Rockwell Medical (RMTI) 10-K2020 FY Annual report

Rockwell Medical is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, Ferric Pyrophosphate Citrate ("FPC"), which we believe has the potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and improve patients’ lives. We are also one of the two major suppliers of life-saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

We have two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform. We are marketing both products to kidney dialysis centers for their patients receiving dialysis. In 2021, we intend to advance our FPC platform strategy by starting a Phase II trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous ("IV") medications in the home infusion setting. The trend toward providing medical care, including the delivery of medicines, at home make the home infusion market a rapidly growing area of healthcare. We believe that the home infusion setting is a natural path for expansion of our platform as many of the patients suffer from diseases that are associated with iron deficiency and anemia. In our R&D pipeline, we are also investigating FPC’s impact in the treatment of hospitalized patients with acute heart failure, with the potential to begin another Phase II program in these patients in 2022.

We are the second largest supplier of hemodialysis concentrates in the United States, with a reputation for excellent service, quality, and reliability. We believe that this reputation, which is based on over 25 years of service to the kidney dialysis centers, combined with about $60 million in annual revenue, approximately 300 dedicated employees, expertise in manufacturing and logistics and the added expertise in pharmaceutical development and commercialization brought to the Company by recent additions to our management team, gives us a solid foundation on which to grow.

At Rockwell Medical, we are dedicated to replacing the currently inadequate standard of care for treatment of iron deficiency in acute and chronic disease by leveraging our proprietary FPC platform technology. Our proprietary drug platform, FPC, is a next-generation parenteral iron therapeutic. We believe our FPC platform has several advantages over other parenteral iron therapies. Importantly, it provides iron that is immediately available for critical body processes once it is administered. It has been demonstrated to be safe and well-tolerated, with a safety profile similar to placebo.

Iron deficiency can develop into a serious medical condition that is often overlooked and undertreated in several illnesses because it is hard to treat. It is a common comorbidity in many disease states, such as end-stage kidney disease, chronic kidney disease, acute heart failure, cancer and multiple chronic gastrointestinal conditions. Iron deficiency impacts patients’ health in many ways, including anemia, organ dysfunction, slower recovery, diminished energy and reduced quality of life.

Our strategy is to accelerate Rockwell’s growth by creating and developing pharmaceutical products based on our FPC technology for disease states where patients can benefit the most from an effective treatment for iron deficiency, while concurrently refining our dialysis business to drive incremental growth and efficiencies. We plan to leverage and build on the foundation provided by our current dialysis business serving kidney dialysis centers by developing a pipeline of additional potential drug therapies in multiple disease states. We’ve preliminarily identified three disease states where we believe FPC may have the biggest impact.

We plan to accelerate our growth by combining the solid foundation, strength and reputation of our dialysis business with the high-growth potential from therapeutics derived (or generated) from our FPC platform in multiple disease states where patients can benefit the most from an effective treatment for iron deficiency. In parallel with continually seeking to drive incremental growth and efficiencies in our dialysis business unit, our strategy is to accelerate the growth of our business in large, higher-margin markets by creating and developing pharmaceutical products based on our proprietary FPC technology that address iron deficiency in patients who are currently under-treated.

We are one of the two major suppliers of hemodialysis concentrates in the United States. Over the past 25 years we have developed a core expertise in manufacturing and delivering hemodialysis concentrates. Because these concentrates are used to maintain human life by removing toxins and balancing electrolytes in the dialysis patient’s bloodstream, we manufacture them under cGMP regulations as described below. Our concentrates are manufactured in three facilities, totaling 159,000 square feet, located in Michigan, Texas and South Carolina, from which we deliver these products to dialysis clinics throughout most of the United States. We utilize our own delivery fleet as well as third parties. We employ approximately 300 people in the concentrates unit of our dialysis business.

The “Rockwell Medical” name has earned a reputation for dependability, quality and service within our customer base. This reputation was further strengthened during the recent challenges presented, not only by the COVID-19 pandemic, but also by the multitude of recent natural disasters where our team has been challenged by hurricanes, flooding and freezing, while still meeting production demands.

Our dialysis business in concentrates and our growth opportunities with FPC technology are synergistic. We are leveraging our leadership position in the dialysis sector to commercialize our first two FPC-based products, Triferic and Triferic AVNU, which are indicated for the replacement of iron to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease. We commercialize the Triferic products ourselves in the United States, and are partnering with established local pharmaceutical companies for the regulatory approval and commercialization outside of the United States.

Although we have an excellent reputation for dependability and service within the dialysis sector, with concentrates and Triferic, our growth opportunities for both in the US dialysis market are challenged by the consolidated ownership of dialysis clinics, a capitated reimbursement model and the demographics of the patient population. The two largest dialysis organizations treat approximately 73% of the patients in the United States. One manufactures its own concentrates and IV iron and we already supply concentrates to the other. Through our partnership with Baxter International, we currently supply concentrates to a significant percentage of the small and medium sized dialysis organizations. In a sector, such as kidney dialysis, with capitated reimbursement for the dialysis procedure and all included inputs, new product success depends on compelling data demonstrating improved patient outcomes and/or pharmacoeconomics versus the current standard of care in practice in the clinics. Once Medicare determined that Triferic and Triferic AVNU would be reimbursed under the fixed bundled rate, market adoption became more dependent on the generation of these data, which were not required for the drug's approval from the FDA.

Notwithstanding the growth limitations mentioned above, we have made progress and continue to be confident that Triferic has the potential to be the treatment of choice for the maintenance of hemoglobin in dialysis patients. Toward this end, we have increased our efforts in generating real world data in clinics with current protocols, which we believe will help with the adoption of Triferic and Triferic AVNU as these results are developed and disseminated over time. In addition, we believe the hemodialysis industry may experience a great deal of change over the next several years. We plan to take the steps necessary to generate the data necessary to potentially allow Triferic and Triferic AVNU to benefit from these new innovations, such as the potential approval of a class of drugs, known as hypoxia-inducible factor prolyl hydroxylase inhibitors ("HIF-PHIs"), as well as the new, solid-state dialysis equipment in development. We plan to study Triferic in combination with these potential new innovations as they become available.

A key element of our dialysis business strategy is to also improve the strength of our concentrates business by creating efficiencies and enhancing our manufacturing and transportation operations. We have launched projects to identify ways to improve the overall profitability of these core operations. Specifically, we are reviewing our entire supply chain to identify opportunities for improvement, prioritizing initiatives that will have the largest impact on long-term efficiency, profitability and growth.

Our accelerated growth strategy is to go beyond our foundational business in dialysis by leveraging the efficacy and safety data from Triferic. We are planning to develop an FPC-based therapeutic for iron deficiency to be given in the home infusion setting. The number of patients served by home infusion therapy has grown from approximately 800,000 in 2010 to over 3,000,000 in 2019. The home infusion setting is expected to continue this rapid expansion, which has been further supported in the COVID-19 environment. Many patient groups requiring home infusion therapies suffer from diseases that are associated with an incidence of iron deficiency and anemia. For example, it is estimated that 40%-55% of all home parenteral nutrition patients are iron deficient (see Market Opportunity below). We believe, based on our data with hemodialysis patients, FPC as a home infusion therapy for iron deficiency anemia may have distinct advantages over currently available iron replacement therapy options (see Platform Technology below).

Based on feedback received in March 2021 from the FDA, we plan on initiating a Phase 2 clinical study in home infusion patients with iron deficient anemia during the second half of 2021 to confirm the dose and duration of FPC treatment. We expect data from the trial in the second half of 2022 (see Clinical Pipeline below).

We continue exploring other potential patient populations for application of our technology. We are considering disease states where patients can benefit the most from an effective treatment for iron deficiency, and where the development path, cost estimates and reimbursement are the most favorable.

Ferric Pyrophosphate Citrate (“FPC”) is a next-generation parenteral iron that is an important advance in the treatment of iron deficiency anemia, with the potential to be developed for numerous indications. FPC is structurally and functionally different from traditional macromolecular IV iron, or parenteral iron carbohydrate complexes. It is unique in molecular structure and mode-of-action. All components of FPC are normal constituents in the blood. Importantly, FPC has already been shown to be efficacious in clinical trials and is well-tolerated with over one million doses administered to date. The first two formulations based upon the FPC platform received approval for the replacement of iron to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease ("HDD-CKD"). Other formulations of our FPC platform, in other disease states, are currently being researched and developed.

FPC is a novel complex iron salt, developed to replace iron losses in patients with anemia in an entirely new way. This unique and differentiated molecule consists of an iron atom complexed to one pyrophosphate and two citrate anions. FPC is a form of protected iron in which citrate and pyrophosphate are tightly complexed to the iron. The molecule is water soluble, making the iron completely bioavailable, and has the ability to deliver iron directly and completely to transferrin, the body's iron transport protein. This transferrin-bound iron is immediately delivered to the bone marrow to be incorporated into hemoglobin, as well as to other tissues such as skeletal muscle and smooth muscle (e.g. the heart). As a result, this novel approach to iron management has the potential for application in the treatment of iron disorders and iron deficiency anemia in multiple disease states. This mechanism uses the body’s own means to transport iron safely to tissues that need iron (e.g. red blood cells and muscle).

The structure of FPC minimizes the potential for the iron to be taken up into the body’s storage cells, such as those present in the liver and other tissues, which is a problem with traditional macromolecular IV iron. Iron release from body storage cells can be slowed or blocked when inflammation is present. Because of its mechanism of action, FPC increases bioavailable iron unimpeded by inflammation without excessively increasing body iron stores or causing inflammation, iron toxicity, or oxidative stress.

FPC iron is delivered to the bone marrow regardless of other underlying conditions that might otherwise block the release of iron. Some of the challenges of managing iron in sick patients, including inflammation, hepcidin block, and functional iron deficiency, can be overcome with FPC due to its ability to provide immediately bioavailable iron.

Our first FPC-based product, Triferic, is used proactively in hemodialysis patients to maintain iron homeostasis, such that the amount of iron delivered to the patient and to the bone marrow for erythropoiesis closely approximates the amount lost during hemodialysis. FPC bypasses the hepcidin induced block caused by inflammation, of iron-release from the macrophages and liver (see “Our Triferic Portfolio” below). Consequently, tissue iron overload is avoided, unlike when traditional macromolecular IV iron are administered proactively. FPC delivers iron and maintains hemoglobin without increasing iron stores (ferritin) and thus addresses an unmet need in hemodialysis patients.

FPC has demonstrated an excellent safety profile. No reported instances of anaphylaxis or other serious adverse events have been received during more than 1.2 million doses administered. Triferic may be administered even to patients with history of allergic reactions to IV iron.

We are actively evaluating additional indications for potential development (see "Pipeline" below).

We currently commercialize Triferic, Triferic AVNU and our dialysis concentrates portfolio of products. We partner with Baxter Healthcare Corporation, a subsidiary of Baxter International, Inc. ("Baxter"), for commercialization of our concentrates products in the United States and certain other countries. We partner with Nipro Medical Corporation for our concentrate products in certain countries not included in our Baxter agreement, as described below. Our clinical development programs are all based on FPC, our proprietary platform technology. We are directly executing on clinical development programs in the United States, while our international development efforts in dialysis for local regulatory approval are conducted by our partners.

We are an established leader in manufacturing and delivering high-quality hemodialysis concentrates and dialysates, along with certain ancillary products, to dialysis providers and distributors in the United States and abroad. We manufacture, sell and distribute hemodialysis concentrates and other medical products and supplies used in the treatment of patients with End-Stage Kidney Disease (“ESKD”). As one of the two major suppliers in the United States, our dialysis concentrate products are used to maintain human life by removing toxins and replacing critical nutrients in the dialysis patient’s bloodstream. In 2020, we estimate that we supplied approximately 27% of the United States domestic market with dialysis concentrates, with the majority of our sales are being made in the United States. We also supply dialysis concentrates to distributors serving a number of foreign countries, primarily in the Americas and the Pacific Rim.

All of our concentrate products are manufactured according to Association for the Advancement of Medical Instrumentation guidelines and the FDA's Current Good Manufacturing Practice ("cGMP"). Our concentrate products are diluted with purified water on-site at the clinic in the dialysis machine, creating dialysate, which works to clean the patient’s blood.

Our Dri-Sate Concentrate is our original acetic acid-based product. Dri-Sate is packaged as a dry powder acid concentrate for use with our Dry Acid Concentrate Mixer. Dri-Sate is packaged as dry acid concentrate in 25 gallon cases.

Our RenalPure Liquid Concentrate is our original acetic acid-based product and is packaged in 55 gallon drums and four one gallon jugs to a case.

Our Dry Acid Concentrate Mixer is designed for our CitraPure and Dri-Sate Dry Acid products and enables the clinic to mix acid concentrate on-site. Clinics using our Dry Acid Concentrate products realize numerous advantages, including lower cost per treatment, reduced storage space requirements, reduced number of deliveries and more flexibility in scheduling deliveries, while enabling us to reduce distribution and warehousing costs.

RenalPure bicarbonate is a dry powder mixed on-site at the clinic and is packaged for bulk and individual treatment and SteriLyte bicarbonate is a liquid packaged in four one gallon jugs to a case and is used mainly in acute care settings.

We offer certain ancillary products to selected customers including cleaning agents, 6% bleach for disinfection, citric and descale, filtration salts and other supplies used by hemodialysis providers.

Triferic (dialysate) and Triferic AVNU (IV) are currently the only FDA-approved therapies indicated to replace iron and maintain hemoglobin in adult hemodialysis patients. These were our first products based on our FPC platform technology. Triferic (dialysate) in a liquid form was approved in 2015. In 2016, the powder version of Triferic (dialysate) was also approved. These two formulations provide a convenient means to administer Triferic (dialysate) in a clinical setting. Triferic AVNU, approved in 2020, has the same indication for use as Triferic (dialysate), but it is formulated for delivery as an IV infusion.

Each hemodialysis treatment results in a small amount of blood loss due to trapping of red blood cells in the extracorporeal blood circuit and blood loss from the vascular access. This blood loss, when combined with repeated blood draws, increased blood loss from the gastrointestinal (“GI”) tract and stimulation of erythropoiesis by use of erythropoiesis stimulating agents (“ESAs”), frequently results in iron deficiency in hemodialysis patients. Hemodialysis-related blood loss averages about 1g to 1.5g of elemental iron annually, not taking into consideration possible blood losses from dialyzer clotting or bleeding from surgical procedures related to vascular access.

Triferic (dialysate) and Triferic AVNU are currently the only FDA-approved therapy indicated to replace iron to maintain hemoglobin in adult hemodialysis patients. We believe that Triferic, due to its unique mechanism of action, facilitates both potential clinical and cost-saving benefits. Triferic is an innovative iron therapy that replaces the ongoing iron losses that routinely occur in the vast majority of hemodialysis patients. Our first formulation of the drug is delivered via the dialysate, which is an innovative mode of delivery that we believe adds a convenience factor for the dialysis units.

The first presentation of Triferic (dialysate) is a liquid, single-patient dose, which was approved by the FDA in 2015. The second presentation is a powder packet, multiple-use formulation of Triferic (dialysate), which was approved by the FDA in 2016. We built a commercial organization for our Triferic products and launched both Triferic products in the United States in May 2019.

In 2013, we successfully completed two pivotal Phase 3 efficacy trials, called CRUISE-1 and CRUISE-2, for Triferic. The CRUISE studies were identical single-blind, placebo controlled, parallel group, multi-center studies comparing Triferic delivered via hemodialysis bicarbonate concentrate to a placebo group receiving standard hemodialysis solution, with approximately 600 subjects split evenly between the two studies and treatment arms. Oral or IV iron supplementation was

In January 2014, we completed our long-term safety study for Triferic which was a prospective, randomized, double-blinded, placebo-controlled, crossover, multicenter, multinational, Phase 3 study with an enrollment of 718 hemodialysis patients in the United States and Canada. This large-scale long-term safety study, coupled with the successful Phase 3 CRUISE studies, dosed over 100,000 Triferic administrations and demonstrated a safety profile similar to placebo.

Triferic (dialysate) received a reimbursement J-code on January 1, 2016 from the Centers for Medicare & Medicaid Services (“CMS”), providing that it would be reimbursed for administration to dialysis patients within the existing fixed-price “bundle” of payments that CMS provides to dialysis providers. In June 2018, the Company determined, based on feedback provided from CMS’s Innovation Center (“CMMI”), that Triferic (dialysate) was unlikely to obtain add-on reimbursement in the near term. As a result, the Company changed its commercialization strategy to plan for the commercial launch of Triferic (dialysate) with reimbursement within the bundle of payments to dialysis providers, while continuing to develop Triferic AVNU (IV). On April 26, 2019, we were notified of a preliminary recommendation by CMS to grant our powder packet formulation of Triferic (dialysate) a separate J-Code, which became effective on July 1, 2019.We commercially launched Triferic (dialysate) in May 2019.

We also developed Triferic AVNU, an IV formulation of Triferic, for use by hemodialysis patients in the United States as well as international markets. Triferic AVNU was developed pursuant to a Special Protocol Assessment (“SPA”) with the FDA. As part of the SPA, the FDA agreed that an equivalence approach would be acceptable for Triferic AVNU. As a result, rather than conducting additional safety and efficacy trials, the FDA agreed that our NDA would be acceptable, if we were able to show equivalence between Triferic AVNU and Triferic (dialysate) by comparing pharmacokinetic (“PK”) parameters of total iron and transferrin-bound iron of Triferic AVNU to Triferic (dialysate). The formal equivalence study was completed during 2018, and Triferic AVNU met bioequivalence criteria compared with Triferic (dialysate). Triferic AVNU was approved by the FDA on March 27, 2020. The approval and commercial availability of Triferic AVNU is an important advance for the portfolio given that Triferic AVNU can be administered to any hemodialysis patient regardless of the type of bicarbonate technology, or machine technology including hemodiafiltration, used. Use of Triferic (dialysate) is limited to clinics that use a central loop or liquid jugs to deliver bicarbonate. However, Triferic AVNU must be delivered at every dialysis session via slow IV infusion, over 3-4 hours, which may be logistically challenging for some clinics.

In November 2018, CMS issued interpretive guidance on the availability of Medicare reimbursement for certain products indicated to treat renal disease. Under this guidance, Triferic (dialysate) is ineligible for add-on reimbursement under the CMS Transitional Drug Add On Pricing Adjustment (“TDAPA”) program. However, based on that guidance, we believed that Triferic AVNU would remain eligible for add-on reimbursement, so long as it was approved by the FDA on or after

We are also continuing to research other presentations of, and delivery methodologies for, Triferic for potential application in ESKD patients within the dialysis sector in an effort to maximize the commercial potential of Triferic. Furthermore, we intend to initiate clinical studies that would assess Triferic with new prolyl hydroxylase inhibitors in the clinical setting (See Clinical Development and R&D below). Once a new prolyl hydroxylase inhibitor is available for use, we expect to initiate a study of Triferic to maintain hemoglobin levels.

The United States hemodialysis market is currently the largest market in the world for dialysis products. As of 2018, there were an estimated 551,000 hemodialysis patients.

The great majority of hemodialysis patients receive dialysis treatment three times per week, or approximately 153 times per year. Most patients have their dialysis treatment performed at a free-standing clinic for permanent loss of kidney function. These are commonly referred to as “chronic” patients. Patients that have their treatment performed at hospitals for temporary loss of kidney function are typically referred to as “acute” patients. The small percentage of chronic patients that receives their treatment at home are referred to as “home” dialysis patients. In each setting, a dialysis machine dilutes concentrated solution, such as Rockwell’s concentrate products, with purified water. The resulting solution is called dialysate. Dialysate is pumped through an artificial kidney or filter (called a dialyzer) while the patient’s blood is pumped through a semi-permeable membrane inside the dialyzer in the opposite direction the dialysate is flowing. The dialysate can exchange bicarbonate, sodium, calcium, magnesium and potassium into the patient’s blood, while removing fluid and waste. Dialysate generally contains dextrose, sodium chloride, calcium, potassium, magnesium, sodium bicarbonate and citric acid or acetic acid. The patient’s physician chooses the proper concentrations required for each patient based on each particular patient’s needs.

In addition to using concentrate products during every in-center treatment, a dialysis provider also uses other products such as blood tubing, fistula needles, dialyzers, drugs, specialized component kits, dressings, cleaning agents, filtration salts and other supplies, some of which we sell.

The primary causes of anemia in dialysis patients are loss of renal erythropoietin (“EPO”) production and iron deficiency due to chronic inflammation and increased blood losses related to uremia and hemodialysis. The result is an iron loss of∼5–7mg per dialysis session. The current standard of care for treating anemia in HDD-CKD patients are injectable ESAs and traditional macromolecular IV iron. ESAs and traditional macromolecular IV iron are often used together.

HDD-CKD patients have abnormalities in iron metabolism caused by ongoing blood loss during the hemodialysis treatment, repeated blood draws to follow laboratory parameters and a limited diet. Furthermore, absorption of iron from the diet and mobilization from body stores is reduced due to increases in a peptide called hepcidin. Hepcidin is the master regulator of iron uptake and distribution and is elevated in patients with inflammation, such as ESKD patients on dialysis. Since iron is a critical component of hemoglobin production, reduced levels of iron can cause iron deficiency anemia.

EPO is a hormone that is produced by the kidneys and stimulates red blood cell production in the bone marrow. In patients with HDD-CKD, the kidneys do not make enough EPO and as a result the bone marrow makes fewer red blood cells, causing anemia. ESAs are synthetic recombinant versions of human EPO that are administered to HDD-CKD patients to stimulate red blood cell production. Administration of ESAs creates a significant demand for iron in the bone marrow, since iron is a critical building block for hemoglobin that is contained in red blood cells.

IV iron is used to support anemia management in dialysis patients to achieve or maintain an iron replete state prior to, during and following initiation of ESA therapy. Traditional IV iron carbohydrate products are macromolecular carbohydrate complexes which are taken up by macrophages which transfer to the liver where iron gets stored. Iron complexes are metabolized within the macrophages to release iron so that it can bind to transferrin in plasma - the iron carrier in the circulation. Transferrin carries the iron to the bone marrow for hemoglobin generation during red cell production. Due to the inflammation present in hemodialysis patients, hepcidin, the master molecule responsible for regulation of iron absorption from the GI tract and export of recycled iron from the macrophages is elevated, thereby blocking the release of iron from macrophages, which is referred to as iron sequestration. This reduces the efficiency of iron delivery to the bone marrow for erythropoiesis, leading to a state of functional iron deficiency. Since macromolecular IV iron finds a depot in macrophages, it is administered in large doses and is, therefore, suited as a replacement therapy in iron depleted patients. Consistent with this mechanism of action, traditional macromolecular IV iron was approved as large dose injection/infusion to replenish and restore iron stores in iron-depleted patients (serum ferritin level < 200 ng/mL) with iron deficiency anemia.

Since macromolecular IV iron has been the only therapy available for hemodialysis patients for over 30 years, it has been commonly used off-label in hemodialysis patients in a proactive manner for maintaining iron balance and preventing the development of iron deficient state. When iron-carbohydrate complexes are administered intravenously to hemodialysis

In summary, we believe that cumulative tissue iron overload caused by high doses of macromolecular IV iron over time may lead to complications such as infections and cardiovascular disease, which are potentially hazardous to patients’ long-term health. Furthermore, the carbohydrate moiety in IV iron complexes is thought to be responsible for anaphylactic reactions occasionally seen in IV iron complexes.

A class of drugs, known as hypoxia-inducible factor prolyl hydroxylase inhibitors ("HIF-PHIs"), are in development for a variety of indications, including the treatment of anemia for patients with chronic kidney disease. HIF-PHIs are designed to stimulate erythropoiesis and manage iron utilization, and can be administered orally. Certain HIF-PHI compounds, including roxadustat and vadadustat, have reached or completed Phase 3 development in the United States, and an NDA for roxadustat was submitted in the United States in December 2019 and remains pending FDA review. If approved, HIF-PHIs could potentially offer a more convenient alternative to injectable ESAs for treatment of anemia in CKD patients, while potentially increasing iron availability for hemoglobin synthesis.

Based on published presentations of data from a roxadustat trial, we believe the introduction of HIF-PHIs may be an opportunity for us to establish Triferic as a preferred therapy for iron replacement with this new class of drugs. Based on our understanding of the trial, Triferic given at each dialysis could be sufficient for the iron needs of the average roxadustat dialysis patient (see Clinical Pipeline below for more information on our study plans).

Home infusion therapy includes specialized services that allow patients to receive intravenous medications at home. Providers are specialized, closed-door pharmacies with expertise in sterile compounding and clinical management of IV therapies. The therapy is supported by multi-disciplinary clinical teams (pharmacists, nurses, dietitians and doctors).

Many patient groups requiring home infusion therapies suffer from chronic diseases that are associated with a risk of iron deficiency and anemia. As an example, one group in particular at high risk for developing iron deficiency anemia (“IDA”) is patients who require parenteral nutrition. It is estimated that 40-55% of all patients on parenteral nutrition are iron deficient. Patients with IDA can exhibit symptoms of fatigue, shortness of breath, rapid or irregular heartbeats and glossitis - all which affect quality of life. The majority of these patients are undertreated, due in part to limitations with currently available IV iron products. Home infusion represents a large and rapidly growing segment of healthcare where we believe FPC may have distinct advantages over currently available iron replacement therapy options.

Diseases commonly requiring infusion therapy include infections that are unresponsive to oral antibiotics, cancer and cancer-related pain, dehydration, gastrointestinal diseases or disorders which prevent normal functioning of the gastrointestinal system, and more. A recent National Home Infusion Association (NHIA) study found that in 2019 home infusion and specialty providers cared for more than 3 million patients in the United States, representing a 300% increase since the last industry study in 2008.

Until the 1980s, patients receiving infusion therapy had to remain in the inpatient setting for the duration of their therapy, which often lasted for several hours. Heightened emphasis on cost-containment in health care, as well as developments in the clinical administration of the therapy, led to strategies to administer infusion therapy in alternate settings. For individuals requiring long-term therapy, inpatient care is not only tremendously expensive but also prevents the individual from resuming normal lifestyle and work activities.

The technological advances that enabled safe and effective administration of infusion therapies in the home, the desire of patients to resume normal lifestyles and work activities while recovering from illness, and the cost-effectiveness of home care are important. Consequently, home infusion therapy has evolved into a comprehensive medical therapy that is a much less costly alternative to inpatient treatment in a hospital or skilled nursing facility.

Home infusion has been proven to be a safe and effective alternative to inpatient care for many disease states and therapies. For many patients, receiving treatment at home or in an outpatient infusion suite setting is preferable to inpatient care. A thorough patient assessment and home assessment are performed before initiating infusion therapy at home to ensure that the patient is an appropriate candidate for home care (Source: www.nhia.org).

The home and specialty infusion marketplace is experiencing rapid growth and provides a favorable reimbursement opportunity for suitable drugs because of the benefits listed above. In addition to these factors, COVID-19 and its impact has accelerated existing trends.

We believe the home infusion sector will continue to grow in the future. Growth will be driven by: (1) high rates of patient demand, and satisfaction with services, (2) site of care optimization programs driving by commercial payers, (3) legislation to expand coverage for Medicare beneficiaries and (4) a robust pipeline of specialty IV treatments.

IDA is a common comorbidity for many different types of patients with diseases that are treated with home infusion therapy.

It is recommended that patients receiving home parenteral nutrition be screened regularly for anemia. Treatment with parenteral iron for these patients with iron deficiency is recommended. Inadequate response to treatment may be related to continued blood loss, inflammation, ineffective absorption or poor adherence to therapy. Treatment patterns are inadequate for patients on home infusion therapy with IDA. IV iron supplementation is more effective than oral formulations, however, concern for adverse events is a deterrent. Home infusion of traditional macromolecular IV iron is limited due to the risk of hypersensitivity and need for medical supervision of the injection, and concerns about incompatibility with other infused drugs (e.g., stability of parenteral nutrition lipids when delivered with carbohydrate-based IV iron preparations). An office visit for infusion of IV iron is costly, inconvenient, and often does not fit the physician practice care model. Limitations with the current approach can lead to a vicious cycle of late diagnosis and treatment, inconsistent follow-up, and increased risk of office visits or hospitalizations.

For home parenteral nutrition (“HPN”) patients specifically, there is a significant opportunity for FPC for home infusion and an unmet need for effective proactive iron maintenance therapy. There are approximately 113,000 HPN patients annually, of which 83,000 patients require short-term care (averaging 45 days) and 30,000 patients require long-term care. An estimated 40% to 55% of such patients are iron deficient and the majority of patients have a negative iron balance due to low/no dietary iron absorption and inflammation. The current treatment for these patients is daily infusions of parenteral nutrition

We believe FPC is uniquely suited for use as a home infusion therapy:

We use Baxter as our exclusive commercial partner responsible for marketing our Dialysis Concentrate Products within the United States and in select foreign markets pursuant to an exclusive Distribution Agreement, as amended (collectively, the “Distribution Agreement”). In June 2017, we entered into the First Amendment to Exclusive Distribution Agreement with Baxter which, among other things, enabled us to negotiate directly with DaVita, Inc. ("DaVita") on a long-term contract for the supply of our concentrate products. In August 2019, we signed a new Products Purchase Agreement (the "Products Purchase Agreement") with DaVita. The Products Purchase Agreement provides for an increase in the product sale prices relative to the prices charged for products under the previous agreement with DaVita. In March 2020, we entered into a Second Amendment to the Exclusive Distribution Agreement with Baxter (the “Second Amendment”). The Second Amendment provides for, among other things, a commitment by Rockwell to maintain a specified manufacturing capacity for Baxter, a cap upon the net amount of reimbursable transportation expenses and modified extension terms.

We also supply dialysis concentrates to distributors serving a number of foreign countries, primarily in the Americas and the Pacific Rim. Nipro Medical Corporation is our primary distributor of our dialysis concentrates in certain countries in Latin America that are not covered under the Baxter Distribution Agreement.

Dialysate concentrates accounted for approximately 98.5% of our 2020 revenue. Approximately 91.0% of our 2020 sales were to distributors and customers for use in the United States.

Our primary customers in the United States for sales of Triferic (dialysate), Triferic AVNU and our dialysis concentrates are dialysis provider organizations. The dialysis provider market is considerably consolidated, with the top 10 provider organizations treating approximately 90% of in-center hemodialysis patients. We market and sell Triferic (dialysate), Triferic AVNU directly to these medium-sized, and independent dialysis chains.

Our initial target customers include selected medium and small sized dialysis chains and independent dialysis centers. The launch of Triferic (dialysate) has enabled us to engage with key customers in the dialysis industry regarding the potential

We have made progress and continue to be confident that Triferic has the potential to be the treatment of choice for the maintenance of hemoglobin in dialysis patients. Toward this end, we have increased our efforts in generating real world data in clinics with current protocols, which we believe will help with the adoption of Triferic as these results are created and disseminated over time. In addition, we believe the hemodialysis industry may experience a great deal of change over the next several years. We plan to take the steps necessary to generate the data necessary to potentially allow Triferic to benefit from these new innovations, such as the potential approval of a class of drugs, known as hypoxia-inducible factor prolyl hydroxylase inhibitors ("HIF-PHIs"), as well as the new, solid-state equipment in development. We plan to study Triferic in combination with these potential new innovations as they become available (see Clinical Pipeline below).

Our strategy for growth includes the expansion of Triferic sales outside the United States by licensing it to key partners for development and/or commercialization. Partnering in these regions allows us to better leverage the development, regulatory, commercial presence and expertise of business partners to accelerate sales of our products throughout the world. To date, we have established partnerships in China, India, Korea, Canada, Peru and Chile. We continue to pursue international licensing opportunities in other countries and regions.

In 2016, we licensed the commercialization rights for Triferic (dialysate) and Triferic AVNU for the Chinese market to Wanbang Biopharmaceutical ("Wanbang"), a subsidiary of Shanghai Fosun Pharmaceutical (Group) Co., Ltd.. Wanbang estimates there are almost 600,000 patients receiving hemodialysis in the People’s Republic of China and it is expected to become the largest ESRD market in the world over the next several years. Wanbang recently enrolled patients in a Phase III trial. If approved, Wanbang will commence commercialization of Triferic following the regulatory approval (for more information see Clinical Development below).

We have licensed the commercialization rights for Triferic (dialysate) and Triferic AVNU for the Korean market to Jeil Pharmaceuticals (“Jeil”). It is estimated there are approximately 78,000 hemodialysis patients in Korea. Jeil has recently submitted the NDA for both Triferic (dialysate) and Triferic AVNU with the goal of being able to commercially launch Triferic (AVNU) in 2022.

We have also executed a distribution agreement to market our Triferic products in Canada with RMC Health Care Inc. We filed for regulatory approval of Triferic AVNU (IV) in May of 2020, and if approved and granted favorable placement on both national and providence formularies, we would be entitled to receive a transfer price based on our partner’s sales price in Canada. It is estimated that approximately 17,000 patients are receiving hemodialysis in Canada.

Peru:

Chile:

We currently operate in one market segment, the hemodialysis market, which involves the manufacture, sale and distribution of hemodialysis products to hemodialysis clinics, including pharmaceutical, dialysis concentrates, dialysis kits and other ancillary products used in the dialysis process.

DaVita, Inc., accounted for 50% of our concentrate sales in 2020 and 49% of our concentrate sales in 2019. Our accounts receivable from this customer were $1.1 million and $1.2 million as of December 31, 2020 and 2019, respectively. In August 2019, we signed a new Products Purchase Agreement with DaVita, with an initial term expiring on December 31, 2023.

In October 2014, we entered into the Distribution Agreement with Baxter, which was amended in June 2017 and March 2020, pursuant to which Baxter received exclusive distribution rights for our concentrate products in the United States, a commitment by Rockwell to maintain a specified manufacturing capacity for Baxter, a cap upon the net amount of reimbursable transportation expenses and modified extension terms. Our domestic customer contracts for the supply of dialysis concentrate products that permitted assignment to Baxter without consent have been assigned to Baxter. As a result, for 2020 and 2019, our direct sales to Baxter aggregated approximately 25% and 27% of sales, respectively, and we had a receivable from Baxter of $1.6 million and $2.0 million as of December 31, 2020 and 2019, respectively.

Another customer, Nipro Medical Corporation, accounted for 7% and 9% of our sales in 2020 and 2019, respectively. No other customers accounted for more than 10% of our sales in any of the last three years.

DaVita, Baxter, the accounts administered by Baxter, and Nipro Medical Corporation are important to our business, financial condition and results of operations. The loss of any significant accounts could have a material adverse effect on our business, financial condition and results of operations.

See Item 1A “Risk Factors” for a discussion of certain risks related to our key customers.

The majority of our international sales in each of the last two years were sales to domestic distributors that were resold to end users outside the United States. Our total international sales, including sales made through domestic distributors for resale outside the United States, aggregated 9% and 11% of our overall sales in 2020 and 2019, respectively.

See Item 1A “Risk Factors” for a discussion of certain risks related to our foreign sales.

In the United States, our principal competitor for concentrate products is Fresenius Medical Care NA (“Fresenius”), a vertically integrated manufacturer and marketer of dialysis devices, drugs and supplies and operator of dialysis clinics, which has substantially greater financial, technical, manufacturing, marketing, and research and development resources than us. Fresenius, through its Fresenius Kidney Care division, operates approximately 2,600 clinics and treats approximately 37% of the in-center hemodialysis patients in the United States. Fresenius also manufactures and sells a full range of renal products, including dialysis machines, dialyzers, concentrates and other supplies used in hemodialysis. Fresenius also services clinics owned by others with its products where it commands a market leading position in its key product lines. Fresenius manufactures its concentrate in its own regional manufacturing facilities. Fresenius and Rockwell are the two major dialysis concentrate suppliers in the United States.

We expect to differentiate Triferic (dialysate) and Triferic AVNU for iron maintenance therapy for hemodialysis patients based on its unique mode of action, clinical benefits, ability to lower treatment cost for providers, ease of administration and excellent safety profile.

Historically, macromolecular IV iron have been used to treat iron deficiency anemia, and currently, the drug Venofer® is generally regarded as having dominant market share in dialysis over other Macromolecular IV iron drug products, such as Sanofi’s Ferrlecit®. Venofer® is owned by Switzerland-based Vifor Pharma Management Ltd. (“Vifor”). Vifor also markets Ferinject® which is primarily used to treat anemia in a non-dialysis setting. Fresenius has a sublicense agreement that allows Fresenius to distribute Venofer® to the dialysis market in the United States and Canada. Other Macromolecular IV iron competitors include Actavis’ generic Macromolecular IV iron drug, Nulecit®. Since macromolecular IV iron products are indicated for repletion therapy and not explicitly for iron maintenance therapy, they are not technically direct competitors to Triferic. The molecular structures, modes-of-action and FDA-approved clinical indications are different. Both therapies are needed to treat dialysis patients, where Triferic is given at every dialysis treatment to maintain iron levels, macromolecular IV iron are intended to be administered only to treat excessively low (or absolute) iron deficiency. Accordingly, as Triferic gains market share, we expect Macromolecular IV iron use will decline.

The markets for drug products are highly competitive. Competition in drug delivery systems is generally based on marketing strength, product performance characteristics (i.e., reliability, safety, patient convenience) and product price. Acceptance by dialysis providers and nephrologists is also critical to the success of a product. The first product on the market in a particular therapeutic area typically is able to obtain and maintain a significant market share. In a highly competitive marketplace and with evolving technology, additional product introductions or developments by others could render our products or technologies noncompetitive or obsolete. In addition, pharmaceutical and medical device companies are largely dependent upon health care providers being reimbursed by private insurers and government payers. Drugs approved by the FDA might not receive reimbursement from private insurers or government payers.

Prior to 2011, CMS had paid providers for dialysis treatments under the Medicare program in two parts: the composite rate and separately reimbursed drugs and services. The composite rate was a payment for the complete dialysis treatment except for physicians’ professional services, separately billed laboratory services and separately billed drugs. CMS implemented a bundled reimbursement rate in 2011. The bundled rate is a single payment per treatment, thereby eliminating reimbursement for individual drugs and services to providers. Regulations provide that the rate is recalculated each year. As a result, dialysis drugs are typically viewed by providers as an additional cost that must be provided within the fixed bundled payment. Both Triferic (dialysate) and Triferic AVNU are reimbursed within the bundle for dialysis treatment. This reimbursement status makes commercialization more difficult, as dialysis centers may view Triferic as increasing their costs and lowering their operating margins. To counter this, we must show improved patient outcomes and experiences, which would justify the lower operating margins for dialysis providers.

We believe that Triferic represents innovation for iron replacement within ESKD. We believe that medical education will play an integral role in helping to further the awareness and understanding of how Triferic can address the replacement of ongoing iron losses and maintenance of hemoglobin in ESKD patients. Medical affairs will be increasingly important as additional data on the use of Triferic become available, as discussed above and in “Clinical Pipeline” below.

Rockwell plans to conduct a study to evaluate the efficacy, safety and compatibility of Triferic and roxadustat for the maintenance of hemoglobin in HDD-CKD patients. The primary objective of the study will be to evaluate the efficacy of roxadustat-Triferic in maintaining erythropoiesis in adult patients with chronic kidney disease receiving hemodialysis. Efficacy will be measured primarily by the change from baseline in hemoglobin (Hgb). Secondary objectives will include: the efficacy of roxadustat-Triferic as compared to roxadustat alone based on Hgb response and level during the study, the need for IV iron use in subjects treated with roxadustat-Triferic as compared to roxadustat alone, and the efficacy of roxadustat-Triferic based on Hgb response in inflamed subjects (stratify). Commencement of the study is pending FDA approval of roxadustat and its commercial availability in the United States. As of March 2021, the FDA has recommended an advisory panel review the new drug application for roxadustat.

To support the sales of our Triferic products, we are evaluating potential clinical studies and are conducting real-world data initiatives that we believe have the potential to support the value proposition for both Triferic (dialysate) and Triferic AVNU (IV). Such initiatives, if successful, have the potential to provide valuable clinical and pharmacoeconomic data that can be used by our medical teams to educate dialysis providers of the benefits of Triferic.

As part of this program we are collecting data from sites that are purchasing Triferic (dialysate) in the United States so that we can assess the impact of Triferic (dialysate) on various clinical and pharmacoeconomic measures.

Results from a study, conducted by New York University and reported in Critical Care Medicine, showed $296,000 in cost savings from Triferic. The study, which was independent of Rockwell, reviewed the effects of long-term use of Triferic in a large outpatient dialysis clinic, and showed substantial cost savings due to reductions in ESA and macromolecular IV iron use without impacting patient safety and hemoglobin targets. In a retrospective data review of 100 patients that were followed before and after implementation of Triferic dialysate, there was a relative reduction in average weekly ESA dose of 26.4%, total use of IV iron replacement therapy decreased with a relative reduction in the use of all iron products (iron sucrose 65.7%, sodium ferric gluconate 98.2%) while anemia targets were met. This clinic determined that the reduction of these agents resulted in a net savings of more than $296,000 in one fiscal year.

The FDA has feedback on our proposed clinical development plans which we intend to incorporate into the next iteration of clinical protocols and FDA correspondence and dialogue. FDA has accepted our proposed development strategy to pursue an approval via the 505(b)(1) pathway as a novel NDA for FPC for treatment of IDA in adult patients. The FDA further agreed with our approach to cross-reference non-clinical pharmacology and toxicology from our prior INDs and does not foresee the need for additional studies in these areas.

We plan to take advantage of the early consultation opportunities provided by FDA in a pre-IND meeting to further clarify study design, patient selection and study endpoints for our Phase II study of a FPC for treatment of IDA in adult patients receiving home infusion therapies. We currently expect to have this meeting and be able to initiate the clinical trial in the second half of this year.

Pursuant to the Distribution Agreement, Baxter is our exclusive agent for commercializing our hemodialysis concentrate and ancillary products in the United States to clinics other than DaVita and various foreign countries for an initial term of 10 years ending October 2, 2024. We retain sales, marketing and distribution rights for our hemodialysis concentrate products for our international customers and in those countries in which we have an established commercial presence. During the term of the Distribution Agreement, Baxter has agreed not to manufacture or sell any competitive concentrate products in the United States hemodialysis market, other than specified products. The Distribution Agreement does not include any of the Company’s drug products. In June 2017, we entered into the First Amendment to the Distribution Agreement with Baxter (the “Amendment”). The Amendment provides for, among other things, reduced pricing on certain accounts and incentives to Baxter to pursue new customers and increase future sales. In March 2020, we entered into the Second Amendment to the Distribution Agreement with Baxter (the “Second Amendment”). The Second Amendment provides for, among other things, a commitment by Rockwell to maintain a specified manufacturing capacity for Baxter, a cap upon the net amount of reimbursable transportation expenses and modified extension terms.

Under the Distribution Agreement, Baxter purchases concentrate-related products from us at pre-determined gross margin-based prices per unit adjusted each year during the term and subject to an annual true up. The Distribution Agreement also requires Baxter to meet minimum annual purchase levels, subject to a cure period and certain other relief, in order to maintain its exclusive distribution rights. The minimum purchase levels increase each year over the term of the Distribution Agreement. Purchases in any calendar year that exceed the minimum may be carried forward and applied to future years’ minimum requirements. The Distribution Agreement, as amended by the Second Amendment, also contains provisions regarding our obligations to maintain specified manufacturing capacity and quality levels. We continue to manage customer service, transportation and certain other functions for our current customers. For customer service, Baxter pays us an amount equal to our related costs plus a slight mark-up for these services. For transportation costs, Baxter pays us an amount equal to our related costs, subject to the defined caps contained within the Second Amendment, which are based upon defined percentages of liquid concentrate product being shipped.

The Distribution Agreement also provides that, upon the mutual determination of us and Baxter, Baxter will pay us up to $10 million to build a new manufacturing facility in the Pacific time-zone that would serve customers in the western United States. The fee payable in connection with construction of the facility will be reduced to the extent that the facility is not operational within 12 months after the start of construction. Except for any leased components, we will own and operate the facility when completed.

Either party may terminate the Distribution Agreement upon the insolvency or material breach of the other party or in the event of a force majeure. In addition, Baxter may also terminate the Distribution Agreement at any time upon 270 days’ prior written notice to us or if (i) prices increase beyond certain thresholds and notice is provided within 45 days after the true up payment is due for the year in which the price threshold is exceeded, (ii) a change of control of the Company occurs and 270 days’ notice is provided, or (iii) upon written notice that Baxter has been enjoined by a court of competent jurisdiction from selling in the United States any product covered by the Distribution Agreement due to a claim of intellectual property infringement or misappropriation relating to such product. If Baxter terminates the Distribution Agreement under the discretionary termination or the price increase provisions, it would be subject to a limited non-compete obligation in the United States with respect to certain products for a period of two years.

Pursuant to the Distribution Agreement, we received an upfront fee of $20 million in October 2014. If a “Refund Trigger Event” occurs prior to December 31, 2021, we would be obligated to repay 25% of the upfront fee and any paid portion of the facility fee. A “Refund Trigger Event” means any of the following: (i) a change of control of the Company involving any of certain specified companies; (ii) a termination by Baxter due to the Company’s bankruptcy or breach, or due to price increases that exceed the stated thresholds; (iii) a termination by either party due to a force majeure; (iv) settlement or adjudication of any claim, action or litigation relating to a covered product that materially and adversely affects Baxter’s commercialization of the product; and (v) any regulatory action or ruling relating to a covered product that materially and adversely affects Baxter’s commercialization of the product.

The Distribution Agreement may be extended for an additional five years by Baxter if Baxter achieves a specified sales target and pays an extension fee of $7.5 million. If the first extension occurs, the Distribution Agreement term may later be extended an additional five years at Baxter’s option at no additional cost.

Any devices manufactured or distributed by us pursuant to FDA clearances or approvals are subject to continuing regulation by the FDA and certain state agencies. As a manufacturer of medical devices for marketing in the United States, we are required to adhere to regulations, including 21 CFR 820, which is commonly referred to as the Quality System Regulation, setting forth detailed cGMP requirements, which include testing, control and documentation requirements. We must also comply with medical device reporting regulations which require that we report to the FDA any incident in which our products may have caused or contributed to a death or serious injury, or in which our products malfunctioned and, if the malfunction were to recur, it would be likely to cause or contribute to a death or serious injury. Under such a scenario, our products may be subject to voluntary recall by us or required recall by the FDA. Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. The FD&C Act prohibits the marketing of approved medical devices for unapproved uses.

We are subject to routine inspection by the FDA and certain state agencies for compliance with cGMP requirements and other applicable quality system regulations. We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, transportation and disposal of hazardous or potentially hazardous substances.

We have 510(k) clearance from the FDA to market hemodialysis concentrates in both liquid and powder form. In addition, we have received 510(k) clearance for our Dry Acid Concentrate Mixer.

We must comply with the FD&C Act and related laws and regulations, including cGMP, to retain 510(k) clearances. We cannot assure you that we will be able to maintain our 510(k) clearances from the FDA to manufacture and distribute our products. If we fail to maintain our 510(k) clearances, we may be required to cease manufacturing and/or distributing our products, which would have a material adverse effect on our business, financial condition and results of operations. If any of our FDA clearances are denied or rescinded, sales of our products in the United States would be prohibited during the period we do not have such clearances.

The marketing of pharmaceutical products in the United States, such as Triferic, requires the approval of the FDA. The FDA has established regulations, guidelines and safety standards which apply to the pre‑clinical evaluation, clinical testing, manufacturing and marketing of our new iron maintenance therapy product and other pharmaceutical products. The steps required before a pharmaceutical product can be produced and marketed for human use include: (i) pre‑clinical studies; (ii) submission to the FDA of an Investigational New Drug Application (“IND”), which must become effective before human clinical trials may commence in the United States; (iii) adequate and well controlled human clinical trials; (iv) submission to the FDA of an NDA; and (v) review and approval of the NDA by the FDA. An NDA generally is required for products with new active ingredients, indications, routes of administration, dosage forms or strengths. An NDA requires that complete clinical studies of a product’s safety and efficacy be submitted to the FDA, the cost of which is substantial. The costs are often less, however, for new delivery systems, which utilize already approved drugs than for drugs with new active ingredients.

Pre‑clinical studies are conducted to obtain preliminary information on a pharmaceutical product’s efficacy and safety in animal or in vitro models. The results of these studies are submitted to the FDA as part of the IND and are reviewed by the FDA before human clinical trials begin. Human clinical trials may begin 30 days after receipt of the IND by the FDA unless the FDA objects to the commencement of clinical trials.

Human clinical trials are typically conducted in three sequential phases, but the phases may overlap. Phase 1 trials consist of testing the product primarily for safety, metabolism and pharmacologic action in a small number of patients or healthy volunteers at one or more doses. In Phase 2 trials, the safety and efficacy of the product are evaluated in a patient population somewhat larger than the Phase 1 trials with the primary intent of determining the effective dose range. Phase 3 trials typically involve additional testing for safety and clinical efficacy in an expanded population at a large number of test sites. A clinical plan, or protocol, accompanied by documentation from the institutions participating in the trials, must be received by the FDA prior to commencement of each of the clinical trials. The FDA may order the temporary or permanent discontinuation of a clinical trial at any time.

The results of product development and pre‑clinical and clinical studies are submitted to the FDA as an NDA for approval. If an application is submitted, there can be no assurance that the FDA will review and approve the NDA in a timely manner. The FDA may refuse to file an NDA if it is not sufficiently complete to permit substantive review. The FDA may deny an NDA by way of a complete response letter if applicable regulatory criteria are not satisfied or it may require additional testing, including pre‑clinical, clinical and or product manufacturing tests. Even if such data are submitted, the FDA may ultimately deny approval of the product. Further, if there are any modifications to the drug, including changes in indication, manufacturing process, labeling, or a change in a manufacturing facility, an NDA supplement may be required to be submitted to the FDA. Product approvals may be withdrawn after the product reaches the market if compliance with regulatory standards is not maintained or if problems occur regarding the safety or efficacy of the product. The FDA may require testing and surveillance programs to monitor the effect of products which have been commercialized and has the power to prevent or limit further marketing of these products based on the results of these post‑marketing programs.

Manufacturing facilities are subject to periodic inspections for compliance with regulations, such as cGMP requirements, and each domestic drug manufacturing facility must be registered with the FDA. Foreign regulatory authorities may also have similar regulations. We expend significant time, money and effort in the area of quality assurance to comply with all applicable requirements. FDA approval to manufacture a drug is site specific. In the event an approved manufacturing facility for a particular drug becomes inoperable, obtaining the required FDA approval to manufacture such drug at a different manufacturing site could result in production delays, which could adversely affect our business and results of operations. Manufacturers and distributors must comply with various post‑market requirements, including adverse event reporting, re‑evaluation of approval decisions and notices of changes in the product or in the process or procedures used to manufacture a product.

Once an NDA is approved, a product is subject to certain post-approval requirements. As an NDA applicant, we are required to submit to FDA information about any adverse event associated with the use of our approved drug, whether or not the adverse event is considered drug related. If our marketed drug is found to be potentially harmful or does not comply with applicable requirements, we also may recall the product. The FDA regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Major changes and some moderate changes to an approved drug, or to the conditions established in the approved NDA, may require the submission and approval of a new NDA or NDA supplement before the change can be implemented. Other changes may be made at the time of FDA’s receipt of the NDA supplement or may be described in our next annual report for the approved NDA.

Under the Pediatric Research Equity Act ("PREA"), NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any drug for an indication where orphan designation has been granted.

The federal and state governments in the United States, as well as many foreign governments, from time to time explore ways to reduce medical care costs through health care reform. Due to uncertainties regarding the ultimate features of reform initiatives and their enactment and implementation, we cannot predict what impact any reform proposal ultimately adopted may have on the pharmaceutical and medical device industry or on our business or operating results. Our activities are subject to various federal, state and local laws and regulations regarding occupational safety, laboratory practices, and environmental protection and may be subject to other present and possible future local, state, federal and foreign regulations. We do not expect that compliance with these regulations, including environmental laws, will have a material adverse impact on our financial condition.

The approval procedures for the marketing of our products in foreign countries vary from country to country, and the time required for approval may be longer or shorter than that required for FDA approval. We generally depend on our foreign distributors or marketing partners to obtain the appropriate regulatory approvals to market our products in those countries, which generally do not require additional testing for products that have received FDA approval.

However, since medical practice and governmental regulations differ across regions, further testing may be needed to support market introduction in some foreign countries. Some foreign regulatory agencies may require additional studies involving patients located in their countries. Even after foreign approvals are obtained, further delays may be encountered before products may be marketed. Issues related to import and export can delay product introduction. Many countries require additional governmental approval for price reimbursement under national health insurance systems.

We have several trademarks and service marks used on our products and in our advertising and promotion of our products, and we have applied for registration of such marks in the United States and several foreign countries. Most such applications have resulted in registration of such trademarks and service marks.

As of December 31, 2020, we owned or had the rights to 30 issued patents (4 U.S. and 26 foreign) and 56 pending applications (6 U.S. and 50 foreign). Patents and patent applications owned or licensed by us include claims to FPC in both dialysate and IV compositions, formulations and methods of making, as well as other patent claims, including Erythropoietin Stimulation Agent ("ESA") sparing methods using Triferic, and parenteral nutritional compositions including Triferic.

See Item 1A “Risk Factors” for a discussion of certain risks related to our intellectual property.

As of December 31, 2020, we had 300 employees, substantially all of whom are full time employees. Our arrangements with our employees are not governed by any collective bargaining agreement. Our employees are employed on an “at‑will” basis.

Our key human capital management objectives are to identify, recruit, integrate, retain and motivate our new and existing employees. We believe that our compensation and benefit programs are appropriately designed to attract and retain qualified talent. Employees receive an annual base salary and are eligible to earn performance-based cash bonuses. To create and maintain a successful work environment, we offer a comprehensive package of additional benefits that support the physical and mental health and wellness of all of our employees and their families. Additionally, we grant equity awards in order to allow for directors, officers and senior-level employees to share in the performance of the Company.

We are committed to a safe workplace for our employees and have implemented health and safety management processes into our operations. In response to the COVID-19 pandemic, we have implemented additional safety measures for the protection of our employees, including work-from-home measures for applicable employees and additional cleaning and protective measures.

Investing in our common stock involves significant risks. You should carefully consider the risks described below before making a decision to invest in our common stock. If we are unable to successfully address these risks and challenges, our business, financial condition, results of operations, or prospects could be materially adversely affected. In such case, the trading price of our common stock would likely decline, and you may lose all or part of your investment. Below is a summary of some of the risks we face.

RISKS RELATED TO OUR DRUG BUSINESS

The commercial success and ultimate profitability of Triferic depends in part on reimbursement of Triferic by government and commercial payors. Both formulations of Triferic are reimbursed “within the bundle,” which means that dialysis providers will not receive any additional amount of reimbursement from Medicare or Medicaid to compensate them for the cost of purchasing and administering Triferic. This reimbursement constraint has resulted and may continue to result in a slower rate of commercial adoption than initially anticipated. In order to address this constraint, we are working with dialysis providers to demonstrate with healthcare economic data the improved patient outcomes and reduction in utilization of other anemia therapies associated with Triferic, as well as the resulting savings that offset the costs associated with Triferic. The commercial success of the Triferic portfolio would be significantly impacted if we are unable to generate additional positive healthcare economic data used in these conversations.

In order to gain broad market acceptance, we expect that we will need to penetrate the dialysis market, which is highly concentrated in the United States. DaVita and Fresenius own or manage a large number of the outpatient dialysis facilities in the United States, which account for approximately 73% of the total number of hemodialysis patients in the United States. This represents a substantial majority of Triferic’s addressable market opportunity in the free-standing dialysis clinic setting. Due to this concentration, these entities have substantial purchasing leverage, which may put pressure on our pricing by their potential ability to extract price discounts on our products, correspondingly negatively impacting our bargaining position and profit margins. To date, neither Fresenius nor DaVita have adopted Triferic in their dialysis facilities. We do not expect to be able to successfully penetrate a large portion of the total addressable market in the United States without Fresenius or DaVita.

Increased market acceptance will depend on a number of factors, such as demonstration of Triferic's safety and efficacy, cost-effectiveness, and advantages over existing products. Other factors that have impacted and may continue to impact the commercial success and ultimate profitability of Triferic include:

Additionally, Triferic competes against current anemia therapies (including macromolecular intravenous iron and the ESA class of drugs) and may in the future compete with products such as HIF-PHIs, if approved. It has been difficult to gain market acceptance from dialysis chains, anemia managers and nephrologists. Implementation of Triferic in clinics requires changes to established customer protocols, formularies, administration methods and operational practices. There is no assurance that we can persuade dialysis centers to adopt their protocols and utilize the drugs in a manner consistent with state regulatory agencies. This challenge has been enhanced by the ongoing COVID-19 pandemic, as dialysis centers are often unable or unwilling to make such changes. In addition, clinics typically need to adjust their protocols to optimize the financial impact of Triferic. We expect that the success of the commercialization of Triferic will be contingent upon being able to overcome these hurdles which may continue to be slower than anticipated, if at all.

We cannot assure you that we will be able to generate meaningful and sustained revenues through the sale of either formulation of Triferic. If we are not successful in commercializing either formulation of Triferic, our entire investment in Triferic may be of no value, our inventory of finished product may expire or become obsolete (resulting in write-offs of such inventory), our licensing rights could be materially adversely affected and the price of our common stock could substantially decline. Even if we are successful in commercializing either formulation of Triferic, since the market is highly concentrated, our continued success may depend on adoption of Triferic by the limited number of existing dialysis providers.

The COVID-19 pandemic continues to evolve rapidly. The ultimate impact of the COVID-19 pandemic or a similar public health emergency is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems, or the global economy as a whole. However, any one or a combination of these events could have an adverse effect on the operation of and results from our clinical trials and on our other business operations, which could negatively impact our business, operating results and financial condition.

The FDA must approve any new indication for an approved product. Triferic (dialysate) and Triferic AVNU are approved by the FDA for use in adult patients receiving hemodialysis treatments and has not yet been approved for other indications or for other claims for which we may seek approval. We are not able to promote Triferic (dialysate) and Triferic AVNU or encourage our customers to use Triferic (dialysate) and Triferic AVNU for purposes other than the indications of use

Our success depends in part on our ability to obtain and defend patent and other intellectual property rights that are important to the commercialization of our drug products and product candidates. The degree of patent protection that will be afforded to our drug products and processes in the United States and in other important markets remains uncertain and is dependent upon the scope of protection afforded to us by the patent offices, courts, administrative bodies and lawmakers in the relevant jurisdictions. We can provide no assurance that we will successfully obtain or preserve patent protection for the technologies incorporated into our drug products and processes, or that the protection obtained will be of sufficient breadth and degree to protect our commercial interests in all countries where we conduct business. If we cannot prevent others from exploiting our inventions, we will not derive the benefit from them that we currently expect.

While we have an issued patent in the United States and certain other major markets, including Europe and Japan, that covers the I.V. and Dialysate formulations of Triferic, these patents expire in 2029. The previously issued foundational composition-of-matter patents for Triferic expired in 2016. In light of the current patent protection that we have for Triferic, it is possible that a competitor could seek to manufacture a generic version of Triferic using product specifications and manufacturing methods that do not infringe our issued patent. Further, it is possible that a competitor could seek to invalidate our issued Triferic patent.

We also rely on regulatory exclusivity for protection of our drug products, which includes regulatory data protection and market protection. Implementation and enforcement of regulatory exclusivity varies widely from country to country. Failure to qualify for regulatory exclusivity, or failure to obtain or maintain the necessary extent or duration of such protections for our drug products could affect our revenues, our decision on whether to market our drug products in a particular country and could otherwise have an adverse impact on our results of operations. In the United States, our regulatory exclusivity for Triferic (dialysate) as a new chemical entity started with FDA approval of the product. Because of the delay between approval and the commercial launch of Triferic, our regulatory exclusivity has expired and we must rely on patent protection for the long-term protection of our Triferic franchise.

We rely on CMOs to manufacture Triferic. If a CMO is unable to manufacture Triferic in sufficient quantities and on a consistent basis, or if it becomes unwilling to produce Triferic for us, we may not be able to supply our customers in a timely manner. For Triferic (dialysate) and Triferic AVNU, we have a single-source finished goods supplier and do not have a long-term supply contract. If we were to experience a supply disruption, it could take an extended period of time to find and qualify an alternate supplier. The manufacturing facilities and processes used by our CMOs must be approved by the FDA and foreign regulators, where applicable, before the drug products manufactured by such CMOs can be sold. After approval, CMOs must

We may not be able to obtain the raw materials or packaging components we need, or the price of such materials or components may rise significantly, for a variety of reasons, including but not limited to:

Some of the suppliers for our raw materials or packaging components are single-source suppliers. Finding an alternative source can be expensive and take a substantial amount of time, especially when regulatory approval is required to qualify the supplier. If we are unable to obtain our raw materials and packaging components and are not able to establish alternative supply sources, or if the prices for such items increase substantially, our CMOs may not be able to produce the desired quantities of our drug products and our expected gross profit margins may be materially adversely affected.

The regulatory procedures for obtaining marketing approval of drug products and product candidates, including Triferic (dialysate) and Triferic AVNU, outside the United States vary from country to country and such approvals can be difficult to obtain. Regulatory approval in foreign countries may require additional clinical testing, such is the case with Triferic and our ability to file for regulatory approval in Europe. These tests may be expensive and time consuming and there can be no assurance as to our ability to achieve a positive result, even if we have had positive clinical trial results in the past. We have encountered and may continue to encounter delays in the foreign approval process, which could delay the initiation of marketing of our products. Many countries require additional government approval for price reimbursement under national health insurance systems.

Even if we obtain the necessary foreign approval in a particular market, we do not have expertise selling and marketing on an international level and, therefore, may not be successful in realizing commercial value from our drug products. Thus, our strategy is to out-license the rights to our drug products in markets outside the United States to partners who we believe will have the necessary resources and expertise to obtain regulatory approval and ultimately commercialize our out-licensed drug products. However, we may not be successful in finding new partners who will be willing to invest in our drug

If we are successful in obtaining partners to develop and commercialize our drug products in foreign markets, we will be dependent upon their effectiveness in selling and marketing our drug products in those foreign markets. These partners may face stiff competition, government price regulations, generic versions of our drug products, violations of our intellectual property rights and other negative events or may otherwise be ineffective in commercializing our drug products, any of which could reduce the market potential for our drug products and our success in those markets.

We may be subject to additional risks if Triferic (dialysate), Triferic AVNU or any other drug product candidates are approved and marketed outside of the United States, including:

As part of our business strategy to expand our drug product portfolio, if we would seek to acquire or in-license other drug products or product candidates that we believe are a complementary fit with our current product portfolio, as well as other product or product candidates that we believe have substantial development potential. We may not be able to identify such products or product candidates. If we do, the negotiation of such arrangements can be a lengthy and complex process and there can be no assurance that any such negotiations will be completed on a timely basis or at all, or result in an arrangement that will enable us to effectively integrate, develop and launch such products or product candidates effectively.

In addition, the market potential for new drug products or product candidates is highly uncertain and evaluation of such potential requires significant judgment and assumptions. There is a significant risk that any new drug product may not be able to be brought to market as profitably as expected or at all. If the results of any new drug product initiative are materially worse than expected, it could have a material adverse effect on our business, results of operations, financial position and cash flows.

Medicare and Medicaid fund the majority of dialysis costs in the United States. Many dialysis providers receive the majority of their funding from the government and are supplemented by payments from private health care insurers. These providers depend on Medicare and Medicaid funding to be viable businesses. Changes to health insurance and reimbursement by Congress may have a negative impact on Medicare and Medicaid funding and on reimbursement protocols. If Medicare and Medicaid funding were to be materially decreased, dialysis providers would be severely impacted, increasing our risk of not being paid in full. An increase in our exposure to uncollectible accounts could have a material adverse effect on our business, results of operations, financial position and cash flows.

Since 2011, CMS has continued to modify reimbursement policies for dialysis under the ESKD prospective payment system generally resulting in lower payment to dialysis providers. We anticipate that dialysis providers will continue to seek ways to reduce their costs per treatment due to this change in reimbursement practice, which could reduce our sales and profitability and have a material adverse effect on our business, results of operations, financial position and cash flows.

As a result of these changes to Medicare and Medicaid reimbursement, the dialysis provider industry may continue to consolidate. This may result in increased purchasing leverage for providers across all dialysis product categories and increased pricing pressure on all suppliers to the industry.

A new class of drugs, known as HIF-PHIs, is currently in development for a variety of indications, including the treatment of anemia for patients with chronic kidney disease. HIF-PHIs are designed to stimulate erythropoiesis and manage iron utilization and can be administered orally. Certain HIF-PHI compounds, including roxadustat and vadadustat, have reached or completed Phase 3 development in the United States, and an NDA for roxadustat was submitted in the United States in December 2019. If successfully developed and approved, HIF-PHIs could potentially offer a more convenient, more effective and/or safer alternative to injectable ESAs for treatment of anemia in HDD-CKD patients while potentially increasing iron availability for hemoglobin synthesis. It is possible that HIF-PHIs may significant limit or potentially eliminate the need for parenteral iron to be administered to patients on dialysis. It is also possible that it is not medically appropriate to use a HIF-PHI in conjunction with Triferic.

We cannot guarantee that we will be able to initiate and complete clinical trials and successfully accomplish all required regulatory activities or other activities necessary to gain approval and commercialize our future product candidates. In the future, we may file INDs for any future indications or future product candidates. If any such future IND is not approved by the FDA, our clinical development timeline may be negatively impacted and any future clinical programs may be delayed or terminated. As a result, we may be unable to obtain regulatory approvals or successfully commercialize our products. We do not know whether any other clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our future product candidates or allow our competitors to bring products to market before we do, which would impair our ability to successfully commercialize our future product candidates and may harm our business, results of operations and prospects. Our or our future collaborators’ inability to timely complete clinical development could result in additional costs to us as well as impair our ability to generate product revenue, continue development, commercialize our future product candidates, reach sales milestone payments and receive royalties on product sales. In addition, if we make changes to a product candidate including, for example, a new formulation, we may need to conduct additional nonclinical studies or clinical trials to bridge or demonstrate the comparability of our modified product candidate to earlier versions, which could delay our clinical development plan or marketing approval for our current product candidate and any future product candidates.

The timely completion of clinical trials largely depends on patient enrollment. We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our future clinical trials, and even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials. Some of the disease states in which we are investigating FPC, specifically the home setting, present logistical challenges for patient enrollment in clinical trials. In addition, our competitors, some of whom have significantly greater resources than we do, may conduct clinical trials for the same indications or in the same therapeutic areas and seek to enroll patients in their studies that may otherwise be eligible for

Undesirable side effects caused by our future product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. Additional clinical studies may be required to evaluate the safety profile of our future product candidates.

Lack of efficacy, adverse events or undesirable side effects may emerge in clinical trials conducted by third parties developing product candidates like ours. We have no control over their clinical trials or development program, and lack of efficacy, adverse events or undesirable side effects experienced by subjects in their clinical trials could adversely affect our stock price, our ability to attract additional capital and our clinical development plans for our future product candidates or even the viability of our future product candidates, including by creating a negative perception of FPC pipeline product candidates by healthcare providers or patients.

From time to time, we may publicly disclose preliminary or topline data from our clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data from our clinical trials. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.

We do not expect our FPC pipeline product candidates to be commercially available for several years, if at all. Our future product candidates will be subject to strict regulation by regulatory authorities in the United States and in other countries. We cannot market any product candidate until we have completed all necessary preclinical studies and clinical trials and have obtained the necessary regulatory approvals. We do not know whether regulatory agencies will grant approval for our future product candidates. Even if we complete preclinical studies and clinical trials successfully, we may not be able to obtain regulatory approvals or we may not receive approvals to make claims about our products that we believe to be necessary to effectively market our products. Data obtained from preclinical studies and clinical trials is subject to varying interpretations that could delay, limit or prevent regulatory approval, and failure to comply with regulatory requirements or inadequate manufacturing processes are examples of other problems that could prevent approval.

Even if we receive regulatory approval for our FPC pipeline product candidates, we will have tested them in only a small number of patients during our clinical trials. If our applications for marketing are approved and more patients begin to use our product, new risks and side effects associated with our products may be discovered. As a result, regulatory authorities may revoke their approvals. We might have to withdraw or recall our products from the marketplace. We may also experience a significant drop in the potential sales of our product if and when regulatory approvals for such product are revoked. As a result, we may experience harm to our reputation in the marketplace or become subject to lawsuits, including class actions. Any of these results could decrease or prevent any sales of our approved product or substantially increase the costs and expenses of commercializing and marketing our product.

Even if we obtained regulatory approval for a product candidate, it would be subject to ongoing requirements by the FDA and comparable foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP, regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, or undesirable side effects caused by such products are identified, a regulatory agency may: issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings about such product; mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners; require that we conduct post-marketing studies; require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance; seek an injunction or impose civil or criminal penalties or monetary fines; suspend marketing of, withdraw regulatory approval of or recall such product; suspend any ongoing clinical studies; refuse to approve pending applications or supplements to applications filed by us; suspend or impose restrictions on operations, including costly new manufacturing requirements; or seize or detain products, refuse to permit the import or export of products or require us to initiate a product recall. The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate product revenue.

Upon the occurrence of a “Refund Trigger Event” under the Distribution Agreement with Baxter, we may be required to repay to Baxter $5.0 million of the $20.0 million upfront fee and a portion of the facility fee. A Refund Trigger Event includes, among other things, termination due to an uncured material breach by us. If we are required to make any such payment to Baxter, we may need to reallocate funds from other parts of our business, which could force us to change or delay plans for use of that capital. In any such event, our financial condition, results of operations, and cash reserves could be materially and adversely affected.

Sales of our medical device products are highly concentrated in a few customers. One customer accounted for nearly half of our sales in each of the last three years and for a substantial number of the clinics we serve. The loss of any of these significant customers could have a material adverse effect on our business, results of operations, financial position and cash flows.

We provided Baxter with certain pricing concessions as an incentive to increase its domestic concentrate business. Baxter may not be successful in increasing its domestic concentrate business. If Baxter is not successful in increasing its concentrate business, we may realize lower operating profit from concentrates as a result.

A significant portion of our costs relates to chemicals and other raw materials, which are subject to price volatility based on demand and are highly influenced by the overall level of economic activity in the United States and abroad. These costs have tended to rise from year to year and are likely to continue to rise in the future. Under the Distribution Agreement with Baxter, such cost inflation may result in increases in the prices we charge Baxter. If these increases exceed levels specified in the Distribution Agreement, Baxter has the option to terminate the Distribution Agreement and obtain a refund of a portion of the fees (as a Refund Trigger Event) we received from Baxter. Any such termination or refund could have a material adverse effect on our business, results of operations, financial position and cash flows.

Additionally, the Second Amendment to our Distribution Agreement with Baxter, established a cap on the percentage amount that we receive in reimbursement for transportation expenses. This reimbursement cap could result in Rockwell not being able to obtain the full amount of our transportation costs. We have also been adversely affected by a general shortage in commercial truckers in the United States. This has negatively impacted our profit margins as we pay higher costs to ship products to our customers. Continued increases in shipping costs, the costs of raw materials, or increases in transportation costs that are not reimbursed due to the cap on expenses with Baxter could negatively impact our profit margins, as we may be limited in our ability to pass these costs along to our customers.

In addition, one of the most expensive components of our dialysis solutions is pharmacopeia grade salt. Pharmacopeia grade salt is primarily manufactured domestically by two suppliers. It was announced in September 2020 that our primary supplier of pharmacopeia, one of our largest suppliers of pharmacopeia grade salt, is merging with the other primary manufacturer of pharmacopeia grade salt which could have an effect of our costs of raw material.

We have limited capital resources, a cumulative deficit of approximately $337.4 million since inception and we expect to incur further losses for the foreseeable future. As of December 31, 2020, we had approximately $58.7 million of cash, cash equivalents and investments available-for-sale, and working capital of $56.7 million. Net cash used in operating activities for the year ended December 31, 2020 was approximately $29.6 million.

Our ability to fund our activities in the long term will be dependent upon our ability to successfully execute on the development of the FPC platform in new indications and our ability to successfully commercialize and increase adoption of Triferic (dialysate) and Triferic AVNU. Both of these factors are subject to significant risks and uncertainties and there can be no assurance that we will be successful in achieving approval of FPC in new indications or that we will successfully expanding our Triferic franchise. If our planned clinical program is delayed or experiences failures, or if our commercialization of Triferic fails to achieve targeted levels of success, we may be forced to implement cost-saving measures that may potentially have a negative impact on our activities and we may have increased difficulty raising capital to fund our operations. If we are unable to raise required capital, we may be forced to curtail our activities and, ultimately, cease operations. Even if we are able to raise sufficient capital, such financings may only be available on unattractive terms, or result in significant dilution of stockholders’ interests and, in such event, the market price of our common stock may decline.

Our forecast of the period of time through which our existing capital resources will be adequate to support our current operations is a forward-looking statement that involves risks and uncertainties. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include, but are not limited to:

If our cash is insufficient to meet our future operating requirements, we will have to raise additional funds. Our capital raising activities may include, but may not be limited to, the issuance of common stock or other securities via private placement or public offerings or the issuance of debt. While we may seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all. Furthermore, additional equity financings may be dilutive to our stockholders and newly issued securities may have rights, preferences or privileges senior to those of holders of our common stock.

Debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business. Additionally, we may have difficulty borrowing money through a term loan or debt facility given the covenants in our distribution agreement with Baxter which prohibit us from entering into a contract encumbering the assets used in our concentrate business. These assets currently constitute a substantial portion of the tangible assets we own. If our development activities require substantial cash resources in the future in excess of our liquid resources on hand and if our cash flows are not sufficient to support financing through unsecured indebtedness, we may not be able to obtain debt financing and our capital financing options may become limited.

The Company was subjected to a proxy contest at the 2017 Annual Meeting of Shareholders, which resulted in the negotiation of changes to the Board and the incurrence of substantial costs.  A future proxy contest would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and the Board. The potential of a proxy contest could interfere with our ability to execute our strategic plan, give rise to perceived uncertainties as to our future direction, adversely affect our relationships with customers, suppliers, investors, prospective and current team members and others, result in the loss of potential business opportunities or make it more difficult to attract and retain qualified personnel, any of which could materially and adversely affect our business and operating results.

We may also be subject, from time to time, to other legal and business challenges in the operation of our company due to actions instituted by activist shareholders. Responding to such actions, which may include publicity campaigns and, potentially, litigation, could be costly and time-consuming, divert the time and attention of our Board of Directors and management from our business, interfere with our ability to execute our strategic plan, give rise to perceived uncertainties as to our future direction, adversely impact our lobbying efforts, adversely affect our relationships with customers, suppliers,  prospective and current team members and others, result in the loss of potential business opportunities or make it more difficult to attract and retain qualified personnel, any of which could materially and adversely affect our business and operating results. We cannot predict, and no assurances can be given as to, the outcome or timing of any matters relating to actions by activist shareholders or the ultimate impact on our business, results of operations, financial position and cash flows.

We are highly dependent on the product development, clinical and business development expertise of the principal members of our management, scientific and clinical team. Although we have entered into employment agreements with our executives and key employees, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees.

Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel is critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of, and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel.

We hired a new Chief Executive Officer and Chief Financial Officer in 2020 and have hired additional executive-level employees who are leading the commercialization of Triferic. This leadership transition may be difficult to manage and may cause operational and administrative inefficiencies, added costs, decreased productivity among our employees, and loss of personnel with deep institutional knowledge, which could result in significant disruptions to our operations. In addition, we must successfully integrate our new management team members within our organization in order to achieve our operating objectives, and these changes in key management positions may temporarily affect our financial performance and results of operations as our new management becomes familiar with our businesses. These changes could also increase the volatility of our stock price.

We use hazardous materials, including chemicals and biological agents and compounds, which could be dangerous to human health and safety or the environment. Our operations also produce hazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our pharmaceutical development efforts.

In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. If one of our employees was accidentally injured from the use, storage, handling or disposal of these materials or wastes, the medical costs related to his or her treatment would be covered by our workers’ compensation insurance policy. However, we do not carry specific biological or hazardous waste insurance coverage and our property and casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended, or operations otherwise affected.

In addition to proceedings described in Note 14 “Commitments and Contingencies” in the accompanying consolidated financial statements for the year ended December 31, 2020, it is possible that other legal proceedings could be brought against us in the future. The results of complex legal proceedings are difficult to predict. These lawsuits assert types of claims that, if resolved against us, could give rise to substantial damages, and an unfavorable outcome or settlement of these lawsuits, or any future lawsuits, could have a material adverse effect on our business, financial condition, results of operations and/or stock price. Even if any future lawsuits are not resolved against us, the costs of defending such lawsuits may be material to our business and our operations. Moreover, these lawsuits may divert our Board and our management’s attention from the operation of our business. For more information on our legal proceedings, see Note 14 “Commitments and Contingencies – Litigation” in the accompanying consolidated financial statements for the year ended December 31, 2020.

We received letters in 2017 from the SEC informing us that the SEC was conducting an inquiry into our accounts receivable and inventory, calculation practices regarding such information, as well as disclosure regarding our dispute with Baxter and requesting that we voluntarily provide certain information and documents relating to our accounts receivable and inventory calculations and reporting practices, as well as information relating to the Baxter dispute. In 2018, we received additional requests (including a subpoena) from the SEC asking for certain records and information relating to the termination of our prior Chief Executive Officer and Chief Financial Officer, as well as the facts and circumstances leading up to the resignation of our prior audit firm. The SEC’s letters stated that the SEC’s inquiry should not be construed as an indication that any violation of any federal securities laws has occurred. We have provided all of the requested information and documents to the SEC from the 2017 requests and are substantially complete in providing the requested information and documents from the 2018 subpoena. We have and will continue to fully cooperate with the SEC investigation. At this stage, we are unable to predict when the SEC’s inquiry will conclude or what the consequences may be. Furthermore, any continuation of the SEC inquiry may cause a diversion of management’s time and attention, which could have a material adverse effect on our business, results of operations, financial position and cash flows.

Our businesses are highly regulated. The testing, manufacture and sale of the products we manufacture directly or through third party CMOs are subject to extensive regulation by the FDA and by other federal, state and foreign authorities. Before drug product candidates or medical devices, such as our concentrate products, can be commercially marketed in the United States, the FDA must give either premarket approval or 510(k) clearance. After a product is approved, regulatory authorities may impose significant restrictions on a product’s indicated uses or marketing or requirements for potentially costly post-marketing studies. Our drug products are subject to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record- keeping and reporting of safety and other post-market information. In addition, manufacturers and their facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current cGMP and applicable state laws. As such, we and our CMOs are subject to continual review and periodic inspections to assess compliance with cGMP and state laws. Accordingly, we and our partners must continue to expend time, money and effort in all areas to achieve and maintain regulatory compliance. We are also required to report certain adverse reactions and production problems, if any, to applicable regulatory authorities and to comply with requirements concerning advertising and promotion for our drug products or product candidates.

If non-compliant inventory is sold or if a regulatory agency determines that we are not compliant with any applicable regulatory requirements, we may be subject to warnings from, or enforcement action by, state and federal government authorities, which may include penalties, fines, injunctions, recall or seizure of products, suspension of production, denial of future regulatory approvals, withdrawal or suspension of existing regulatory approvals, operating restrictions, injunctions and criminal prosecution. If regulatory sanctions are applied, the value of our Company and our operating results could be materially and adversely affected. Our business could also be adversely affected by delays in obtaining necessary regulatory approvals and any restrictions placed by the FDA on our intended marketing or the use of our drug products.

Our failure to comply with applicable regulations could also result in product liability litigation against us. In addition, our failure to comply with applicable regulations with respect to our concentrate products could constitute a breach by us of the Distribution Agreement, providing Baxter with various remedies that would be material and adverse to us. Moreover, changes in applicable regulatory requirements could significantly increase the costs of our operations, which, if such higher costs result in price increases that exceed the thresholds specified in the Distribution Agreement, could give Baxter the right to terminate the Distribution Agreement and obtain a partial refund of certain fees paid to us.

If concerns are raised regarding the safety of a product candidate as a result of undesirable side effects identified during clinical testing, the FDA may decline to approve the product candidate at the end of the NDA review period or issue a letter requesting additional data or information prior to making a final decision regarding whether or not to approve the product candidate. Following FDA approval, if we or others later identify previously unknown undesirable side effects caused by our product candidate or concentrate products, if known side effects are more frequent or severe than in the past, or if we or others detect unexpected safety signals for such products or any products perceived to be similar to such products, the FDA or other applicable regulatory authorities may require the addition of unfavorable labeling statements, specific warnings or contraindications, may suspend or withdraw their approval of the product, may require it to be removed from the market or may impose restrictions on the distribution or use of the product. Such side effects may also result in litigation against us by private litigants.

We maintain product liability insurance. We cannot be sure that such insurance would be sufficient to protect us against liabilities associated with any of these events in view of our expanding business or that such insurance will remain available at economical levels. We may have significant legal expenses that are not covered by insurance. In addition, our reputation could be damaged by such sanctions or product liability litigation and that could harm our business reputation and marketing ability. Any such sanctions or litigation could also hurt our ability to retain product liability insurance or make such insurance more expensive. In any such event, our business, results of operations, financial position and cash flows could be materially adversely affected.

It is possible that we may infringe on intellectual property rights of others without being aware of the infringement. If a third party believes that one of our drug products or product candidates infringes on the third party’s patent, it may sue us even if we have received our own patent protection for the technology. If we infringe the rights of a third party, we could be prevented from manufacturing and selling products, forced to pay damages, compelled to license technology from the party claiming infringement and lose the opportunity to license our technology to others and collect royalty payments, any of which could have a material adverse effect on our business. If Baxter is prevented from selling any of our concentrate or ancillary products due to a patent infringement or if its ability to sell any of our concentrate or ancillary products due to a patent infringement is materially and adversely affected, Baxter may be entitled to terminate our Distribution Agreement and obtain a refund of a portion of the upfront fee and facility fee.

As is common in the biotechnology and pharmaceutical industry, we engage the services of consultants to assist us in the development of our drug products and product candidates. Many of these consultants were previously employed at, may have previously been, or are currently providing consulting services to, other biotechnology or pharmaceutical companies, including our competitors or potential competitors. As such, the Company advises consultants not to disclose, or use trade secrets, or proprietary information of their former employers or their former or current customers. Although no claims against us are currently pending, we may be subject to claims that these consultants or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and day-to-day business operations.

Any future sales by us of substantial amounts of our common stock, or the possibility of such sales, could adversely affect the market price of our common stock and also impair our ability to raise capital through an offering of our equity securities in the future. In the future, we may issue additional shares or warrants in connection with investments or for other purposes considered advisable by our Board of Directors. Any substantial sale of our common stock may have an adverse effect on the market price of our common stock and may dilute the economic value and voting rights of existing stockholders.

In addition, as of December 31, 2020, there were 6,481,095 shares issuable upon the exercise of the then-outstanding and exercisable stock options, 1,728,929 shares issuable upon the exercise of then-outstanding stock options that were not yet exercisable, and 23,178,509 shares issuable upon the exercise of then-outstanding and exercisable warrants. The market price of the common stock may be depressed by the potential exercise of these options. The holders of these options are likely to exercise them when we would otherwise be able to obtain additional capital on more favorable terms than those provided by the options.

We have substantial net operating loss carryforwards ("NOLs") available to reduce future taxable income. Our ability to use our NOLs to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon our generation of future taxable income before the expiration dates of the NOLs. In addition to uncertainty regarding our future profitability, our use of the NOLs may be subject to annual limitations under the “ownership change” provisions of Section 382 of the Internal Revenue Code of 1986, as amended, which may result in the expiration of some or all of the NOLs before they can be used. In general, an “ownership change” occurs if, during a rolling three-year period, there is a greater than 50% change in the percentage ownership of the corporation by 5% owners (and persons treated as 5% owners), as defined in Section 382 and related regulations. We may experience an ownership change in the future as a result of future changes in our stock ownership. The inability to use our NOLs to reduce federal taxable income could result in increased future tax liability to us and reduce the cash that would otherwise be available to our business.

Since inception, we have not paid any cash dividend on our common stock and do not anticipate paying such dividends in the foreseeable future. The payment of dividends is within the discretion of our Board of Directors and depends upon our earnings, capital requirements, financial condition and requirements, future prospects, restrictions in future financing agreements, business conditions and other factors deemed relevant by the Board. We intend to retain earnings and any cash resources to finance our operations. Therefore, it is highly unlikely we will pay cash dividends.

We lease a 51,000 square foot facility and a 17,500 square foot facility in Wixom, Michigan under a lease expiring in August 2021. We also lease two other manufacturing facilities, a 51,000 square foot facility in Grapevine, Texas under a lease expiring in December 2025, and a 57,000 square foot facility in Greer, South Carolina under a lease expiring in February 2023. In addition, we executed a lease for 4,100 square feet of office space in Hackensack, New Jersey under a lease expiring on July 1, 2024.

We use each of our facilities to manufacture and warehouse our products. All such facilities and their contents are covered under various insurance policies which management believes provide adequate coverage. We use the office space in Wixom, Michigan as our principal administrative office. As a result of the ongoing COVID-19 pandemic, we consolidated the office space in Hackensack, New Jersey since employees are required to work from home based upon state law and stay-at-home orders. We are re-assessing our commercial footprint and need for office space given our experience of working from home during the COVID-19 pandemic. We expect that we may need additional manufacturing capacity and distribution facilities to meet our business requirements.

Our common stock is listed on The Nasdaq Global Market under the trading symbol “RMTI”.

As of February 28, 2021, there were 48 holders of record of our common stock.

Our Board of Directors has discretion whether or not to pay dividends. Among the factors our Board of Directors considers when determining whether or not to pay dividends are our earnings, capital requirements, financial condition, future business prospects and business conditions. We have never paid any cash dividends on our common stock and do not anticipate paying dividends in the foreseeable future. We intend to retain earnings, if any, to finance the development and expansion of our operations.

There were no unregistered sales of equity securities which have not been previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K during the year ended December 31, 2020.

The information contained under “Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10‑K under the heading “Securities Authorized for Issuance Under Equity Compensation Plans” is incorporated herein by reference.

Not applicable.

Rockwell Medical is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, ferric pyrophosphate citrate (“FPC”), which we believe has significant potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and improve patients’ lives. We are also one of the two major suppliers of life saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

Rockwell Medical has evolved its strategy over the past year to develop into a more medically-, scientifically- and data-driven company. We believe future clinical, regulatory and commercial success requires us to generate compelling clinical data in each of our programs. Our strategy is to accelerate Rockwell’s growth by creating and developing pharmaceutical products based on our FPC technology for disease states where patients can benefit the most from an effective treatment for iron deficiency, while concurrently refining our dialysis business to drive incremental growth and efficiencies. We plan to leverage and build on the foundation provided by our current dialysis business serving kidney dialysis centers by developing a pipeline of additional potential drug therapies in multiple disease states.

We have two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform. We are marketing both products to kidney dialysis centers for their patients receiving dialysis. In 2021, we intend to advance our FPC platform strategy by starting a Phase II trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous medications in the home infusion setting. In our R&D pipeline, we

Since inception, we have incurred significant net losses and have funded our operations primarily through revenue from commercial products, proceeds from the issuance of debt and equity securities and payments from partnerships. At December 31, 2020, we had an accumulated deficit of approximately $337.4 million and shareholders’ equity of $34.2 million. As of December 31, 2020, we had approximately $58.7 million of cash, cash equivalents and investments available-for-sale, and working capital of $56.7 million. Net cash used in operating activities for the year ended December 31, 2020 was approximately $29.6 million. Based on the currently available working capital, capital raise and debt financing noted above, management believes the Company currently has sufficient funds to meet its operating requirements for at least the next twelve months from the date of the filing of this report.

The actual amount of cash that we will need to execute our business strategy is subject to many factors, including, but not limited to, the expenses and revenue associated with the commercial operations in the United States and internationally (with partners); the timing and magnitude of cash received from drug product sales; the timing and expenditures associated with the development programs including our FPC technology for home infusion and potentially acute heart failure; and the costs associated with our manufacturing and transportation operations related to our concentrate business.

We may elect to raise capital in the future through one or more of the following: (i) equity and debt raises through the equity and capital markets, though there can be no assurance that we will be able to secure additional capital or funding on acceptable terms, or if at all; and (ii) strategic transactions, including potential alliances and collaborations focused on markets outside the United States, as well as potential combinations (including by merger or acquisition) or other corporate transactions.  In particular, our Baxter Agreement prohibits us from entering into a contract that would encumber the assets used in our concentrate business without the prior written consent of Baxter.  Due to the fact that the assets used in our concentrate business currently constitute a substantial portion of the tangible assets we own other than our drug inventory, we may not be able to, or we may find it difficult, to obtain secured debt financing without the consent of Baxter. 

We believe that our ability to fund our activities in the long term will be highly dependent upon 1) our ability to execute on the development of the FPC platform for new therapies, and 2) our ability to commercialize and increase adaptation of Triferic (dialysate) and Triferic AVNU. Both of these strategies is subject to significant risks and uncertainties such that there can be no assurance that we will be successful is achieving approval of FPC in a new therapeutic area or that we will be able to have sustained commercial success with Triferic (dialysate) and Triferic AVNU. If our planned clinical program is delayed or fails or if our commercialization of Triferic (dialysate) and/or Triferic AVNU should fail to increase sales, we may be forced to implement cost-saving measures that may potentially have a negative impact on our activities and potentially the results of our research and development programs. Even though we began commercialization of Triferic (dialysate) and Triferic AVNU as planned, if the results are unsuccessful, we may be unable to secure the additional capital that we will require to continue our research and development activities and operations, which could have a material adverse effect on our business. If we are unable to raise the required capital, we may be forced to curtail all of our activities and, ultimately, cease operations. Even if we are able to raise sufficient capital, such financings may only be available on unattractive terms, or result in significant dilution of stockholders’ interests and, in such event, the market price of our common stock may decline.

Net cash used in operating activities was $27.3 million for the year ended December 31, 2019. The net loss for this period was higher than net cash used in operating activities by $6.8 million, which was primarily attributable to non-cash

Net cash used in investing activities was $4.7 million during the year ended December 31, 2019. The net cash used was primarily due to the purchase of investments available-for-sale of $41.7 million, offset by $38.3 million sale of our available-for-sale investments, $0.6 million for the purchase of equipment and $0.8 million for the purchase of research and development licenses acquired from a related party.

Net cash provided by financing activities was $21.1 million during the year ended December 31, 2019. The net cash provided was primarily due to net proceeds of $17.3 million and $5.1 million from the sale of our common stock, related to our public offering and our at-the market offerings, respectively, partially offset by payment of $1.1 million related to a short term note payable.

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These accounting principles require us to make estimates, judgments and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and contingencies. All significant estimates, judgments and assumptions are developed based on the best information available to us at the time made and are regularly reviewed and updated when necessary. Actual results could differ from these estimates. Changes in estimates are reflected in our financial statements in the period of change based upon on‑going actual experience, trends, or subsequent realization depending on the nature and predictability of the estimates and contingencies.

Interim changes in estimates are generally applied prospectively within annual periods. Certain accounting estimates, including those concerning revenue recognition, allowance for doubtful accounts, inventory reserves, share based compensation, impairments of long‑lived assets, and accounting for income taxes, are considered to be critical in evaluating and understanding our financial results because they involve inherently uncertain matters and their application requires the most difficult and complex judgments and estimates. These are described below. For further information on our accounting policies, see Note 3 to our Consolidated Financial Statements.

Revenue Recognition

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight related to contracts with customers are accounted for as a fulfillment cost and are included in cost of sales when control of the goods transfers to the customer.

Accounts Receivable

Accounts receivable are stated at invoice amounts. The carrying amount of trade accounts receivable is reduced by an allowance for doubtful accounts that reflects our best estimate of accounts that may not be collected. We review outstanding trade accounts receivable balances and based on our assessment of expected collections, we estimate the portion, if any, of the balance that may not be collected as well as a general valuation allowance for other accounts receivable based primarily on historical experience. All accounts or portions thereof deemed to be uncollectible are written off to the allowance for doubtful accounts.

Inventory

Inventory is stated at the lower of cost or net realizable value.  Cost is determined on the first‑in first‑out (FIFO) method.  Inventory that is not expected to be converted to cash over the next year is classified as non-current.  Our policy is to reserve for our drug product inventory that we determine is unlikely to be sold to, or if sold, unlikely to be utilized by our customers on or before its expiration date.  

Property and Equipment

Property and equipment are recorded at cost and are depreciated using the straight‑line method over the useful lives of the assets, which range from three to ten years. Expenditures for routine maintenance and repairs are expensed as incurred. Leasehold improvements are amortized using the straight‑line method over the shorter of the useful lives or the related lease term.

Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Impairment losses on long-lived assets, such as real estate and equipment, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses are then measured by comparing the fair value of assets to their carrying amounts. For the years ended December 31, 2020 and 2019, there were no impairments of long-lived assets.

Goodwill and Intangible Assets

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. Intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date. We do not amortize goodwill and intangible assets with indefinite useful lives.

We review goodwill and indefinite-lived intangible assets at least annually for possible impairment. Goodwill and indefinite-lived intangible assets are reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or the indefinite-lived intangible assets below their carrying values.

Intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.

Definite-lived intangible assets consist of our license fees related to the technology, intellectual property and marketing rights for Triferic covered under certain issued patents have been capitalized and are being amortized over the life of the related patents which is generally 17 years.

Deferred Revenue

In October of 2014, the Company entered into a 10-year distribution agreement with Baxter and received an upfront fee of $20 million. The upfront fee was recorded as deferred revenue and is being recognized based on the proportion of product shipments to Baxter in each period, compared with total expected sales volume over the term of the Distribution Agreement. The Company recognized revenue of approximately $2.0 million and $2.1 million related to the Baxter agreement for each of the years ended December 31, 2020 and 2019, respectively.

In 2016, the Company entered into a distribution and license agreement with Wanbang (the "Wanbang Agreement") and received an upfront fee of $4.0 million. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of approximately $0.2 million and $0.3 million for the years ended December 31, 2020 and 2019, respectively. Deferred revenue related to the Wanbang Agreement totaled $2.7 million and $2.9 million for the years ended December 31, 2020 and 2019, respectively.

Stock-Based Compensation

The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards. For stock-based compensation awards to non-employees, the Company re-measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. Changes in the estimated fair value of these non-employee awards are recognized as compensation expense in the period of change. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. For the years ended December 31, 2020 and 2019, the Company recorded stock-based compensation expense on its options granted under the Company’s equity compensation plans to its directors and officers, and its employees.

Accounting for Income Taxes

We estimate our income tax provision to recognize our tax expense and our deferred tax liabilities and assets for future tax consequences of events that have been recognized in our financial statements using current enacted tax laws. Deferred tax assets must be assessed based upon the likelihood of recoverability from future taxable income and to the extent that recovery is not likely, a valuation allowance is established. The allowance is regularly reviewed and updated for changes in circumstances that would cause a change in judgment about whether the related deferred tax asset may be realized. These calculations and assessments involve complex estimates and judgments because the ultimate tax outcome can be uncertain and future events unpredictable. If we determine that the deferred tax asset will be realized in the future, it may result in a material beneficial effect on earnings.

None.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. We maintain internal control over financial reporting designed to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, internal control over financial reporting determined to be effective provides only reasonable assurance regarding the

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020. In making their assessment of internal control over financial reporting, our management used the criteria described in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our evaluation included documenting, evaluating and testing of the design and operating effectiveness of our internal control over financial reporting. Based on this evaluation, and the remediation of all the material weaknesses as described in our Annual Report filed on Form 10-K for the year ended December 31, 2019 relating to change management and third-party management controls, user access security and segregation of duties as it relates to user access controls in our Information Technology General Controls ("ITGC"), and the pervasive effect on other ITGC dependent business activity level internal control cycles, we concluded that we maintained effective control over financial reporting at a reasonable assurance level as of December 31, 2020.

During the quarter ended June 30, 2020, the Company remediated the ITGC control deficiencies in connection with change management and third-party management and enhanced evidentiary review and documentation of key ITGC controls and implemented new programs and policies to provide improved control over change management and third-party management controls to the ERP system. During the quarter ended September 30, 2020, we continued our improvements by remediating the ITGC control deficiencies in connection with user access security and segregation of duties as it relates to user access controls. During the quarter ended December 31, 2020, we finalized our remediation efforts by evaluating and testing the design, implementation and operating effectiveness of the pervasive effect from the ITGC material weakness on other ITGC dependent business activity level internal control cycles. As of December 31, 2020, our management has remediated all material weaknesses described in our Annual Report filed on Form 10-K for the year ended December 31, 2019 and has deemed internal controls over financial reporting, our disclosure controls and procedures were effective as of December 31, 2020.

The information required by this Item 10 is incorporated herein by reference to information in our proxy statement for our 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”), which we expect to be filed with the SEC within 120 days of the end of our fiscal year ended December 31, 2020, including under headings “Election of Directors,” “Executive Officers,” “Corporate Governance” and, as applicable, "Delinquent Section 16(a) Reports."

The information required by this Item 13 is incorporated herein by reference to information in our 2021 Proxy Statement, including under headings “Independence” and “Related Party Transactions.”

The information required by this Item 14 is incorporated herein by reference to information in our 2021 Proxy Statement, including under heading “Independent Accountants.”

The following documents are filed as part of this report or were previously filed and incorporated herein by reference to the filing indicated.

Rockwell Medical, Inc. ("Rockwell Medical," "Rockwell" or the "Company") is a commercial-stage, biopharmaceutical company developing and commercializing our next-generation parenteral iron technology platform, ferric pyrophosphate citrate (“FPC”), which we believe has significant potential to lead to transformative treatments for iron deficiency in multiple disease states, that we believe could reduce healthcare costs and improve patients’ lives. We are also one of the two major suppliers of life saving hemodialysis concentrate products to kidney dialysis clinics in the United States.

We have two novel, FDA approved therapies, Triferic and Triferic AVNU, which are the first two products developed from our FPC platform. We are marketing both products to kidney dialysis centers for their patients receiving dialysis. In 2021, we intend to advance our FPC platform strategy by starting a Phase II trial for the treatment of iron deficiency anemia in patients outside of dialysis, who are receiving intravenous medications in the home infusion setting. In our R&D pipeline, we are also exploring FPC’s impact in the treatment of hospitalized patients with acute heart failure, with the potential to begin another Phase II program in these patients in 2022.

We are the second largest supplier of hemodialysis concentrates in the United States, with a reputation for excellent service, quality, and reliability. We believe that this reputation, which is based on over 25 years of service to the kidney dialysis centers, combined with about $60 million in annual revenue, approximately 300 dedicated employees, expertise in manufacturing and logistics and the added expertise in pharmaceutical development and commercialization brought to the Company by recent additions to our management team, gives us a solid foundation on which to grow.

The Company expects it will require additional capital to sustain its operations and make the investments it needs to execute its strategic plan, including the commercialization of Triferic (dialysate) and Triferic AVNU in dialysis, generating additional data for Triferic in dialysis, developing FPC for iron deficiency anemia in patients undergoing home infusion and for progressing our pipeline development program of new indications for its FPC platform. If the Company is unable to generate sufficient revenue from sales of its commercial products and from partnerships, the Company will need to obtain additional equity or debt financing. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available on favorable terms, if at all.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Rockwell Transportation, Inc. and Rockwell Medical India Private Limited. Rockwell Medical India Private Limited was formed in 2017 for the purpose of conducting certain commercial activities in India. All intercompany balances and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the 2019 financial statements and notes to conform to the 2020 presentation.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight related to contracts with customers are accounted for as a fulfillment cost and are included in cost of sales when control of the goods transfers to the customer.

The following is a description of principal activities from which the Company generates its revenue.

Drug and dialysis concentrate products are sold directly to dialysis clinics and to wholesale distributors in both domestic and international markets. Distribution and license agreements for which upfront fees are received are evaluated upon execution or modification of the agreement to determine if the agreement creates a separate performance obligation from the

The Company received upfront fees under 4 distribution and license agreements that have been deferred as a contract liability.  The amounts received from Wanbang Biopharmaceuticals Co., Ltd. (“Wanbang”), Sun Pharmaceutical Industries Ltd. ("Sun Pharma") and Jeil Pharmaceutical Co., Ltd. ("Jeil Pharma") are recognized as revenue over the estimated term of the applicable distribution and license agreement as regulatory approval was not received and the Company did not have sufficient experience in China, India and South Korea, respectively, to determine that regulatory approval was probable as of the execution of the agreement. The amounts received from Baxter Healthcare Corporation (“Baxter”) are recognized as revenue at the point in time that the estimated product sales under the agreement occur.

For the business under the Company’s distribution agreement with Baxter (the “Baxter Agreement”) and for the majority of the Company’s international customers, the Company recognizes revenue at the shipping point, which is generally the Company’s plant or warehouse. For other business, the Company recognizes revenue based on when the customer takes control of the product. The amount of revenue recognized is based on the purchase order less returns and adjusted for any rebates, discounts, chargebacks or other amounts paid to customers. There were no such adjustments for the periods reported. Customers typically pay for the product based on customary business practices with payment terms averaging 30 days, while distributor payment terms average 45 days.

Revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.

For the years ended December 31, 2020 and 2019, license fee revenue was $2.2 million and $2.3 million, respectively. For the years ended December 31, 2020 and 2019, product sales revenue was $60.0 million and $59.0 million, respectively.

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers.

There were 0 impairment losses recognized related to any receivables arising from the Company’s contracts with customers for the years ended December 31, 2020 and 2019.

For the years ended December 31, 2020 and 2019, the Company did 0t recognize material bad-debt expense and there were 0 material contract assets recorded on the consolidated balance sheets as of December 31, 2020 and 2019.  The Company does not generally accept returns of its concentrate products and 0 reserve for returns of concentrate products was established as of December 31, 2020 or December 31, 2019.

The contract liabilities primarily relate to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products.

For the year ended December 31, 2020, revenue recognized from performance obligations related to prior periods was not material.

Revenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and contracts with variable consideration related to undelivered performance obligations, totaled $10.2 million and $12.1 million as of December 31, 2020 and 2019, respectively. The amount relates primarily to upfront payments and consideration received from customers that are received in advance of the customer assuming control of the related products. The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. The Baxter Agreement includes minimum commitments of product sales over the duration of the agreement. As of December 31, 2020 unfulfilled performance obligations related to the Baxter Agreement are product sales totaling $7.2 million, which will be amortized through expiration of the agreement on October 2, 2024.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with fair value and classification of warrants, revenue recognition, allowance for doubtful accounts, inventory reserves, accrued expenses, deferred license revenue, stock-based compensation, impairments of long-lived assets, and accounting for income taxes.

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents excluding items held in Investments - Available for Sale as noted below. Cash and cash equivalents include cash held in banks, money market mutual funds and unrestricted certificates of deposit. The Company’s cash and cash equivalents exceeds the Federal Deposit Insurance Corporation insured limits. The Company has not experienced any credit losses for amounts in excess of insured limits.  Currently the Company does not reasonably believe a significant risk of credit loss exists.

Level 1: Quoted prices in active markets for identical assets or liabilities.

The Company has designated its short term investments as of each balance sheet date as available-for-sale securities and accounts for them at their respective fair values. Available-for-sale securities are measured at fair value, including accrued interest, with temporary unrealized gains and losses reported as a component of stockholders' equity until their disposition. We review all available-for-sale securities at each period end to determine if they remain available-for-sale based on our then current intent and ability to sell the security if required to do so. The cost of securities sold is based on the specific identification method.

All of our investments available-for-sale are subject to periodic impairment review. We recognize an impairment charge when a decline in the fair value of our investments below the cost basis is judged to be other than temporary.

Accounts receivable are stated at invoice amounts. The carrying amount of trade accounts receivable is reduced by an allowance for doubtful accounts that reflects our best estimate of accounts that may not be collected. We review outstanding trade accounts receivable balances and based on our assessment of expected collections, we estimate the portion, if any, of the balance that may not be collected as well as a general valuation allowance for other accounts receivable based primarily on historical experience. All accounts or portions thereof deemed to be uncollectible are written off to the allowance for doubtful accounts.

Inventory is stated at the lower of cost or net realizable value.  Cost is determined on the first‑in first‑out (FIFO) method. Inventory that is not expected to be converted to cash over the next year is classified as non-current.  Our policy is to reserve for our drug product inventory that we determine is unlikely to be sold to, or if sold, unlikely to be utilized by our customers on or before its expiration date.  

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Impairment losses on long-lived assets, such as real estate and equipment, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. Intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date. 

Rockwell reviews goodwill and indefinite-lived intangible assets at least annually for possible impairment. Goodwill and indefinite-lived intangible assets are reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or the indefinite-lived intangible assets below their carrying values.

Intangible assets with definite lives are amortized over their estimated useful lives. Intangible assets subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.

Definite-lived intangible assets consist of our license fees related to the technology, intellectual property and marketing rights for Triferic covered under certain issued patents have been capitalized and are being amortized over the life of the related patents which is generally 17 years.

In October 2014, the Company entered into a 10 year distribution agreement with Baxter and received an upfront fee of $20 million. The upfront fee was recorded as deferred revenue and is being recognized based on the proportion of product shipments to Baxter in each period, compared with total expected sales volume over the term of the Distribution Agreement. The Company recognized revenue of approximately $2.0 million and $2.1 million for the years ended December 31, 2020 and 2019, respectively. Deferred revenue related to the Baxter agreement totaled $7.2 million and $9.1 million as of December 31, 2020 and 2019, respectively.

If a “Refund Trigger Event” occurs prior to December 31, 2021, Rockwell would be obligated to repay 25% of the upfront fee.

During the year ended December 31, 2016, the Company entered into a distribution agreement with Wanbang and received an upfront fee of $4.0 million. The upfront fee was recorded as deferred revenue and is being recognized as revenue based on the agreement term. The Company recognized revenue of approximately $0.2 million and $0.3 million during the years ended December 31, 2020 and 2019, respectively. Deferred revenue related to the Wanbang agreement totaled $2.7 million and $2.9 million as of December 31, 2020 and 2019, respectively.

The effects of tax positions are generally recognized in the financial statements consistent with amounts reflected in returns filed, or expected to be filed, with taxing authorities. For tax positions that the Company considers to be uncertain, current and deferred tax liabilities are recognized, or assets derecognized, when it is probable that an income tax liability has been incurred and the amount of the liability is reasonably estimable, or when it is probable that a tax benefit, such as a tax credit or loss carryforward, will be disallowed by a taxing authority. The amount of unrecognized tax benefits related to current tax positions is insignificant. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expense.

The Company recognizes research and product development expenses as incurred. The Company incurred product development and research costs related to the commercial development, patent approval and regulatory approval of new products aggregating approximately $7.1 million and $6.9 million for the years ended December 31, 2020 and 2019, respectively.

The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards. For stock-based compensation awards to non-employees, the Company re-measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. Changes in the estimated fair value of these non-employee awards are recognized as compensation expense in the period of change. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. For the years ended December 31, 2020 and 2019, the Company recorded stock-based compensation expense on its options granted under the Company’s equity compensation plans to its directors and officers, and its employees (See Note 13).

In addition to awards with service-based vesting conditions, the Company has granted performance share units with market and performance conditions, to certain of its executives. The fair value of awards with performance conditions are based on the fair value of the Company’s common stock on the date of grant. The fair value of awards with market conditions are based on a Monte Carlo simulation model. Assumptions and estimates utilized in the calculation of the fair value of the market awards include the risk-free interest rate, dividend yield, average closing price, expected volatility based on the historical volatility of the Company, and the remaining period of the award.

The awards with performance conditions vest and result in issuance, at settlement, of common stock for each recipient based upon the recipient’s continued employment with the Company through the settlement date of the award and the Company’s achievement of specified milestones. The requisite service period of the awards with performance conditions is generally 1-2 years. In the case of awards with performance conditions, the Company recognizes stock-based compensation expense based on the grant date fair value of the award when achievement of the underlying performance-based targets become probable.

The awards with market conditions vest and result in the issuance of common stock based upon the recipient’s continuing employment with the Company through the settlement date of the award related to the market capitalization criteria.

In the normal course of business, the Company may become subject to loss contingencies, such as legal proceedings and claims arising out of its business, including government investigations. An accrual for a loss contingency is recognized when it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated. The Company expenses legal costs associated with loss contingencies as they are incurred.

ASC 260, Earnings Per Share, requires dual presentation of basic and diluted earnings per share (“EPS”), with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issued common stock were exercised or converted into common stock or resulted in the issuance of common stock that are then shared in the earnings of the entity.

Basic net loss per share of common stock excludes dilution and is computed by dividing the net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that are then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive. The Company has only incurred losses, therefore, basic and diluted net loss per share is the same. Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share for the years ended December 31, 2020 and 2019 were as follows:

Accumulated other comprehensive income includes all changes in equity during a period except those that resulted from investments by or distributions to the Company’s stockholders. Accumulated other comprehensive income refers to revenues, expenses, gains and losses that are included in comprehensive income, but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity. Accumulated other comprehensive income consists of unrealized gains and losses on available‑for‑sale investment securities and foreign currency translation adjustments.

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change.

The fair value of investments available-for-sale are determined using quoted market prices from daily exchange-traded markets based on the closing price as of the balance sheet date and are classified as Level 1, as described in Note 3, Fair Value Measurement to our consolidated financial statements.

As of December 31, 2020 and 2019, the amortized cost and estimated fair value of our available-for-sale securities were due in one year or less.

We operate in one market segment, the hemodialysis market, which involves the manufacture, sale and distribution of hemodialysis products to hemodialysis clinics, including pharmaceutical, dialysis concentrates, dialysis kits and other ancillary products used in the dialysis process.

One customer, DaVita, Inc. ("DaVita"), accounted for 50% of our sales in 2020 and 49% of our sales in 2019.  Our accounts receivable from this customer were $1.1 million and $1.2 million as of December 31, 2020 and 2019, respectively. 

In October 2014, we entered into the Distribution Agreement with Baxter, which was amended in June 2017 and March 2020, pursuant to which Baxter received exclusive distribution rights for our concentrate products in the United States, a commitment by Rockwell to maintain a specified manufacturing capacity for Baxter, a cap upon the net amount of reimbursable transportation expenses and modified extension terms. Our domestic customer contracts for the supply of dialysis concentrate products that permitted assignment to Baxter without consent have been assigned to Baxter.  As a result, for 2020 and 2019, our direct sales to Baxter aggregated approximately 25% and 27% of sales, respectively, and we had a receivable from Baxter of $1.6 million and $2.0 million as of December 31, 2020 and 2019, respectively.

DaVita and Baxter and the accounts administered by Baxter are important to our business, financial condition and results of operations.  The loss of any significant accounts could have a material adverse effect on our business, financial condition and results of operations.  No other domestic customers accounted for more than 10% of our sales in any of the last two years.

The majority of our international sales in each of the last two years were sales to domestic distributors that were resold to end users outside the United States.  Our sales to foreign customers and distributors accounted for approximately 9% and 11% of our total sales in 2020 and 2019, respectively. One international customer, Nipro Medical Corporation, accounted for 7% and 9% of our sales for 2020 and 2019, respectively.

Under the Distribution Agreement, Baxter purchases concentrate-related products from us at pre-determined gross margin-based prices per unit adjusted each year during the term and subject to an annual true up. The Distribution Agreement also requires Baxter to meet minimum annual purchase levels, subject to a cure period and certain other relief, in order to maintain its exclusive distribution rights. The minimum purchase levels increase each year over the term of the Distribution Agreement. Purchases in any calendar year that exceed the minimum may be carried forward and applied to future years’ minimum requirements. The Distribution Agreement, as amended by the Second Amendment, also contains provisions regarding our obligations to maintain specified manufacturing capacity and quality levels. We continue to manage customer service, transportation and certain other functions for our current customers. For customer service, Baxter pays us an amount equal to our related costs plus a slight mark-up for these services. For transportation costs, Baxter pays us an amount equal to our related costs, subject to the defined caps contained within the Second Amendment, which are based upon defined percentages of liquid concentrate product being shipped.

The Distribution Agreement also provides that, upon the mutual determination of us and Baxter, Baxter will pay us up to $10 million to build a new manufacturing facility in the Pacific time-zone that would serve customers in the western United States. The fee payable in connection with construction of the facility will be reduced to the extent that the facility is not operational within 12 months after the start of construction. Except for any leased components, we will own and operate the facility when completed.

Either party may terminate the Distribution Agreement upon the insolvency or material breach of the other party or in the event of a force majeure. In addition, Baxter may also terminate the Distribution Agreement at any time upon 270 days’ prior written notice to us or if (i) prices increase beyond certain thresholds and notice is provided within 45 days after the true up payment is due for the year in which the price threshold is exceeded, (ii) a change of control of the Company occurs and 270 days’ notice is provided, or (iii) upon written notice that Baxter has been enjoined by a court of competent jurisdiction from selling in the United States any product covered by the Distribution Agreement due to a claim of intellectual property infringement or misappropriation relating to such product. If Baxter terminates the Distribution Agreement under the discretionary termination or the price increase provisions, it would be subject to a limited non-compete obligation in the United States with respect to certain products for a period of two years.

Pursuant to the Distribution Agreement, we received an upfront fee of $20 million in October 2014. If a “Refund Trigger Event” occurs prior to December 31, 2021, we would be obligated to repay 25% of the upfront fee and any paid portion of the facility fee. A “Refund Trigger Event” means any of the following: (i) a change of control of the Company involving any of certain specified companies; (ii) a termination by Baxter due to the Company’s bankruptcy or breach, or due to price increases that exceed the stated thresholds; (iii) a termination by either party due to a force majeure; (iv) settlement or adjudication of any claim, action or litigation relating to a covered product that materially and adversely affects Baxter’s commercialization of the product; and (v) any regulatory action or ruling relating to a covered product that materially and adversely affects Baxter’s commercialization of the product. The Upfront Fee has been deferred and is being recognized as revenue based on the proportion of product shipments to Baxter in each period to total expected sales volume over the term of the Distribution Agreement. We recognized revenue associated with the Upfront Fee totaling $2.0 million and $2.1 million for the years ended December 31, 2020, and 2019, respectively.

The Distribution Agreement may be extended for an additional five years by Baxter if Baxter achieves a specified sales target and pays an extension fee of $7.5 million. If the first extension occurs, the Distribution Agreement term may later be extended an additional five years at Baxter’s option at no additional cost.

As of December 31, 2020 and 2019, we classified $1.2 million and $0.4 million, respectively, of inventory as non-current all of which was related to Triferic or the active pharmaceutical ingredient for Triferic. As of December 31, 2020 and 2019, we had total Triferic inventory aggregating $3.9 million and $3.5 million respectively, against which we had reserved $2.6 million and $2.8 million, respectively.

For the year ended December 31, 2020, the Company’s inventory reserves and write-offs decreased overall by $0.1 million, which consisted primarily of an increase in inventory reserve of $0.3 million offset by a reduction to inventory reserve of $0.4 million related to destruction of Triferic inventory. For the year ended December 31, 2019, inventory reserves and write-offs increased by $1.3 million.

Total goodwill was $0.9 million at December 31, 2020 and 2019. We completed our annual impairment tests as of December 31, 2020 and 2019, and determined that 0 adjustment for impairment of goodwill was required during the years ended December 31, 2020 and 2019.

As of December 31, 2020 and 2019, there were 2,000,000 shares of preferred stock, $0.0001 par value per share, authorized and 0 shares of preferred stock issued or outstanding.

As of December 31, 2020 and 2019, there were 170,000,000 shares of common stock, $0.0001 par value per share, authorized and 93,573,165 and 65,378,890 shares issued and outstanding, respectively.

During the year ended December 31, 2019, 30,000 vested employee stock options were exercised for net cash proceeds of $147,900 at a weighted average exercise price of $4.93 per share.

During the year ended December 31, 2020, 0 vested employee stock options were exercised.

During the year ended December 31, 2020, 988,958 shares of performance-based restricted stock and 152,097 shares of time-based restricted stock were forfeited. Forfeitures of the performance-based and time-based restricted stock were related to the resignation of Stuart Paul, former CEO, and Angus Smith, former CFO.

The Board of Directors adopted the Rockwell Medical, Inc., 2007 Long Term Incentive Plan (“2007 LTIP”) on April 11, 2007. The 2007 LTIP expired on April 11, 2017 and 0 equity awards were granted under the 2007 LTIP following its expiration. There were 11,500,000 shares of common stock reserved for issuance under the 2007 LTIP. The Board of Directors adopted the 2018 Long-Term Incentive Plan (“2018 LTIP”) on January 29, 2018 as a replacement for the 2007 LTIP. Initially there were 3,300,000 shares of common stock reserved for issuance under the 2018 LTIP. On May 18, 2020, at the Annual Meeting, the Company’s stockholders approved the amendment and restatement of the Rockwell Medical, Inc. 2018 Long Term Incentive Plan to increase the number of shares of common stock issuable thereunder by 2,900,000 shares bringing common stock reserve for issuance up to 6,200,000 under the 2018 LTIP. The Compensation Committee of the Board of Directors (the “Committee”) is responsible for the administration of the 2007 LTIP and 2018 LTIP, including the grant of stock based awards and other financial incentives including performance based incentives to employees, non‑employee directors and consultants.

Our standard stock option agreement under the 2007 LTIP and 2018 LTIP allows for the payment of the exercise price of vested stock options either through cash remittance in exchange for newly issued shares, or through non‑cash exchange of previously issued shares held by the recipient for at least six months in exchange for our newly issued shares.  The 2007 LTIP and 2018 LTIP also allow for the retention of shares in payment of the exercise price and income tax withholding.  The latter