses during the applicable reporting period. Actual results could differ from those estimates. Such differences could be material to these condensed consolidated financial statements. Cash and Cash Equivalents We consider liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. At March 31, 2017 and December 31, 2016 , all of our cash and cash equivalents were held in either commercial bank accounts or money market funds. Inventory Inventory is stated at the lower of cost or estimated net realizable value. We determine the cost of our inventory, which includes amounts related to materials, third-party contract manufacturing and packaging services, and manufacturing overhead, on a first-in, first-out basis. We capitalize inventory costs at our suppliers when, based on management’s judgment, the realization of future economic benefit is probable at each given supplier. We received approval for Auryxia from the U.S. Food and Drug Administration, or FDA, on September 5, 2014, and on that date began capitalizing inventory purchases of saleable product from certain suppliers. Prior to FDA approval, all saleable product purchased from such suppliers was included as a component of research and development expense. Accounts Receivable, Net We extend credit to our customers for U.S. Auryxia product sales resulting in accounts receivable. Customer accounts are monitored for past due amounts. Past due accounts receivable, determined to be uncollectible, are written off against the allowance for doubtful accounts. Allowances for doubtful accounts are estimated based upon past due amounts, historical losses and existing economic factors, and are adjusted periodically. We offer cash discounts to certain of our customers, generally 2% of the sales price, as an incentive for prompt payment. The estimate of cash discounts is recorded at the time of sale. We account for the cash discounts by reducing revenue and accounts receivable by the amount of the discounts we expect our customers to take. Accounts receivable are reported in the condensed consolidated balance sheets net of the allowances for doubtful accounts and cash discounts. There was no allowance for doubtful accounts at March 31, 2017 and December 31, 2016 . Revenue Recognition Our commercial launch of our only product, Auryxia, in the United States, occurred in late December 2014. We sell product to a limited number of major wholesalers, our Distributors, as well as certain pharmacies, or collectively, our Customers. Our Distributors resell the product to retail pharmacies for purposes of their reselling the product to fill patient prescriptions. In accordance with GAAP, our revenue recognition policy requires that: (i) there is persuasive evidence that an arrangement exists between us and the Customer, (ii) delivery has occurred, (iii) collectability is reasonably assured, and (iv) the price is fixed or determinable. In the fourth quarter of 2016, we began to recognize revenue under the pull-through (ex-factory) method based on sales to our Customers as a result of our ability to reasonably estimate product returns based on our prior sales and return history. Prior to the fourth quarter of 2016, we recognized revenue based on the resale of Auryxia for the purposes of filling patient prescriptions, and not based on initial sales from us to our Customers as we did not have sufficient history such that we could reliably estimate returns based on sales to our Customers. As a result, prior to the fourth quarter of 2016, we deferred Auryxia revenue recognition until the earlier of the product being resold for purposes of filling patient prescriptions and the expiration of the right of return (twelve months after the expiration date of the product). The deferred revenue was recorded net of discounts, rebates, and chargebacks. We also deferred the related cost of product sales and recorded such amounts as finished goods inventory held by others, which was included in inventory on our condensed consolidated balance sheet, until revenue related to such product sales was recognized. We have written contracts with our Customers and delivery occurs when a Customer receives Auryxia. We evaluate the creditworthiness of each of our Customers to determine whether revenues can be recognized upon delivery, subject to satisfaction of the other requirements, or whether recognition is required to be delayed until receipt of payment. In order to conclude that the price is fixed or determinable, we must be able to (i) calculate our gross product sales from the sales to Customers and (ii) reasonably estimate our net product sales. We calculate gross product sales based on the wholesale acquisition cost that we charge our Customers for Auryxia. We estimate our net product sales by deducting from our gross product sales (a) trade allowances, such as invoice discounts for prompt payment and distributor fees, (b) estimated government and private payor rebates, chargebacks and discounts, such as Medicaid rebates, (c) reserves for expected product returns and (d) estimated costs of incentives offered to certain indirect customers, including patients. Trade Allowances: We generally provide invoice discounts on Auryxia sales to our Distributors for prompt payment and pay fees for distribution services. The payment terms for sales to Distributors generally include a prompt-pay discount for payments made within 35 days. Based on our judgment and industry experience, we expect our Distributors to earn these discounts, and we deduct the full amount of these discounts from our gross product sales and accounts receivable at the time such revenues are recognized. Fees for distribution services are deducted from our gross product sales and we accrue these fees which appear in our accrued expenses on our condensed consolidated balance sheets. Rebates, Chargebacks and Discounts: We contract with Medicaid, other government agencies and various commercial and Medicare Part D private insurance providers, or collectively, our Third-party Payors, so that Auryxia will be eligible for partial or full reimbursement from such Third-party Payors. We also contract with certain specialty pharmacies directly so that Auryxia will be eligible for purchase by these specialty pharmacies. We estimate the rebates, chargebacks and discounts we will provide to Third-party Payors and specialty pharmacies, and we deduct these estimated amounts from our gross product sales at the time the sales are recognized. We estimate the rebates, chargebacks and discounts that we will provide to Third-party Payors and specialty pharmacies based upon (i) our contracts with these Third-party Payors and specialty pharmacies, (ii) the government-mandated discounts applicable to government-funded programs and (iii) information obtained from our Customers and other third parties regarding the payor mix for Auryxia. Product Returns: Consistent with industry practice, we generally offer our Customers a limited right to return our Auryxia based on the product’s expiration date. Our Customers have the right to return Auryxia during the 18 -month period beginning six months prior to the labeled expiration date and ending twelve months after the labeled expiration date. Currently the expiration date for Auryxia is eighteen months after it has been converted into tablet form, which generally occurs within a few months before Auryxia is delivered to Customers. We estimate product returns based on the historical return patterns and we track actual returns by individual manufacturing lots. We expect that Distributors and pharmacies will not stock significant inventory due to the cost of the product, the expense to store our product, and our product being readily available for distribution. We record an estimate of returns at the time of sale. If necessary, our estimated rate of returns may be adjusted for actual return experience as it becomes available. As of March 31, 2017, we have experienced a relatively limited number of product returns; however, our returns experience may change over time. As we continue to gain more historical experience with actual returns, we may be required to make a future adjustment to our product returns estimate, which would result in a corresponding change to our net product sales in the period of adjustment and could be significant. Other Incentives: Other incentives that we offer to indirect customers include co-pay assistance rebates provided by us to commercially insured patients who have coverage for Auryxia and who reside in states that permit co-pay assistance programs, and vouchers for a small supply of Auryxia at no patient cost. Our co-pay assistance program is intended to reduce each participating patient’s portion of the financial responsibility for Auryxia’s purchase price to a specified dollar amount. Based upon the terms of the program and information regarding programs provided for similar specialty pharmaceutical products, we estimate the average co-pay assistance amounts and the percentage of patients that we expect to participate in the program in order to establish our accruals for co-pay assistance rebates and deduct these estimated amounts from our gross product sales at the time the sales are recognized. We adjust our accruals for co-pay assistance and voucher rebates based on our estimates regarding the portion of issued rebates that we estimate will not be redeemed. Classification of Product Sales Allowances and Accruals Allowances against receivable balances primarily relate to prompt-pay discounts and chargebacks and are recorded at the time of sale, resulting in a reduction in product sales revenue and the recording of product sales receivables net of allowances. Accruals related to Medicaid, Medicare Part D and other government and commercial rebates, as well as wholesaler fees and product returns are recorded at the time of sale, resulting in a reduction in product sales and the recording of an increase in accrued expenses. Our U.S. Auryxia product sales for the three months ended March 31, 2017 and 2016 were offset by provisions for allowances and accruals as set forth in the tables below. (in thousands) Three months ended Percent of gross Auryxia product sales Three months ended Percent of gross Auryxia product sales Gross Auryxia product sales $ 17,954 $ 8,625 Less provision for product sales allowances and accruals: Trade allowances 1,278 7 % 1,146 13 % Rebates, chargebacks and discounts 5,818 33 % 1,678 20 % Product returns (69 ) — — — Other incentives (1) 422 2 % 185 2 % Total 7,449 42 % 3,009 35 % Net U.S. Auryxia product sales $ 10,505 $ 5,616 (1) Includes co-pay assistance and voucher rebates. We recognize license revenue in accordance with Accounting Standards Codification, or ASC, 605, Revenue Recognition . We analyze each element of our licensing agreement to determine the appropriate revenue recognition. The terms of the license agreement may include payment to us of non-refundable upfront license fees, milestone payments if specified objectives are achieved, and/or royalties on product sales. We recognize revenue from upfront payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists under the contract. We recognize milestone payments as revenue upon the achievement of specified milestones only if (i) the milestone payment is non-refundable, (ii) substantive effort is involved in achieving the milestone, (iii) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone, and (iv) the milestone is at risk for both parties. If any of these conditions are not met, we defer the milestone payment and recognize it as revenue over the estimated period of performance under the contract. For arrangements for which royalty revenue information becomes available and collectability is reasonably assured, we recognize revenue during the applicable period earned. When collectability is reasonably assured but a reasonable estimate of royalty revenue cannot be made, the royalty revenue is recognized in the quarter that the licensee provides the written report and related information to us. Cost of Goods Sold Cost of goods sold includes the cost of active pharmaceutical ingredient, or API, for Auryxia on which product sales were recognized during the period, as well as the associated costs for tableting, packaging, shipment, insurance and quality assurance. Cost of goods sold also includes expenses due to the licensor of Auryxia related to the manufacturing of product and U.S. Auryxia product sales recognized during the period. License Expenses License expenses include royalty and other expenses due to the licensor of Auryxia related to our license agreement with JT and Torii. With regard to royalty expense, such expense is directly related to the royalty revenue received from JT and Torii and is recognized in the same period as the revenue is recorded. Other expenses are recognized in the period they are incurred. Research and Development Costs Research and development costs are expensed as incurred. Pre-approval inventory expenditures are recorded as research and development expense as incurred. The capitalization of inventory for our product candidate(s) commences when it is probable that the product will be approved for commercial marketing. Non-refundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and expensed over the period that the goods are delivered or the related services are performed, subject to an assessment of recoverability. We make estimates of costs incurred in relation to external clinical research organizations, or CROs, and clinical site costs. We analyze the progress of clinical trials, including levels of patient enrollment, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability. Significant judgments and estimates must be made and used in determining the accrued balance and expense in any accounting period. We review and accrue CRO expenses and clinical trial study expenses based on work performed and rely upon estimates of those costs applicable to the stage of completion of a study. Accrued CRO costs are subject to revisions as such trials progress to completion. Revisions are charged to expense in the period in which the facts that give rise to the revision become known. With respect to clinical site costs, the financial terms of these agreements are subject to negotiation and vary from contract to contract. Payments under these contracts may be uneven, and depend on factors such as the achievement of certain events, the successful recruitment of patients and the completion of portions of the clinical trial or similar conditions. The objective of our policy is to match the recording of expenses in our condensed consolidated financial statements to the actual services received and efforts expended. As such, expenses related to clinical site costs are recognized based on our estimate of the degree of completion of the event or events specified in the specific clinical study or trial contract. Stock-Based Compensation We grant stock options and restricted stock to employees, directors and consultants. We are required to estimate the expected forfeiture rate and only recognize expense for those equity awards that are expected to vest. Forfeitures are estimated based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes model has several inputs, including the volatility in the price of our stock, the risk-free interest rate, the expected term of the option, the closing market price of our stock on the grant date and the exercise price. We base our estimates of our stock price volatility on the historical volatility of our common stock; however, these estimates are neither predictive nor indicative of the future performance of our stock. For purposes of the fair value calculation, we assume that no dividends will be paid during the life of the options. The aggregate fair value of awards calculated using the Black-Scholes option pricing model is generally amortized on a straight‑line basis over the requisite service period, and is recognized based on the proportionate amount of the requisite service period that has been rendered during each reporting period. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment. The fair value of restricted stock granted to our employees and directors is determined based upon the quoted closing market price per share on the date of grant, adjusted for estimated forfeitures. For stock-based awards granted to consultants, we recognize compensation expense over the period during which services are rendered by such consultants until completed. At the end of each financial reporting period prior to completion of the service, we re-measure the fair value of these awards using the then-current fair value of our common stock and updated assumption inputs in the Black-Scholes option-pricing model. The total stock-based compensation recorded in a given period is dependent upon the assumptions utilized. As a result, if other assumptions had been used, our recorded stock-based compensation expense could have been materially different from that reported. In addition, because some of the stock options issued to employees, consultants and other third-parties vest upon the achievement of certain performance conditions or milestones, the total expense is uncertain. Basic and Diluted Net Loss Per Common Share Basic net loss per share is computed by dividing the losses allocable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share does not reflect the effect of shares of common stock to be issued upon the exercise of stock options, as their inclusion would be anti-dilutive. The options outstanding as of March 31, 2017 and 2016 , which are not included in the computation of net loss per share amounts, were 12,737,385 and 6,491,921 , respectively. Impairment Long-lived assets are reviewed for an impairment loss when circumstances indicate that the carrying value of long-lived tangible and intangible assets with finite lives may not be recoverable. Management’s policy in determining whether an impairment indicator exists, a triggering event, comprises measurable operating performance criteria as well as qualitative measures. If an analysis is necessitated by the occurrence of a triggering event, we make certain assumptions in determining the impairment amount. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset or used in its disposal. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized. Goodwill is reviewed for impairment annually, or when events arise that could indicate that an impairment exists. We test for goodwill impairment by comparing the fair value of the reporting unit to the unit’s carrying value, including goodwill. When the carrying value of the reporting unit is greater than its fair value, an impairment is recorded equal to the difference between the carrying value and the fair value, not to exceed the carrying amount of goodwill. As of December 31, 2016 , management concluded that there was no impairment of our goodwill. The impairment test as of December 31, 2016 was based on the existing guidance for goodwill impairment tests. We will continue to perform impairment tests annually, and whenever events or changes in circumstances suggest that the carrying value of an asset may not be recoverable. For the periods ended March 31, 2017 and 2016 , management determined that there were no impairment indicators that would trigger a goodwill impairment analysis. Concentrations of Credit Risk We do not have significant off-balance-sheet risk or credit risk concentrations. We primarily maintain our cash and cash equivalents in institutional money market funds. As of March 31, 2017, approximately $87.7 million of our total $90.9 million cash and cash equivalents balance was invested in institutional money market funds. See Note 3 – Fair Value Measurements. Our accounts receivable, net at March 31, 2017 and December 31, 2016 represent amounts due to us from customers. We perform ongoing credit evaluations of our customers and generally do not require collateral. The following table sets forth customers who represented 10% or more of our total accounts receivable, net as of March 31, 2017 and December 31, 2016 . March 31, 2017 December 31, 2016 McKesson Corporation 23 % 31 % Fresenius Medical Care Rx 23 % 22 % Cardinal Health, Inc. 18 % 11 % Davita Rx 17 % 10 % AmerisourceBergen Drug Corporation 16 % 23 % We currently have two suppliers with three approved sites for the supply of Auryxia drug product. If any of our suppliers were to limit or terminate production, or otherwise fail to meet the quality or delivery requirements needed to supply Auryxia at adequate levels, we could experience losses of revenue, which could materially and adversely impact our results of operations. Leases In April 2015, we signed a lease agreement for approximately 27,300 square feet in Boston, Massachusetts, for a 94 -month term that commenced on May 1, 2015 . In order to make the space usable for our operations, substantial improvements were made. Our landlord agreed to pay for up to approximately $1.9 million of the improvements, and we bore all additional costs that were incurred. As such, we have determined that we are the owner of the improvements and account for tenant improvements paid by our landlord as a lease incentive. On May 1, 2015, in accordance with ASC 840-20, Operating Leases , we recorded a deferred lease incentive, and an associated receivable from our landlord, for the total amount to be paid by the landlord for improvements. The deferred lease incentive is being amortized as a partial offset to rent expense over the term of the lease, and the receivable was reduced as cash was received from our landlord. We began occupying the space in November 2015. Improvements made to our leased space have been recorded as fixed assets and will be amortized over the assets’ useful lives or the remaining lease term, whichever is shorter. New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or the FASB, or other standard setting bodies that we adopt as of the specified effective date. We adopted the following new standards on January 1, 2017: • Accounting Standards Update, or ASU, No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . • ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . The new standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. Under the new standard, entities would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, and any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This standard will be effective for us on January 1, 2020; however, we have adopted this standard as of January 1, 2017 with prospective application to our goodwill impairment tests. The adoption of these standards did not have a material impact on our financial position, results of operations or statement of cash flows. For additional information related to these and other standards, see Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, to our consolidated financial statements included in our 2016 Form 10-K. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , a comprehensive new standard which amends revenue recognition principles and provides a single set of criteria for revenue recognition among all industries. The new standard provides a five-step framework whereby revenue is recognized when promised goods or services are transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires enhanced disclosures pertaining to revenue recognition in both interim and annual periods. The standard is effective for interim and annual periods beginning after December 15, 2017 and allows for adoption using a full retrospective method, or a modified retrospective method. The FASB has subsequently issued amendments to ASU No. 2014-09 that have the same effective date and transition date of January 1, 2018. We expect to adopt these standards using the modified retrospective method and continue to evaluate the expected impact that Topic 606 will have on our financial position, results of operations and disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases . The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The new standard will be effective for us on January 1, 2019. The adoption of this standard is expected to have a material impact on our financial position as it will impact the amount of our assets and liabilities. We are currently evaluating the potential impact that this standard may have on our results of operations. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The new standard addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard will be effective for us on January 1, 2018. This standard is not expected to have a material impact on our statement of cash flows upon adoption. |
