Mirum Pharmaceuticals, Inc. 10-Q

Item 1. Financial Statements. Mirum Pharmaceuticals, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share data) June 30, 2024 December 31, 2023 (Note 2) Assets Current assets: Cash and cash equivalents $ 233,245 $ 286,326 Short-term investments 45,126 — Accounts receivable 60,430 67,968 Inventory 20,438 22,312 Prepaid expenses and other current assets 8,590 10,935 Total current assets 367,829 387,541 Restricted cash 250 — Long-term investments 17,075 — Property and equipment, net 1,101 706 Operating lease right-of-use assets 8,759 1,284 Intangible assets, net 261,768 252,925 Other assets 3,972 4,165 Total assets $ 660,754 $ 646,621 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 9,842 $ 7,416 Accrued expenses 101,394 78,544 Operating lease liabilities, current 1,072 1,104 Total current liabilities 112,308 87,064 Operating lease liabilities, noncurrent 8,244 617 Convertible notes payable, net 307,242 306,421 Other liabilities 3,972 3,849 Total liabilities 431,766 397,951 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized, and no shares issued and outstanding as of June 30, 2024 and December 31, 2023 — — Common stock, $ 0.0001 par value; 200,000,000 shares authorized; 47,571,847 and 46,723,143 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively 5 5 Additional paid-in capital 835,616 803,260 Accumulated deficit ( 606,156 ) ( 556,239 ) Accumulated other comprehensive (loss) income ( 477 ) 1,644 Total stockholders’ equity 228,988 248,670 Total liabilities and stockholders’ equity $ 660,754 $ 646,621 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 Table of Contents Mirum Pharmaceuticals, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share and per share data) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue: Product sales, net $ 77,760 $ 32,497 $ 146,677 $ 61,595 License and other revenue 115 5,000 420 7,500 Total revenue 77,875 37,497 147,097 69,095 Operating expenses: Cost of sales 20,227 6,812 38,057 11,791 Research and development 32,672 22,009 64,894 45,557 Selling, general and administrative 49,208 32,949 94,846 63,168 Total operating expenses 102,107 61,770 197,797 120,516 Loss from operations ( 24,232 ) ( 24,273 ) ( 50,700 ) ( 51,421 ) Other income (expense): Interest income 3,486 3,627 7,119 5,899 Interest expense ( 3,569 ) ( 3,726 ) ( 7,146 ) ( 7,968 ) Loss from termination of revenue interest purchase agreement — ( 49,076 ) — ( 49,076 ) Other income (expense), net 312 ( 274 ) 2,069 ( 1,085 ) Net loss before provision for income taxes ( 24,003 ) ( 73,722 ) ( 48,658 ) ( 103,651 ) Provision for income taxes 635 316 1,259 517 Net loss $ ( 24,638 ) $ ( 74,038 ) $ ( 49,917 ) $ ( 104,168 ) Net loss per share, basic and diluted $ ( 0.52 ) $ ( 1.94 ) $ ( 1.06 ) $ ( 2.75 ) Weighted-average shares of common stock outstanding, basic and diluted 47,235,080 38,107,334 47,081,315 37,892,513 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 Table of Contents Mirum Pharmaceuticals, Inc. Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (In thousands) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss $ ( 24,638 ) $ ( 74,038 ) $ ( 49,917 ) $ ( 104,168 ) Other comprehensive income (loss): Unrealized gain on available-for-sale investments 7 54 7 219 Cumulative translation adjustments ( 471 ) ( 114 ) ( 2,128 ) 74 Comprehensive loss $ ( 25,102 ) $ ( 74,098 ) $ ( 52,038 ) $ ( 103,875 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Table of Contents Mirum Pharmaceuticals, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share amounts) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance as of December 31, 2023 46,723,143 $ 5 $ 803,260 $ ( 556,239 ) $ 1,644 $ 248,670 Issuance of common stock in connection with equity award plans 337,963 — 1,205 — — 1,205 Stock-based compensation — — 11,664 — — 11,664 Net loss — — — ( 25,279 ) — ( 25,279 ) Other comprehensive loss — — — — ( 1,657 ) ( 1,657 ) Balance as of March 31, 2024 47,061,106 5 816,129 ( 581,518 ) ( 13 ) 234,603 Issuance of common stock in connection with equity award plans 442,652 — 5,858 — — 5,858 Issuance of common stock in connection with employee stock purchase plan 68,089 — 1,433 — — 1,433 Stock-based compensation — — 12,196 — — 12,196 Net loss — — — ( 24,638 ) — ( 24,638 ) Other comprehensive loss — — — — ( 464 ) ( 464 ) Balance as of June 30, 2024 47,571,847 $ 5 $ 835,616 $ ( 606,156 ) $ ( 477 ) $ 228,988 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Balance as of December 31, 2022 36,956,345 $ 4 $ 535,074 $ ( 392,824 ) $ ( 217 ) $ 142,037 Issuance of common stock in connection with equity award plans 197,703 — 1,390 — — 1,390 Issuance of common stock in at-the-market offerings, net of issuance costs of $ 518 658,206 — 14,480 — — 14,480 Issuance of common stock in connection with achievement of Contingent Milestone 199,993 — 4,292 — — 4,292 Stock-based compensation — — 8,728 — — 8,728 Net loss — — — ( 30,130 ) — ( 30,130 ) Other comprehensive income — — — — 353 353 Balance as of March 31, 2023 38,012,247 4 563,964 ( 422,954 ) 136 141,150 Issuance of common stock in connection with equity award plans 101,699 — 803 — — 803 Issuance of common stock in connection with employee stock purchase plan 76,481 — 1,294 — — 1,294 Issuance of common stock in connection with settlement of Indemnification Holdback liability 31,631 — 896 — — 896 Stock-based compensation 0 — 8,565 — — 8,565 Net loss 0 — — ( 74,038 ) — ( 74,038 ) Other comprehensive loss 0 — — — ( 60 ) ( 60 ) Balance as of June 30, 2023 38,222,058 $ 4 $ 575,522 $ ( 496,992 ) $ 76 $ 78,610 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Table of Contents Mirum Pharmaceuticals, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Six Months Ended June 30, 2024 2023 Operating activities Net loss $ ( 49,917 ) $ ( 104,168 ) Reconciliation of net loss to net cash provided by (used in) operating activities: Stock-based compensation 23,285 16,918 Depreciation and amortization 11,518 2,673 Inventory reserves and firm commitment losses 1,676 665 Costs recognized on sale of acquired inventory 4,566 — Amortization of debt discount and offering costs 821 307 Loss from termination of revenue interest purchase agreement — 49,076 Non-cash interest expense related to the revenue interest liability — 5,060 Unrealized foreign exchange gain ( 2,089 ) — Non-cash lease expense 585 290 Other 25 ( 795 ) Change in operating assets and liabilities: Accounts receivable 7,538 ( 11,332 ) Prepaid and other current assets 2,345 ( 782 ) Inventory ( 6,615 ) ( 1,767 ) Other assets ( 88 ) 229 Accounts payable, accrued expenses and other liabilities 18,221 7,964 Operating lease liabilities ( 462 ) ( 443 ) Net cash provided by (used in) operating activities 11,409 ( 36,105 ) Investing activities Purchase of investments ( 61,938 ) ( 27,329 ) Proceeds from maturities of investments — 120,000 Purchase of property and equipment ( 792 ) ( 109 ) Payments made for additions to intangible assets ( 10,000 ) ( 15,000 ) Net cash (used in) provided by investing activities ( 72,730 ) 77,562 Financing activities Proceeds from issuance of common stock in at-the-market offerings, net of issuance costs — 14,480 Proceeds from issuance of convertible notes, net — 305,304 Proceeds from issuance of common stock pursuant to equity plans 8,496 3,487 Payments on revenue interest liability — ( 195,577 ) Net cash provided by financing activities 8,496 127,694 Effect of exchange rate on cash, cash equivalents and restricted cash equivalents ( 6 ) 74 Net (decrease) increase in cash, cash equivalents and restricted cash equivalents ( 52,831 ) 169,225 Cash, cash equivalents and restricted cash equivalents at beginning of period 286,326 128,003 Cash, cash equivalents and restricted cash at end of period $ 233,495 $ 297,228 Supplemental disclosure of cash flow information: Operating cash flows paid for operating lease $ 602 $ 527 Cash paid for interest $ 6,325 $ — Cash paid for income taxes $ 339 $ — Non-cash operating, investing and financing activities: Accrued milestone payments classified as intangible assets, net $ 10,000 $ — (Decrease) increase of inventory purchases included in accounts payable and accrued liabilities $ ( 3,509 ) $ 1,467 Right-of-use assets obtained in exchange for lease liabilities $ 8,896 $ 473 Decrease in ROU assets and lease liabilities due to lease modification $ 723 $ — Stock-based compensation capitalized to inventory $ 694 $ 375 Issuance of common stock in connection with settlement of Contingent Milestone and Indemnification Holdback liabilities $ — $ 5,188 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents Mirum Pharmaceuticals, Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Description of Business Mirum Pharmaceuticals, Inc. (the “Company”) was incorporated in the State of Delaware on May 2, 2018 , and is headquartered in Foster City, California. The Company is a biopharmaceutical company dedicated to transforming the treatment of rare diseases affecting children and adults. The Company has three approved medicines: LIVMARLI® (maralixibat) oral solution (“Livmarli”), Cholbam® (cholic acid) capsules (“Cholbam”), and Chenodal® (chenodiol) tablets (“Chenodal”). Livmarli is approved for the treatment of cholestatic pruritus in patients with Alagille syndrome (“ALGS”) in the United States (“U.S”). and various other countries around the world and for cholestatic pruritus in patients with primary familial intrahepatic cholestasis (“PFIC”) in the U. S. and the European Union (“EU”). On August 31, 2023, the Company completed the acquisition of assets of Travere Therapeutics, Inc. (“Travere”) that are primarily related to the development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of Chenodal and Cholbam (also known as Kolbam, and together with Chenodal, the “Bile Acid Medicines”), two therapies addressing rare diseases in high-need settings (such acquisition, the “Bile Acid Portfolio Acquisition”) (Note 7). Cholbam is FDA-approved for the treatment of bile acid synthesis disorders due to single enzyme deficiencies and adjunctive treatment of peroxisomal disorders in patients who show signs or symptoms of liver disease. Chenodal is approved for the treatment of radiolucent stones in the gallbladder and has received medical necessity recognition by the FDA for the treatment of cerebrotendinous xanthomatosis (“CTX”). The Company’s development pipeline consists of the clinical-stage product candidate volixibat and life-cycle extension opportunities for Livmarli. The Company commenced significant operations in November 2018. The Company views its operations and manages its business as one operating segment. The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. Liquidity The Company has a limited operating history, has incurred significant operating losses since its inception, and the revenue and income potential of the Company’s business and market are unproven. As of June 30, 2024, the Company had an accumulated deficit of $ 606.2 million and unrestricted cash, cash equivalents and investments of $ 295.4 million. The Company believes that its unrestricted cash, cash equivalents and investments of $ 295.4 million as of June 30, 2024, provide sufficient capital resources to continue its operations for at least twelve months from the issuance date of the accompanying unaudited condensed consolidated financial statements. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The unaudited condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by GAAP for complete financial statements. The operating results presented in these unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2023, as filed with the SEC on March 15, 2024. 6 Table of Contents Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that impact the reported amounts. These estimates and assumptions are based upon historical experience, knowledge of current events and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ materially from those estimates. The Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2024 reflect the Company’s estimates of the impact of the geopolitical and macroeconomic environment, including the impact of inflation, bank failures, high interest rates and foreign exchange rate fluctuations. The duration and the scope of these conditions cannot be predicted; therefore, the extent to which these conditions will directly or indirectly impact the Company’s business, results of operations and financial condition, is uncertain. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments and assumptions or a revision of the carrying value of the Company’s assets or liabilities as of the date of this filing. Significant Accounting Policies There have been no significant changes to the accounting policies during the six months ended June 30, 2024, as compared to the significant accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in the Company’s audited consolidated financial statements included in the Annual Report, unless indicated below. Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments that are readily convertible into cash without penalty and with original maturities of three months or less at the date of purchase to be cash equivalents. The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents are valued at cost, which approximate their fair value. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets that together reflect the same amounts shown in the unaudited condensed consolidated statements of cash flows (in thousands): As of June 30, 2024 2023 Cash and cash equivalents $ 233,245 $ 297,228 Restricted cash 250 — Total cash, cash equivalents, and restricted cash $ 233,495 $ 297,228 Investments The Company classifies all investments in securities as available-for-sale. Management determines the appropriate classification of its investments in securities at the time of purchase. Investments with original maturities beyond three months at the date of purchase and which mature at, or less than twelve months from the balance sheet date, are classified as a current asset. Investments are recorded at fair value, with unrealized gains and losses reported as accumulated other comprehensive income (loss) until realized, with the exception of any declines in fair value below the cost basis that are a result of a credit loss, which, if any, are reported in other income (expense), net in the current period through an allowance for credit losses. Each reporting period, the Company evaluates whether declines in fair values of its available-for-sale securities below their cost basis are a result of credit loss or other factors and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss, the creditworthiness of the security issuers, as well as the Company’s ability and intent to hold the available-for-sale security until a forecasted recovery occurs. Additionally, the Company assesses whether it has plans to sell the security or it is more likely than not it will be required to sell any available-for-sale securities before recovery of its amortized cost basis. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, as well as interest and dividends, are included in interest income. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis and are also included in Other income (expense). To date, the Company has not identified any declines in fair value of its investments related to credit loss. 7 Table of Contents Concentrations of Credit Risk and Off-Balance Sheet Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, accounts receivable and investments. The Company limits the amount of credit exposure by investing cash that is not required for immediate operating needs in money market funds, government obligations and/or commercial paper with short maturities. Additionally, the Company has established guidelines regarding diversification of its investments and their maturities, which are designed to maintain principal and maximize liquidity. To date, the Company has not experienced any losses associated with this credit risk and continues to believe that this exposure is not significant. The Company relies on a single third party logistics provider (“3PL”) and a single specialty pharmacy for all of the Company’s sales of its approved medicines in the United States as well as a single 3PL outside the United States. The Company sources materials and services through several vendors. Certain materials are sourced from a single vendor. The loss of certain vendors could result in a temporary disruption of the Company’s commercialization efforts. As of June 30, 2024 and as of December 31, 2023, the Company did not have any customers that individually accounted for more than 10% of accounts receivable. For the three and six months ended June 30, 2024 and 2023, the Company did not have revenue attributable to any one customer in excess of 10% of sales. Accounts Receivable The Company has accounts receivable amounts due from product sales. The Company also has accounts receivable amounts due from license agreements for milestones achieved, but not yet paid. Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company estimates the allowance for credit losses using the current expected credit loss model. Under this model, the allowance for credit losses reflects the Company’s estimate of lifetime expected credit losses. The Company evaluates the collectability of the cash flows based on the risk of loss over the contractual life, even when that risk is remote, based on judgments about the creditworthiness of its customers, historical experience and other relevant information that is available to the Company. There was no allowance for credit losses as of June 30, 2024. There was no bad debt expense for the three and six months ended June 30, 2024 and 2023. Inventory Inventory is valued at the lower of cost or net realizable value, with cost determined on a first-in, first-out (FIFO) basis. The Company periodically reviews the composition of inventory to identify excess, obsolete, slow-moving or otherwise unsaleable items. If unsaleable items are observed and there are no alternate uses for the inventory, the Company will record a write-down to net realizable value in the period that the decline in value is recognized through a charge to cost of sales. Furthermore, the Company periodically reviews its firm commitments for the purchase of minimum order quantities. If the minimum order quantities exceed the Company’s future demand, a net loss is accrued in cost of sales for such future inventory purchases. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required. Accruals for firm purchase commitments amounted to $ 5.9 million and $ 5.2 million as of June 30, 2024 and December 31, 2023, respectively, of which $ 4.0 million and $ 3.8 million was included in other liabilities on the unaudited condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively. Intangible Assets, Net The Company accounts for asset acquisitions that do not meet the definition of a business using the cost accumulation method, whereby the cost of the acquisition, including certain transaction costs, is allocated to the asset (or assets) acquired on the basis of its (or their) relative fair value(s) on the measurement date. No goodwill is recognized in an asset acquisition. Intangible assets are measured at their fair values as of the acquisition date or, in the case of commercial milestone payments, the date they become due. The evaluation of intangible assets includes assessing the amortization period for which the asset is expected to contribute to the future cash flows of the Company. Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis when the Company is unable to reliably estimate the pattern of cash flow. The Company tests its finite lived intangible assets for impairment annually or if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If it is determined that the asset is impaired, the carrying value is written down to its estimated fair value, with the related impairment charge recognized in the unaudited condensed consolidated statements of operations in the period in which the impairment occurs. The Company has not recorded any impairments to its intangible assets for any of the periods presented. 8 Table of Contents The components of the Company’s intangible assets were as follows (in thousands, except for weighted-average remaining amortization period): June 30, 2024 Gross Carrying Value Accumulated Amortization Net Carrying Amount Weighted-Average Remaining Amortization Period (Years) Commercial milestones $ 59,000 $ ( 4,809 ) $ 54,191 13.0 Developed technology 226,620 ( 19,743 ) 206,877 11.2 Assembled workforce 970 ( 270 ) 700 2.2 Total intangible assets $ 286,590 $ ( 24,822 ) $ 261,768 11.5 December 31, 2023 Gross Carrying Value Accumulated Amortization Net Carrying Amount Weighted-Average Remaining Amortization Period (Years) Commercial milestones $ 39,000 $ ( 3,318 ) $ 35,682 16.2 Developed technology 226,620 ( 10,239 ) 216,381 11.7 Assembled workforce 970 ( 108 ) 862 2.7 Total intangible assets $ 266,590 $ ( 13,665 ) $ 252,925 12.3 Amortization expense was $ 5.7 million and $ 11.2 million for the three and six months ended June 30, 2024, respectively, and $ 1.3 million and $ 2.5 million for the three and six months ended June 30, 2023, respectively. Amortization expense was included in cost of sales in the accompanying unaudited condensed consolidated statements of operations. The following table summarizes the estimated future amortization expense associated with the Company’s intangible assets as of June 30, 2024 (in thousands): Amount 2024 (remaining six months) 11,951 2025 23,903 2026 23,795 2027 23,579 2028 23,579 Thereafter 154,961 $ 261,768 Product Sales, Net The Company recognizes product sales, net when the customer obtains control of its product, which occurs at a point in time, typically upon delivery of the Company’s product to the customer. Revenues from product sales are recorded at the net sales price, or the transaction price, which may include fixed or variable consideration for discounts, government rebates, co-pay assistance, returns and other allowances that are offered within contracts with a customer relating to the sale of the Company's approved medicines. Estimates of variable consideration are calculated based on the actual product sales each reporting period and the nature of the variable consideration related to those sales. Overall, these estimates reflect the Company’s best estimate of the amount of consideration to which the Company expects to be entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained and is included in product sales, net only to the extent that it is considered probable that a significant reversal in the amount of the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimates are reviewed and updated quarterly as additional information becomes known. Actual amounts of consideration ultimately received may differ materially from estimates. If actual results vary from estimates, the Company will adjust these estimates, which would affect product sales, net and earnings in the period such variances are adjusted. Significant categories of sales discounts and allowances are as follows: 9 Table of Contents Government Rebates : The Company records rebates payable under Medicaid and other government programs as a reduction of revenue at the time product revenues are generated. The Company’s rebate calculations may require estimates, including estimates of customer mix, to determine which sales will be subject to rebates and the amount of such rebates. The Company updates its estimates and assumptions on a quarterly basis and records any necessary adjustments to revenue in the period identified. The liability for unpaid rebates is included in accrued expenses on the accompanying unaudited condensed consolidated balance sheets. To date, actual government rebates have not differed materially from the Company’s estimates. Other Incentives : Other incentives include a branded co-pay assistance program for eligible patients with commercial insurance in the United States. The branded co-pay assistance program assists commercially insured patients who have coverage for the Company's approved medicines and is intended to reduce each participating patient’s portion of the financial responsibility of the purchase price up to a specified dollar amount of assistance. The calculation of the accrual for co-pay assistance is based upon an identification of claims and the cost per claims associated with product that has been recognized as revenue. The Company records amounts paid under the brand specific co-pay assistance program for each patient as a reduction of revenue from product sales. To date, actual other incentives have not differed materially from the Company’s estimates. Product Returns : The Company records revenue for product sales, net of estimated product returns. Customers have limited return rights related only to the product’s damage or defect identified upon delivery of the product. The Company estimates the amount of product sales that may be returned and records the estimate as a reduction of revenue and a refund liability in the period the related product revenue is recognized. To date, actual returns have not differed materially from the Company’s estimates. The following table represents total revenues and disaggregates Product sales, net by approved medicine (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Product sales, net: Livmarli $ 47,231 $ 32,497 $ 90,076 $ 61,595 Bile Acid Medicines 30,529 — 56,601 — Total product sales, net 77,760 32,497 146,677 61,595 License and other revenue 115 5,000 420 7,500 Total revenues $ 77,875 $ 37,497 $ 147,097 $ 69,095 The following table sets forth Product sales, net by geographic area based on the ship-to location (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 United States $ 65,080 $ 26,159 $ 121,191 $ 50,773 Rest of the world 12,680 6,338 25,486 10,822 Total product sales, net $ 77,760 $ 32,497 $ 146,677 $ 61,595 Foreign Currency The unaudited condensed consolidated financial statements are presented in U.S. dollars. The functional currency for most of the Company’s foreign subsidiaries is their local currency. Balance sheet accounts of international subsidiaries are translated at the current exchange rates as of the end of each accounting period. Income statement items are translated at average exchange rates for the period. The resulting translation adjustments are recorded as a separate component of stockholders’ equity. Foreign currency transaction gains and losses are included in other income (expense), net in the unaudited condensed consolidated statements of operations. Transaction gains and losses result primarily from fluctuations in exchange rates when intercompany receivables and payables are denominated in currencies other than the functional currency of our subsidiary that recorded the transaction. Unrealized foreign exchange gains amounted to $ 0.4 million and $ 2.1 million for the three and six months ended June 30, 2024, respectively, and were insignificant for the three and six months ended June 30, 2023. Realized foreign exchange gains and losses were insignificant for the three and six months ended June 30, 2024 and 2023, respectively. 10 Table of Contents Net Loss Per Share Basic net loss per share is computed by dividing net loss by the weighted-average shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average shares of common stock and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. Diluted net loss per share excludes the potential impact of the Company’s common stock subject to repurchase, common stock options, restricted stock units, contingently issuable employee stock purchase plan shares and common stock issuable upon conversion of convertible notes because their effect would be anti-dilutive due to the Company’s net loss. Basic and diluted net loss per share were the same for the three and six months ended June 30, 2024 and 2023. The following outstanding potential dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect: As of June 30, As of June 30, 2024 2023 Options to purchase common stock and restricted stock units 12,182,480 10,647,891 Common stock issuable upon conversion of convertible notes 9,964,247 9,964,247 Employee stock purchase plan contingently issuable 27,086 22,207 Total 22,173,813 20,634,345 Recent Accounting Pronouncements Not Yet Adopted From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the accompanying unaudited condensed consolidated financial statements and disclosures. In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”). This new guidance is designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures. The amendments of this update are related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements. 3. Fair Value Measurements Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type are presented in the following table (in thousands): June 30, 2024 Level 1 Level 2 Level 3 Total Financial assets: Money market funds $ 202,651 $ — $ — $ 202,651 U.S. treasury bills 20,697 — — 20,697 Corporate debt securities — 24,384 — 24,384 U.S. government bonds — 20,588 — 20,588 Agency bonds — 2,496 — 2,496 Total financial assets $ 223,348 $ 47,468 $ — $ 270,816 11 Table of Contents December 31, 2023 Level 1 Level 2 Level 3 Total Financial assets: Money market funds $ 278,116 $ — $ — $ 278,116 Total financial assets $ 278,116 $ — $ — $ 278,116 The carrying amounts of certain financial instruments such as cash and cash equivalents, accounts receivable, prepaid expenses, other current assets, accounts payable and accrued expenses as of June 30, 2024 and December 31, 2023 approximate their related fair values due to their short-term nature. Money market funds and U.S. treasury bills are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. Certain financial instruments classified within Level 2 of the fair value hierarchy include the types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The Company reviews trading activity and pricing for these investments as of each measurement date. 4. Financial Instruments The fair value and amortized cost of cash equivalents and available-for-sale investments by major security type are presented in the following table (in thousands): June 30, 2024 Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Cash equivalents and investments: Money market funds $ 202,651 $ — $ — $ 202,651 U.S. treasury bills 20,697 1 ( 1 ) 20,697 Corporate debt securities 24,385 4 ( 5 ) 24,384 U.S. government bonds 20,576 14 ( 2 ) 20,588 Agency bonds 2,500 — ( 4 ) 2,496 Total cash equivalents and investments $ 270,809 $ 19 $ ( 12 ) $ 270,816 Classified as: Cash equivalents $ 208,615 Short-term investments 45,126 Long-term investments 17,075 Total cash equivalents and investments $ 270,816 December 31, 2023 Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Cash equivalents: Money market funds $ 278,116 $ — $ — $ 278,116 Total cash equivalents $ 278,116 $ — $ — $ 278,116 Classified as: Cash equivalents $ 278,116 Total cash equivalents $ 278,116 12 Table of Contents As of June 30, 2024, the remaining contractual maturities of available-for-sale debt securities were as follows (in thousands): Estimated Fair Value Due within one year $ 45,126 One to two years 17,075 Total $ 62,201 During the three and six months ended June 30, 2024 and 2023, there have been no significant realized gains or losses on available-for-sale investments, no investments have been in a continuous unrealized loss position for more than 12 months, and the Company did not recognize any material unrealized gains or losses on these securities. 5. Balance Sheet Components Inventory Inventory consists of the following (in thousands): June 30, 2024 December 31, 2023 Raw materials $ 2,790 $ 2,998 Work in progress 11,593 9,873 Finished goods 6,055 9,441 Total inventory $ 20,438 $ 22,312 Accrued Expenses Accrued expenses consist of the following (in thousands): June 30, 2024 December 31, 2023 Accrued sales deductions $ 37,249 $ 23,650 Accrued compensation and related benefits 16,775 20,939 Accrued professional service fees 13,130 7,941 Accrued contract manufacturing and non-clinical costs 8,331 9,922 Accrued royalties payable 7,420 6,716 Accrued clinical trials 6,381 7,268 Accrued interest 2,108 2,108 Accrued milestone payment 10,000 — Total accrued expenses $ 101,394 $ 78,544 6. Revenue Interest Purchase Agreement Except as described below, the Company's Revenue Interest Purchase Agreement (the “RIPA”) with the Purchasers is described in Note 6 of the “Notes to Consolidated Financial Statements” in the Annual Report. The Purchasers had the right to receive certain revenue interests (the “Revenue Interests”) from the Company based on annual product sales, net of Livmarli, in tiered payments (the “Revenue Interest Payments”). Revenue Interest Payments made as a result of the Company’s product sales, net reduce the revenue interest liability. During the six months ended June 30, 2023, the Company made payments of $ 2.9 million in connection with the RIPA. The Company imputed interest expense associated with this liability using the effective interest rate method. The effective interest rate was calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The interest rate on this liability varied during the term of the agreement depending on a number of factors, including the level of forecasted product sales, net. The Company evaluated the interest rate quarterly based on its current product sales, net forecasts utilizing the prospective method. The Company recorded interest expense related to this arrangement of $ 0.8 million and $ 5.1 million for the three and six months ended June 30, 2023, respectively. 13 Table of Contents In April 2023, the Company exercised its call option in accordance with the RIPA and repurchased all future Revenue Interests. In connection with such repurchase, the Company made a payment of $ 192.7 million and the RIPA terminated in accordance with its terms. The loss from termination of the RIPA of $ 49.1 million, comprised of the $ 50.2 million loss related to the settlement of the revenue interest liability and the $ 1.1 million gain on the derecognition of the related derivative liability, was recorded in the accompanying unaudited condensed consolidated statements of operations. 7. Asset Acquisitions Asset Purchase Agreement with Travere Therapeutics, Inc. On August 31, 2023, the Company completed the Bile Acid Portfolio Acquisition. In accordance with the terms and conditions of the Asset Purchase Agreement entered into with Travere, the Company purchased from Travere substantially all of the assets related to its business of development, manufacturing (including synthesis, formulation, finishing or packaging) and commercialization of the Bile Acid Medicines. The Company paid $ 210.4 million upon closing of the transaction, and up to an additional $ 235.0 million is payable upon the achievement of certain milestones based on specified amounts of annual net sales of the Bile Acid Medicines. The Company accounted for the transaction as an asset acquisition as substantially all the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets, namely, the developed technology related to the Bile Acid Medicines. The developed technology asset consists of certain processes and at-market contracts related to the manufacture and commercialization of the Bile Acid Medicines, regulatory approvals, and other assets, and are considered a single asset as they are interdependently linked. The Company is obligated to pay tiered royalties, based on licensing agreements acquired with the Bile Acid Medicines, with rates ranging from high single digit to mid-teens based on net sales of the Bile Acid Medicines. Assignment and License Agreement with Shire International GmbH (Takeda) In November 2018, the Company entered into an Assignment and License Agreement (the “Shire Agreement”) with Shire International GmbH (“Shire”), which was subsequently acquired by Takeda Pharmaceutical Company Limited (“Takeda”). Under the terms of the Shire Agreement, Shire granted the Company an exclusive, royalty bearing worldwide license to develop and commercialize its two product candidates, Livmarli and volixibat. As part of the Shire Agreement, the Company was assigned license agreements held by Shire with Satiogen Pharmaceuticals, Inc. (“Satiogen”), Pfizer Inc. (“Pfizer”) and Sanofi-Aventis Deutschland GmbH (“Sanofi”). The Company has the right to sublicense under the Shire Agreement and additionally has the right to sublicense under the Satiogen, Pfizer and Sanofi licenses subject to the terms of those license agreements. The Company is obligated to pay Shire up to an aggregate of $ 109.5 million upon the achievement of certain clinical development and regulatory milestones for Livmarli in certain indications and an additional $ 25.0 million upon regulatory approval of Livmarli for each and every other indication. In addition, the Company is required to pay up to an aggregate of $ 30.0 million upon the achievement of certain clinical development and regulatory milestones for volixibat solely for the first indication sought. Upon commercialization, the Company is obligated to pay Shire product sales milestones on total licensed products up to an aggregate of $ 30.0 million. The Company is also obligated to pay tiered royalties with rates ranging from low double-digits to mid-teens based upon annual worldwide net sales for all licensed products; however, these royalties are reduced in part by royalties due under the Satiogen and Sanofi licenses, as discussed below, related to Livmarli and volixibat, as applicable. The Company’s royalty obligations will continue on a licensed product-by-licensed product and country-by-country basis until the later to occur of the expiration of the last valid claim in a licensed patent covering the applicable licensed product in such country, expiration of any regulatory exclusivity for the licensed product in a country and ten years after the first commercial sale of a licensed product in such country. In January 2023, the Company paid the accrued regulatory milestone of $ 15.0 million associated with approval of Livmarli by the European Commission for the treatment of cholestatic pruritus in patients with ALGS two months of age and older. In April 2024, the Company paid a $ 10.0 million milestone associated with the approval of Livmarli for the treatment of cholestatic pruritus in patients with PFIC five years of age and older (now twelve months of age and older) by the FDA. As of June 30, 2024, the Company accrued $ 10.0 million associated with the approval of Livmarli for the treatment of cholestatic pruritus in patients with PFIC three months and older by the European Medicines Agency. The accrued milestone was paid in July 2024. Satiogen License Through the Shire Agreement, the Company was assigned a license agreement with Satiogen pursuant to which the Company obtained an exclusive, worldwide license to certain patents and know-how, with the right to sublicense to a 14 Table of Contents third party subject to certain financial considerations. Pursuant to the terms of the license agreement, the Company was obligated to pay to Satiogen up to an aggregate of $ 10.5 million upon the achievement of certain milestones, of which $ 0.5 million was for initiation of certain development activitie s, $ 5.0 million for the completion of regulatory approvals and $ 5.0 million for commercialization activities. Additionally, the Company was required to pay a low single-digit royalty on net sales. The Company’s royalty obligations continued on a licensed product-by-licensed product and country-by-country basis until the expiration of the last valid claim in a licensed patent covering the applicable licensed product in such country. Royalty obligations under the Satiogen license were creditable against the royalty obligations to Shire under the Shire Agreement. The Company has not paid milestone payments pursuant to this agreement for the periods presented. In May 2022, the Company completed the merger and acquisition of Satiogen for total consideration of approximately $ 24.2 million. At acquisition, Satiogen’s assets consisted of cash and intangible assets related to developed technology. The purchase consideration consisted of 609,305 shares of the Company’s common stock issued upon the closing of the acquisition and cash consideration of $ 2.6 million, with up to an additional 32,494 shares of common stock that would have been issued upon the closing of the acquisition except the parties agreed to such shares being held back by the Company for 12 months from the acquisition date to satisfy certain purchase price adjustments and indemnification obligations that may arise during this period. The purchase consideration also included issuance of up to an additional 199,993 shares of the Company’s common stock, contingent upon the achievement of a certain milestone by June 30, 2025. In December 2022, with the approval of Livmarli by the European Commission for the treatment of cholestatic pruritus in patients with ALGS two months of age and older, the milestone was achieved and the Company issued 199,993 shares of common stock in January 2023. Additionally, in June 2023, the contingencies related to the held back shares were resolved and the Company issued 31,631 shares of common stock. Through the transaction, the Company obtained all Satiogen licensing payments and Satiogen-owned intellectual property relating to Livmarli and volixibat. The transaction resulted in a reduction of total licensing royalty obligations for Livmarli and volixibat. Pfizer License Through the Shire Agreement, the Company was assigned a license agreement with Pfizer pursuant to which the Company obtained an exclusive, worldwide license to certain Pfizer know-how with a right to sublicense. Upon commercialization of any product utilizing the licensed product, the Company will be required to pay to Pfizer a low single-digit royalty on net sales of product sold by the Company, its affiliates or sublicensees. The Company’s royalty obligations continue on a licensed product-by-licensed product basis until the eighth anniversary of the first commercial sale of such licensed product anywhere in the world. Sanofi License Through the Shire Agreement, the Company was assigned a license agreement with Sanofi pursuant to which the Company obtained an exclusive, worldwide license to certain patents and know-how with the right to sublicense to a third party subject to certain financial considerations. The Company is obligated to pay up to an aggregate of $ 36.0 million upon the achievement of certain regulatory, commercialization and product sales milestones. Additionally, upon commercialization, the Company is required to pay tiered royalties in the mid to high single-digit range based upon net sales of licensed products sold by the Company and sublicensees in a calendar year, subject to adjustments in certain circumstances. The Company’s royalty obligations continue on a licensed product-by-licensed product and country-by-country basis until the later to occur of the expiration of the last valid claim in a licensed patent covering the applicable licensed product in such country and ten years after the first commercial sale of a licensed product in such country. Royalty obligations under the Sanofi license are creditable against the royalty obligations to Shire under the Shire Agreement. The Company has not paid milestone payments pursuant to this agreement for the periods presented. As of June 30, 2024, no milestones had been accrued as there were no potential milestones considered probable. 8. Collaboration and License Agreements License and Collaboration Agreement with CANbridge In April 2021, the Company entered into an exclusive license and collaboration agreement with CANbridge Pharmaceuticals, Inc. (“CANbridge”), as amended in March 2024. Under the terms of the agreement, CANbridge has obtained the exclusive right to develop and commercialize Livmarli within the Greater China regions (China, Hong Kong, Macau and Taiwan). In connection with the agreement, the Company received an upfront payment of $ 11.0 million, which, upon satisfaction of the performance obligation and receipt by CANbridge of the right to use and benefit from the license in May 2021, was recorded as license revenue. Additionally, the Company is eligible to receive up to $ 5.0 million in research and development funding, and up to $ 109.0 million for the achievement of future regulatory and commercial milestones, with double-digit tiered royalties based on product net sales. 15 Table of Contents In June 2023, CANbridge achieved a regulatory milestone, triggering a milestone payment to the Company of $ 5.0 million, which was recorded as license revenue in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2023. Research and development funding payable by CANbridge to the Company which is reflected as a reduction of research and development expense in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2024 was insignificant. For the three and six months ended June 30, 2023, the Company recorded research and development funding of $ 1.1 million and $ 1.4 million, respectively. Research and development funding recorded as a receivable which was included in accounts receivable on the accompanying unaudited condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 was insignificant. License and Collaboration Agreement with GC Biopharma In July 2021, the Company entered into an exclusive license and collaboration agreement with GC Biopharma. Under the terms of the agreement, GC Biopharma has obtained the exclusive right to develop and commercialize Livmarli within South Korea for ALGS, PFIC, and biliary atresia (“BA”). In connection with the agreement, the Company received a $ 5.0 million upfront payment, which, upon satisfaction of the performance obligation and receipt by GC Biopharma of the right to use and benefit from the license, was recorded as license revenue. Additionally, the Company is entitled to certain research and development funding and up to $ 23.0 million for the achievement of future regulatory and commercial milestones, with double-digit tiered royalties based on product net sales. In February 2023, GC Biopharma achieved a regulatory milestone under this agreement triggering a milestone payment to the Company of $ 2.5 million, which upon the release of the constraint was included in the transaction price and recognized as license revenue in the accompanying unaudited condensed consolidated statements of operations for the six months ended June 30, 2023. For the three and six months ended June 30, 2024 and 2023, research and development funding payable by GC Biopharma to the Company was insignificant and was reflected as a reduction of research and development expense in the accompanying unaudited condensed consolidated statements of operations. As of June 30, 2024 and December 31, 2023, such research and development funding included in accounts receivable on the accompanying unaudited condensed consolidated balance sheets was insignificant. Licensing Agreement with Takeda In September 2021, the Company entered into an exclusive licensing agreement with Takeda for the development and commercialization of Livmarli in Japan for ALGS, PFIC, and BA. Under the terms of the agreement, Takeda will be responsible for regulatory approval and commercialization of Livmarli in Japan. Takeda will also be responsible for development, including conducting clinical studies in cholestatic indications. The Company is responsible for commercial supply to Takeda. In exchange, the Company is eligible to receive a percentage of Takeda’s annualized net sales, which range from high double digits declining to mid double digits over the first four years from commercial launch and thereafter remains at mid double digits. The Company fully constrained all revenues upon transfer of control of the license to Takeda, which occurred when Takeda could use and benefit from the license, and will recognize any consideration related to sales-based payments when the related sales occur, as the Company has determined that these amounts relate predominantly to the license granted and therefore will be recognized on the later to occur of satisfaction of the performance obligation or the occurrence of the related sales. 9. Leases In January 2019, the Company entered into an operating lease agreement for office space which consisted of approximately 5,600 square feet (the “Initial Lease”). The lease term was approximately four years with an option to extend the term for one five-year term, which at the time was not reasonably assured of exercise and therefore, not included in the lease term. The lease contained a tenant improvement allowance of $ 0.4 million, which was recorded as leasehold improvements on the accompanying unaudited condensed consolidated balance sheets with a corresponding reduction of the right-of-use (“ROU”) asset at inception of the lease. Rent payments commenced in August 2019. In November 2019, the Company amended the operating lease agreement (the “Amended Agreement”) to extend the term of the Initial Lease through March 2025. This extension was accounted for as a lease modification. Additionally, pursuant to the Amended Agreement, the Company expanded the office space by 5,555 square feet for a five-year term expiring in March 2025 (the “Expanded Space”). The Company accounted for the Expanded Space as a separate contract as there were material additional rights of use that were not included in the Initial Lease. The Amended Agreement contained a tenant improvement allowance of $ 0.8 million in connection with the expanded space, which has been recorded as leasehold improvements within property and equipment, net on the accompanying unaudited 16 Table of Contents condensed consolidated balance sheets with a corresponding reduction of the ROU asset at inception of the lease for the expanded space. In January 2024, the Company entered into an operating lease agreement for approximately 36,300 square feet of office space (the “New Lease”). The lease term is approximately five years . Concurrently with entering into the New Lease, the Company entered into an amendment of its existing Amended Agreement to accelerate the lease expiration date from March 2025 to shortly after the commencement date of the New Lease. The New Lease commenced and the Amended Agreement, as amended, terminated in May 2024. The following tables contain a summary of other information and the undiscounted future minimum payments pertaining to the Company’s operating leases that had commenced as of the end of the periods presented: As of June 30, 2024 2023 Weighted-average incremental borrowing rate 7.5 % 8.0 % Weighted-average remaining lease term (in years) 5.1 years 2.4 years Undiscounted Rent Payments as of June 30, 2024 (in thousands) 2024 (remaining six months) $ 633 2025 2,207 2026 2,257 2027 2,321 2028 2,330 Thereafter 1,551 Total undiscounted lease payments 11,299 Less: imputed interest ( 1,983 ) Total lease liability $ 9,316 Rent expense was $ 0.5 million and $ 0.7 million for the three and six months ended June 30, 2024, respectively, and $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2023, respectively. Variable lease payments for operating expenses for the three and six months ended June 30, 2024 and 2023 were insignificant. 10. Convertible Notes Except as described below the Company’s convertible notes are described in Note 10 of the “Notes to Consolidated Financial Statements” in the Annual Report. The convertible notes consisted of the following (in thousands): June 30, 2024 December 31, 2023 Principal amount $ 316,250 $ 316,250 Unamortized debt discount and issuance costs ( 9,008 ) ( 9,829 ) Net carrying amount $ 307,242 $ 306,421 The Company incurred $ 10.9 million of transaction costs related to the issuance of the 4.00 % Convertible Senior Notes due 2029 (the “Notes”), which are being amortized to interest expense over the term of the Notes using the effective interest method. As of June 30, 2024, the remaining amortization period of the debt discount was approximately 17 Table of Contents 4.8 years and the effective interest on the Notes was 4.6 %. The following table sets forth interest expense recognized related to the Notes (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Coupon interest expense $ 3,162 $ 2,601 $ 6,325 $ 2,601 Amortization of debt discount and issuance costs 407 307 821 307 Total interest expense on convertible notes $ 3,569 $ 2,908 $ 7,146 $ 2,908 As of June 30, 2024 and December 31, 2023, the estimated fair value of the Notes was $ 424.4 million and $ 387.3 million, respectively. The fair values were determined based on the quoted price of the convertible notes in an inactive market on the last trading day of the reporting period and have been classified as Level 2 in the fair value hierarchy. 11. Stockholders’ Equity Common Stock In August 2020, the SEC declared effective a registration statement on Form S-3 (“2020 Shelf Registration”) covering the sale of up to $ 300.0 million of the Company’s securities. Also, in August 2020, the Company entered into a sales agreement (“2020 Sales Agreement”) with SVB Securities LLC, which was acquired by Leerink Partners LLC (“Leerink”), pursuant to which the Company could elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $ 75.0 million under the 2020 Shelf Registration through Leerink acting as the sales agent and/or principal. The 2020 Shelf Registration expired in August 2023, and no further sales may be made under the 2020 Sales Agreement. Prior to the expiration of the 2020 Shelf Registration, we issued and sold an aggregate of 2,125,090 shares of common stock pursuant to the 2020 Sales Agreement, resulting in aggregate gross proceeds to us of $ 43.7 million. On September 9, 2022, the Company filed an automatic shelf registration statement on Form S-3 with the SEC (the “2022 Shelf Registration”), which became effective upon filing, pursuant to which the Company registered for sale from time to time in one or more offerings an unlimited amount of any combination of the Company’s common stock, preferred stock, debt securities and warrants, so long as the Company continues to satisfy the requirements of a “well-known seasoned issuer” under SEC rules. This automatic shelf registration statement will remain in effect for up to three years from the date it became effective. As of June 30, 2024, the Company had not issued any securities pursuant to the automatic shelf registration statement. On August 31, 2023, in connection with and immediately prior to the closing of the Bile Acid Portfolio Acquisition, the Company completed the private placement of 8,000,000 shares of the Company’s common stock at a price per share of $ 26.25 , resulting in net proceeds of approximately $ 202.2 million, which the Company used to finance the upfront payment at the closing of the Bile Acid Portfolio Acquisition. On November 2, 2023, the Company entered into a Sales Agreement (the “2023 Sales Agreement”) with Leerink and Cantor Fitzgerald & Co. (the “Sales Agents”), pursuant to which the Company may, from time to time, sell up to an aggregate amount of $ 200.0 million of its common stock through the Sales Agents in an “at-the-market” offering (the “ATM Offering”). The Company is not required to sell shares under the 2023 Sales Agreement. Sales of the Company’s common stock, if any, under the 2023 Sales Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act. The Company will pay a given designated Sales Agent a commission of up to 3.0 % of the aggregate gross proceeds of any shares of common stock sold through such Sales Agent pursuant to the 2023 Sales Agreement. As of June 30, 2024, the Company had not issued any securities pursuant to the 2023 Sales Agreement. 18 Table of Contents Common Stock Reserved for Issuance Common stock reserved for issuance is as follows: As of June 30, 2024 As of December 31, 2023 Stock options, restricted stock units and performance stock units issued and outstanding 12,182,480 10,909,831 Reserved for future stock awards or option grants 2,513,157 2,230,264 Reserved for employee stock purchase plan 1,439,970 1,040,828 Common stock issuable upon conversion of convertible notes 9,964,247 9,964,247 26,099,854 24,145,170 12. Stock-Based Compensation Equity Incentive Plans In November 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”), which permits the granting of stock awards and incentive and nonstatutory stock options to employees, directors and consultants of the Company. In July 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan became effective on July 17, 2019. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other stock or cash-based awards to individuals who are then employees, officers, directors or consultants of the Company. Shares subject to outstanding awards under the 2018 Plan as of the effective date of the 2019 Plan that are subsequently canceled, forfeited or repurchased by the Company will be added to the shares reserved under the 2019 Plan. In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during the ten-year term of the 2019 Plan, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 5 % of the outstanding number of shares of the Company’s common stock on December 31st of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. As of June 30, 2024, 1,696,841 shares of common stock were available for issuance under the 2019 Plan. In March 2020, the compensation committee of the Company’s board of directors approved and adopted the 2020 Inducement Plan (the “2020 Inducement Plan”). Under the 2020 Inducement Plan, the Company may grant nonstatutory stock options, stock appreciation rights, restricted stock and restricted stock units to new employees entering into employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). Through June 30, 2024, the Company’s board of directors has authorized 4,000,000 shares of the Company’s common stock for future issuance under the 2020 Inducement Plan. As of June 30, 2024, 816,316 shares of common stock were available for issuance under the 2020 Inducement Plan. Stock Options The following table summarizes stock option activity during the six months ended June 30, 2024 (in thousands, except share and per share data): Number of Awards Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value Outstanding as of December 31, 2023 9,632,504 $ 15.87 6.9 $ 131,785 Granted 1,618,821 $ 26.45 Exercised ( 473,069 ) $ 14.92 Canceled and forfeited ( 303,271 ) $ 22.41 Outstanding as of June 30, 2024 10,474,985 $ 17.36 6.9 $ 176,312 Vested and exercisable as of June 30, 2024 6,584,348 $ 13.45 5.8 $ 136,591 19 Table of Contents The weighted-average grant date fair value per share of stock options granted during the six months ended June 30, 2024 and 2023 was $ 18.81 and $ 17.24 per share, respectively. The total intrinsic value of options exercised during the six months ended June 30, 2024 and 2023 was $ 6.1 million and $ 1.7 million, respectively. Intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that had exercise prices that were lower than the per share fair value of the common stock on the date of exercise. As of June 30, 2024, the total unrecognized stock-based compensation related to unvested stock option awards granted was $ 61.0 million, which the Company expects to recognize over a weighted-average period of approximately 2.8 years. The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the expected stock price volatility was based upon the weighting of the Company’s historical volatility and the historical volatility of a peer group of publicly traded companies. The historical volatility data was computed using the daily closing prices for the Company’s and its peer companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The following assumptions were used to estimate the fair value of stock option awards granted during the following periods: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Expected term (in years) 5.50 - 6.08 5.50 - 6.08 5.50 - 6.08 5.31 - 6.08 Expected volatility 72.34 %- 77.03 % 81.59 %- 83.13 % 72.34 %- 80.36 % 81.59 %- 85.24 % Risk-free interest rate 4.31 %- 4.62 % 3.35 %- 3.89 % 3.82 %- 4.62 % 3.35 %- 3.91 % Expected dividend yield — — — — Restricted Stock Units The following table summarizes the activity under the Company’s restricted stock units for the six months ended June 30, 2024: Number of Awards Weighted-Average Grant Date Fair Value per Award Unvested and outstanding as of December 31, 2023 1,129,492 $ 23.41 Granted 689,194 $ 26.44 Vested ( 303,901 ) $ 21.08 Cancelled/Forfeited ( 102,060 ) $ 24.86 Unvested and outstanding as of June 30, 2024 1,412,725 $ 25.30 The fair value of restricted stock unit awards granted to employees and nonemployees is equal to the closing market price of the Company’s common stock on the grant date. As of June 30, 2024, the total unrecognized stock-based compensation related to restricted stock unit awards granted was $ 28.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.2 years. Performance Stock Units In January 2023, the Company granted an aggregate of 135,835 performance stock units to certain executive participants (“2023 Executive PSUs”). The 2023 Executive PSUs are subject to a performance condition of achieving certain net product sales levels related to Livmarli during the year ended December 31, 2024. If the performance condition is met, the first tranche of the award will vest on March 15, 2025 and the second tranche will vest on March 15, 2026, subject to the executive employees’ continuous service through each vesting date. The number of units to be vested in the first tranche of the 2023 Executive PSUs is calculated by multiplying two-thirds of the 2023 Executive PSUs granted by a percentage calculated based on attained Livmarli sales metrics, as certified by the Company’s Compensation Committee. 20 Table of Contents The number of units to be vested in the second tranche of the 2023 Executive PSUs equals 50 % of the units vested in the first tranche. In June 2023, the Company granted an aggregate of 12,000 PSUs to certain employees (“2023 Employee PSUs”). The 2023 Employee PSUs are subject to a performance condition of achieving certain net product sales related to Livmarli in the US for the year ended December 31, 2023. The first tranche of the 2023 Employee PSUs vested during the six months ended June 30, 2024. In January 2024, the Company granted an aggregate of 148,250 performance stock units to certain executive participants (“2024 Executive PSUs”). The 2024 Executive PSUs are subject to a performance condition of achieving certain net product sales levels related to the Company’s approved medicines during the year ended December 31, 2025. If the performance condition is met, the first tranche of the award will vest on March 15, 2026 and the second tranche will vest on March 15, 2027, subject to the executive employees’ continuous service through each vesting date. The number of units to be vested in the first tranche of the 2024 Executive PSUs is calculated by multiplying two-thirds of the 2024 Executive PSUs granted by a percentage calculated based on attained sales metrics for the Company’s approved medicines, as certified by the Company’s Compensation Committee. The number of units to be vested in the second tranche of the 2024 Executive PSUs equals 50 % of the units vested in the first tranche. The following table summarizes the activity under the Company's performance stock units for the six months ended June 30, 2024: Number of Awards Weighted-Average Grant Date Fair Value per Award Unvested and outstanding as of December 31, 2023 147,835 $ 23.64 Granted 160,250 $ 26.49 Vested ( 3,645 ) $ 25.39 Cancelled/Forfeited ( 9,670 ) $ 24.34 Unvested and outstanding as of June 30, 2024 294,770 $ 25.14 As of June 30, 2024, the total unrecognized stock compensation related to performance stock units granted was $ 6.1 million, which the Company expects to recognize over a weighted-average period of approximately 1.7 years. 2019 Employee Stock Purchase Plan In July 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Employee Stock Purchase Plan (“ESPP”). A total of 500,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be automatically increased on the first day of each calendar year during the first ten years of the term of the ESPP, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to the lesser of (i) 1 % of the outstanding number of shares of common stock on December 31st of the preceding calendar year, (ii) 1,500,000 shares of common stock or (iii) such lesser amount as determined by the Company’s board of directors. The ESPP became effective on July 17, 2019 and generally provides for six-month consecutive offering periods beginning in May and November of each year. During the three and six months ended June 30, 2024, 68,089 shares were issued under the ESPP. As of June 30, 2024, the Company had 1,439,970 shares available for future issuance under the ESPP. The stock-based compensation related to the ESPP was $ 0.2 million for each of the three months ended June 30, 2024 and 2023, and $ 0.5 million for the six months ended June 30, 2024 and 2023, respectively. Compensation Expense Total stock-based compensation is reflected in the accompanying unaudited condensed consolidated statements of operations as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Selling, general and administrative $ 7,971 $ 5,685 $ 15,560 $ 11,531 Research and development 3,546 2,672 7,407 5,387 Cost of sales 318 — 318 — Total $ 11,835 $ 8,357 $ 23,285 $ 16,918 21 Table of Contents Stock-based compensation capitalized into inventory was $ 0.5 million and $ 0.2 million for the three months ended June 30, 2024 and 2023, respectively, and $ 0.7 million and $ 0.4 million for the six months ended June 30, 2024 and 2023, respectively. 13. Commitments and Contingencies Certain of the Company's contractual arrangements with contract manufacturing organizations require binding forecasts or commitments to purchase minimum amounts for the manufacture of drug product supply, which may be material to the Company's unaudited condensed consolidated financial statements. The Company is subject to potential liabilities under government regulations and various claims and legal actions that are pending or may be asserted from time-to-time. These matters arise in the ordinary course and conduct of the Company’s business and may include, for example, commercial, intellectual property, and employment matters. The Company intends to defend itself vigorously in such matters and when warranted, take legal action against others. Furthermore, the Company regularly assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its unaudited condensed consolidated financial statements. An estimated loss contingency is accrued in the Company’s unaudited condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company does not accrue amounts for liabilities that it does not believe are probable. Litigation is inherently unpredictable, and unfavorable resolutions could occur. As a result, assessing contingencies is highly subjective and requires judgment about future events. During the periods presented, the Company has not recorded any accrual for loss contingencies associated with government regulations, claims or legal actions, determined that an unfavorable outcome is probable or reasonably possible, or determined that the amount or range of any possible loss is reasonably estimable. 22 Table of Contents