Mirum Pharmaceuticals, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (“SEC”) on March 15, 2024. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “Mirum,” “we,” “us” and “our” refer to Mirum Pharmaceuticals, Inc. and its consolidated subsidiaries. Forward-Looking Statements In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements . Overview We are a biopharmaceutical company dedicated to transforming the treatment of rare diseases affecting children and adults. We have three approved medicines: LIVMARLI® (maralixibat) oral solution (“Livmarli”), Cholbam® (cholic acid) capsules (“Cholbam”), and Chenodal® (chenodiol) tablets (“Chenodal” or “chenodiol”). Livmarli is a novel, orally administered, minimally-absorbed ileal bile acid transporter (“IBAT”) inhibitor (“IBATi”) that 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 progressive familial intrahepatic cholestasis (“PFIC”) in the U.S. and and for the treatment of PFIC in the European Union (“EU”). We market and commercialize Livmarli in the U.S. and certain countries in Europe through our specialized and focused commercial team. We have also entered into license and distribution agreements with several rare disease companies for the commercialization of Livmarli in additional countries. On August 31, 2023, we 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”) pursuant to an asset purchase agreement dated July 16, 2023 (such acquisition, the “Bile Acid Portfolio Acquisition”). The FDA approved Cholbam in March 2015, as the first FDA-approved treatment for pediatric and adult patients with bile acid synthesis disorders due to single enzyme defects, and for adjunctive treatment of patients with peroxisome biogenesis disorder-Zellweger spectrum disorder (“PBD-ZSD”) and Smith-Lemli-Opitz syndrome (“SLOS”). 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”). We commercialize Chenodal and Cholbam in the U.S. through our specialized and focused commercial team. We have also assumed several license and distribution agreements with several rare disease companies for the commercialization of Chenodal and Cholbam in additional countries. In October 2023, we reported positive topline data from our RESTORE clinical trial evaluating Chenodal in patients with CTX and we submitted a new drug application for chenodiol for the treatment of CTX to the FDA in June 2024. We are also advancing our product candidate, volixibat, a novel, oral, minimally-absorbed agent designed to inhibit IBAT, for the treatment of adult patients with cholestatic liver diseases. We are developing volixibat in the setting of primary sclerosing cholangitis (“PSC”) and primary biliary cholangitis (“PBC”). Volixibat has been studied in over 400 adults for up to 48 weeks. Clinical trials of volixibat have shown significant activity on IBAT and bile acid markers such as 7αC4, fecal bile acids and cholesterol, demonstrating potent biological activity. We conducted an interim analysis of our 23 Table of Contents VISTAS Phase 2b clinical trial in PSC and reported interim data from our VANTAGE Phase 2b clinical trial in PBC in June 2024. Interim results from the study demonstrated a statistically significant (-3.82, p < 0.0001; change from baseline) improvement in pruritus for volixibat and a placebo-adjusted difference of -2.32 points in the primary endpoint (p=0.0026), as measured by the trial’s zero to ten numerical rating scale identified as the Adult ItchRO scale. In addition, 75% of patients on volixibat achieved a greater than 50% reduction in serum bile acids, and there was an improvement in fatigue at week 16 with volixibat compared to placebo. No new safety signals were observed, and adverse events were similar between the 20 mg and 80 mg treatment groups. The most common adverse event was diarrhea (77%) with all cases mild to moderate; one case resulted in discontinuation. Four patients experienced serious adverse events, including one in the placebo arm. There were no clinically meaningful changes in liver biomarkers. A volixibat dose of 20 mg twice daily was selected for part 2 of the study. The interim analysis for the VISTAS Phase 2b clinical trial in PSC was conducted and the independent data review committee recommended the study continue with a selected volixibat dose of 20 mg twice daily, with no changes to the study. The criteria for continuation included safety as well as a predefined threshold for efficacy. We and the investigators remain blinded to the PSC interim results and analyses. We were incorporated in May 2018 and commenced operations in November 2018. To date, we have focused primarily on acquiring and in-licensing our product candidates, organizing and staffing our company, business planning, raising capital, advancing our product candidates through clinical development, preparing for commercialization of our product candidates, commercializing Livmarli, and conducting business development activities relating to, among other things, portfolio expansion through collaborations and acquisitions. We have not generated operating income to date. We expect to incur significant operating losses for the foreseeable future. Since inception, we have funded our operations primarily through debt, equity, revenue interest financings and cash from our product sales, net and collaboration revenue. Financial Overview Our net loss was $24.6 million and $74.0 million for the three months ended June 30, 2024 and 2023, respectively, and $49.9 million and $104.2 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $606.2 million, compared to $556.2 million as of December 31, 2023. As of June 30, 2024, we had unrestricted cash, cash equivalents and investments of $295.4 million, compared to cash and cash equivalents of $286.3 million as of December 31, 2023. We anticipate we will continue to generate net losses for the foreseeable future as we continue commercial activities for our approved medicines, conduct our ongoing and planned clinical trials, seek regulatory approvals for our product candidates and make potential milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. We expect total product sales of our approved medicines will continue to increase on an annual basis. We have entered into license and collaboration arrangements with other companies whereby we are entitled to receive upfront and license fees, development and sales-based milestones, and tiered royalties based on sales of commercialized products. In select countries, we have entered into distribution agreements for the sale of our approved medicines and such distributors may have fluctuating purchase levels. As a result, our net losses may fluctuate significantly from quarter-to-quarter and year-to-year. We expect to satisfy future cash needs through existing capital balances, revenue from our approved medicines and through a combination of equity offerings, debt financings or other capital sources, collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate the development of one or more of our product candidates or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves. Asset Purchase Agreement with Travere Therapeutics, Inc. On August 31, 2023, we completed the Bile Acid Portfolio Acquisition. We 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. We concurrently entered into a transitional services agreement with Travere, pursuant to which Travere is obligated to perform certain services for a period of time with respect to our use and operation of the Bile Acid Medicines. This agreement has since expired according to its terms. In connection with and immediately prior to the closing of the Bile Acid Portfolio Acquisition, we completed the private placement of 8,000,000 shares of our common stock at a price per share of $26.25, resulting in net proceeds of 24 Table of Contents approximately $202.2 million, which we used to finance the upfront payment at the closing of the Bile Acid Portfolio Acquisition. Assignment and License Agreement with Shire (Takeda) In November 2018, we entered into the Shire License Agreement with Shire, which was subsequently acquired by Takeda, in which we were granted an exclusive, royalty bearing worldwide license to develop and commercialize our two product candidates, Livmarli and volixibat. As part of the Shire License Agreement, we were assigned license agreements held by Shire with Satiogen Pharmaceuticals, Inc. (“Satiogen”), Pfizer, and Sanofi (collectively, “Assigned License Agreements”). Under the Shire License Agreement and Assigned License Agreements, to date, we have accrued or paid aggregate development, regulatory and sales milestones of $91.0 million related to our Livmarli and volixibat programs. Components of Results of Operations Revenue Product Sales, Net We have three approved medicines: Livmarli, Cholbam and Chenodal. We expect total product sales of our approved medicines will continue to increase on an annual basis. Our U.S. revenue from product sales, net further depends on our prescription mix of commercial payors, Medicaid and free medicines under our patient assistance program. We expect our prescription mix and resulting gross to net adjustment in the U.S. to remain consistent. Our rest of world revenue from product sales, net primarily depends on our contractual obligations with our distributors and results of pricing negotiations with governmental authorities in certain European countries where we launch Livmarli and expect to launch our other product candidates, if approved. In addition, in certain countries, governments place large periodic orders. The timing of these orders can be inconsistent and can create quarter-to-quarter variation in revenue. License and Other Revenue Under the exclusive licensing agreements with CANbridge and GC Biopharma, we have recognized as revenue the upfront nonrefundable payments related to the licenses granted upon satisfaction of certain performance obligations. Pursuant to the agreements, we are eligible to receive future milestone payments. These milestone payments are fully constrained and will be recognized in revenue in the period when it is probable that a significant reversal of cumulative revenue recognized for the contract would not occur. We are also eligible to receive royalty payments related to the agreements, which will be recognized as the underlying product sales occur. Our license revenue is dependent upon our licensees’ achievement of future milestones, which are not within our control, and we are unable to reliably estimate the timing of such revenues. Cost of Sales Cost of sales consist of raw materials, third-party manufacturing costs, personnel, facility and other costs of manufacturing commercial products, transportation and freight, amortization of finite-lived intangible assets and royalty payments payable on net sales of our approved medicines under licensing agreements. Cost of sales may also include period costs related to certain manufacturing services and charges for inventory valuation reserves. As of the date of our acquisition of the Bile Acid Medicines from Travere, inventory acquired was valued at its fair value. As a result, our cost of sales exceeds the historical cost to manufacture the inventory and has a negative impact on our gross margin. We expect to sell the majority of acquired inventory that is recorded at fair value within the next year from the balance sheet date. In addition, in connection with the acquisition, we have firm commitments for the purchase of minimum order quantities for active pharmaceutical ingredients. We periodically evaluate these firm commitments to determine if these commitments are in excess of our needs. If any net loss is determined, we record a charge to cost of sales in the period identified. Operating Expenses Research and Development Expenses Research and development expenses primarily relate to clinical development and manufacturing activities of our product candidates. Our research and development expenses include, among other things: • salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions; 25 Table of Contents • external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials; • expenses related to drug formulation development and the production of clinical trial supplies, including fees paid to contract manufacturers; • licensing milestone payments related to development or regulatory events; • research and development funding for collaboration arrangements; • expenses related to non-clinical studies; • expenses related to compliance with drug development regulatory requirements; and • other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies. We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Upfront payments, research and development funding and milestone payments made to third parties in connection with licenses and research and development collaborations are expensed as incurred. Our research and development expense may increase in the future as we continue to develop our current product candidates and look to acquire and develop additional product candidates. Selling, General and Administrative Expense Sales and marketing expense, which is a component of selling, general and administrative expense, primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. General and administrative expense, which is a component of selling, general and administrative expense, primarily consists of corporate support and other administrative expenses, including employee-related expenses. We anticipate that our selling, general and administrative expenses will increase in the future to support our continued commercialization efforts of our approved medicines in the U. S. and internationally as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include increased costs related to hiring of additional personnel and fees to outside consultants to support further marketing, legal, tax, planning and accounting activities. Loss from termination of revenue interest purchase agreement Loss from termination of revenue interest purchase agreement is related to the repurchase and termination of the RIPA in the second quarter of 2023. The repurchase payment included a premium over the remaining revenue interest liability and resulted in the recognition of a loss from termination of the RIPA in our condensed consolidated statements of operations and comprehensive loss. Interest Income Interest income consists of interest earned on our cash equivalents and investments. Interest Expense We incur interest expense on our convertible notes and incurred interest expense on the RIPA. Interest on our convertible notes consists of a 4% per annum fixed rate of interest and amortization of debt discount and amortization costs. Interest on the RIPA consisted primarily of costs associated with our liability and non-cash interest costs associated with the amortization of the related debt discount and deferred issuance costs. Prior to extinguishment of the RIPA in the second quarter of 2023, we imputed interest expense associated with this liability using the effective interest rate method which is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. Other Expense, Net Other expense, net consists of gain or loss from remeasurement of the liabilities associated with the common stock contingently issuable in connection with the acquisition of Satiogen and unrealized and realized currency gains and losses on net assets and liabilities denominated in foreign currency. 26 Table of Contents Critical Accounting Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience, known trends and events, and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions. There have been no significant changes during the three and six months ended June 30, 2024 in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report. Recent Accounting Pronouncements A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Results of Operations for the Three Months Ended June 30, 2024 and 2023 The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023 (in thousands): Three Months Ended June 30, Change 2024 2023 Revenue: Product sales, net $ 77,760 $ 32,497 $ 45,263 License and other revenue 115 5,000 (4,885) Total revenue 77,875 37,497 40,378 Operating expenses: Cost of sales 20,227 6,812 13,415 Research and development 32,672 22,009 10,663 Selling, general and administrative 49,208 32,949 16,259 Total operating expenses 102,107 61,770 40,337 Loss from operations (24,232) (24,273) 41 Other income (expense): Interest income 3,486 3,627 (141) Interest expense (3,569) (3,726) 157 Loss from termination of revenue interest purchase agreement — (49,076) 49,076 Other income (expense), net 312 (274) 586 Net loss before provision for income taxes (24,003) (73,722) 49,719 Provision for income taxes 635 316 319 Net loss $ (24,638) $ (74,038) $ 49,400 Product Sales, Net Product sales, net was $77.8 million for the three months ended June 30, 2024, compared to $32.5 million for the three months ended June 30, 2023. The increase in product sales, net was a result of sales of the Bile Acid Medicines following the completion of the Bile Acid Portfolio Acquisition in August 2023 and our continued commercialization of Livmarli in the U.S. and in certain international markets directly or through partner market supply orders. 27 Table of Contents The following table disaggregates total Product sales, net: Three Months Ended June 30, 2024 2023 Change Product sales, net: Livmarli $ 47,231 $ 32,497 $ 14,734 Bile Acid Medicines 30,529 — 30,529 Total product sales, net $ 77,760 $ 32,497 $ 45,263 License and Other Revenue License and other revenue was $0.1 million for the three months ended June 30, 2024, compared to $5.0 million for the three months ended June 30, 2023. The decrease in license and other revenue was primarily due to the achievement of a regulatory milestone by CANbridge Pharmaceuticals, Inc. (“CANbridge”) associated with our license agreement in 2023. Cost of Sales For the three months ended June 30, 2024, cost of sales was $20.2 million, compared to $6.8 million for the three months ended June 30, 2023. The increase in cost of sales was primarily a result of increased royalty expense of $4.6 million on net sales of Livmarli and the Bile Acid Medicines under licensing agreements, $4.3 million of amortization of acquired intangibles primarily associated with our acquisition of the Bile Acid Medicines in August 2023, increased product cost of sales of $3.1 million related to the Bile Acid Medicines and to a lesser extent for Livmarli, increased excess inventory reserves of $0.7 million and other period costs of $0.7 million associated with increased commercial supply chain expenses and other general expenses. Research and Development Expenses The following table summarizes the period-over-period changes in research and development expenses relating to our product candidates in development for the periods indicated (in thousands): Three Months Ended June 30, Change 2024 2023 Product-specific costs: Livmarli $ 7,575 $ 5,639 $ 1,936 Volixibat 7,842 4,633 3,209 Non product-specific costs: Stock-based compensation 3,546 2,671 875 Personnel 8,460 6,894 1,566 Other 5,249 2,172 3,077 Total research and development expenses $ 32,672 $ 22,009 $ 10,663 Research and development expenses were $32.7 million for the three months ended June 30, 2024, an increase of $10.7 million compared to the three months ended June 30, 2023. The increase was primarily due to: • for Livmarli programs, an increase of $1.9 million, primarily due lower clinical expense reimbursement from our collaboration partners and increased expenses associated with a label expansion study; • for volixibat programs, an increase of $3.2 million, primarily due to increased expenses associated with conduct of the PSC and PBC trials; • for stock-based compensation, an increase of $0.9 million associated with incremental employee equity awards; • for personnel related expenses, an increase of $1.6 million related to increased employee headcount to support our development pipeline; and • for other expense, an increase of $3.1 million, primarily due to other general research and development activities. 28 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses were $49.2 million for the three months ended June 30, 2024, an increase of $16.3 million compared to the three months ended June 30, 2023. The increase was primarily due to an increase of $7.1 million in personnel and other compensation-related expenses, including an increase of $2.3 million in stock-based compensation, reflecting an increase in the number of our selling, marketing and administrative employees to support commercial activities for our approved medicines, an increase of $5.5 million in advertising, promotion and medical affairs expenses associated with commercial activities for our approved medicines, an increase of $3.2 million in expenses primarily related to accounting, legal, compliance, public relations and international expansion activities., and an increase of $0.5 million in other general administrative expenses. Loss from termination of revenue interest purchase agreement Loss from termination of RIPA was zero for the three months ended June 30, 2024, compared to $49.1 million for the three months ended June 30, 2023. The 2023 loss was related to the premium paid to repurchase the revenue interests pursuant to the RIPA. Interest Income Interest income was $3.5 million for the three months ended June 30, 2024, a decrease of $0.1 million compared to the three months ended June 30, 2023. Interest Expense Interest expense was $3.6 million for the three months ended June 30, 2024, a decrease of $0.2 million compared to the three months ended June 30, 2023. For the three months ended June 30, 2024, interest expense consisted of $3.6 million related to our convertible notes. For the three months ended June 30, 2023, interest expense consisted of $2.9 million related to our convertible notes issued during the period and $0.8 million related to the RIPA prior to extinguishment. Other Income (Expense), Net Other income (expense), net was income of $0.3 million for the three months ended June 30, 2024, compared to expense of $0.3 million for the three months ended June 30, 2023. The income for the three months ended June 30, 2024 was primarily attributable to unrealized currency gains on net assets and liabilities denominated in foreign currency. The expense for the three months ended June 30, 2023 primarily related to fair value remeasurement of liabilities associated with our acquisition of Satiogen and realized currency gains and losses on net assets and liabilities denominated in foreign currency. 29 Table of Contents Results of Operations for the Six Months Ended June 30, 2024 and 2023 The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in thousands): Six Months Ended June 30, Change 2024 2023 Revenue: Product sales, net $ 146,677 $ 61,595 $ 85,082 License and other revenue 420 7,500 (7,080) Total revenue 147,097 69,095 78,002 Operating expenses: Cost of sales 38,057 11,791 26,266 Research and development 64,894 45,557 19,337 Selling, general and administrative 94,846 63,168 31,678 Total operating expenses 197,797 120,516 77,281 Loss from operations (50,700) (51,421) 721 Other income (expense): Interest income 7,119 5,899 1,220 Interest expense (7,146) (7,968) 822 Loss from termination of revenue interest purchase agreement — (49,076) 49,076 Other income (expense), net 2,069 (1,085) 3,154 Net loss before provision for income taxes (48,658) (103,651) 54,993 Provision for income taxes 1,259 517 742 Net loss $ (49,917) $ (104,168) $ 54,251 Product Sales, Net Product sales, net was $146.7 million for the six months ended June 30, 2024, compared to $61.6 million for the six months ended June 30, 2023. The increase in product sales, net was a result of sales of the Bile Acid Medicines following the completion of the Bile Acid Portfolio Acquisition in August 2023 and our continued commercialization of Livmarli in the U.S. and in certain international markets directly or through partner market supply orders. The following table disaggregates total Product sales, net: Six Months Ended June 30, 2024 2023 Change Product sales, net: Livmarli $ 90,076 $ 61,595 $ 28,481 Bile Acid Medicines 56,601 — 56,601 Total product sales, net $ 146,677 $ 61,595 $ 85,082 License and Other Revenue License and other revenue was $0.4 million for the six months ended June 30, 2024, compared to $7.5 million for the six months ended June 30, 2023. The decrease in license and other revenue was primarily due to the achievement of regulatory milestones by CANbridge and GC Biopharma associated with our license agreements in 2023. Cost of Sales For the six months ended June 30, 2024, cost of sales was $38.1 million, compared to $11.8 million for the six months ended June 30, 2023. The increase in cost of sales was primarily a result of increased royalty expense of $8.6 million on net sales of Livmarli and the Bile Acid Medicines under licensing agreements, $8.5 million of amortization of acquired intangibles primarily associated with our acquisition of the Bile Acid Medicines in August 2023, increased product cost of sales of $6.0 million related to the Bile Acid Medicines and to a lesser extent for Livmarli, other period 30 Table of Contents costs of $2.1 million associated with increased commercial supply chain expenses and other general expenses and increased excess inventory reserves of $1.0 million. Research and Development Expenses The following table summarizes the period-over-period changes in research and development expenses relating to our product candidates in development for the periods indicated (in thousands): Six Months Ended June 30, Change 2024 2023 Product-specific costs: Livmarli $ 14,020 $ 12,878 $ 1,142 Volixibat 14,870 9,480 5,390 Non product-specific costs: Stock-based compensation 7,407 5,387 2,020 Personnel 17,614 13,198 4,416 Other 10,983 4,614 6,369 Total research and development expenses $ 64,894 $ 45,557 $ 19,337 Research and development expenses were $64.9 million for the six months ended June 30, 2024, an increase of $19.3 million compared to the six months ended June 30, 2023. The increase was primarily due to: • for Livmarli programs, an increase of $1.1 million, primarily due to lower clinical expense reimbursement from our collaboration partners and increased expenses associated a label expansion study; • for volixibat programs, an increase of $5.4 million, primarily due to increased expenses associated with conduct of the PSC and PBC trials of $6.2 million, partially offset by lower expenses of $0.6 million related to discontinuation of the intrahepatic cholestasis of pregnancy clinical trial; • for stock-based compensation, an increase of $2.0 million associated with incremental employee equity awards; • for personnel related expenses, an increase of $4.4 million related to increased employee headcount to support our development pipeline; and • for other expense, an increase of $6.4 million, primarily due to other general research and development activities. Selling, General and Administrative Expenses Selling, general and administrative expenses were $94.8 million for the six months ended June 30, 2024, an increase of $31.7 million compared to the six months ended June 30, 2023. The increase was primarily due to an increase of $13.0 million in personnel and other compensation related expenses, including an increase of $4.0 million in stock-based compensation, reflecting an increase in the number of our selling, marketing and administrative employees to support commercial activities for our approved medicines, an increase of $9.7 million in advertising, promotion and medical affairs expenses associated with commercial activities for our approved medicines, an increase of $6.7 million in expenses primarily related to accounting, legal, compliance, public relations and international expansion activities and an increase of $2.2 million in other general administrative expenses. Loss from termination of revenue interest purchase agreement Loss from termination of RIPA was zero for the six months ended June 30, 2024, compared to $49.1 million for the six months ended June 30, 2023. The 2023 loss was related to the premium paid to repurchase the revenue interests pursuant to the RIPA. Interest Income Interest income was $7.1 million for the six months ended June 30, 2024, an increase of $1.2 million compared to the six months ended June 30, 2023. The increase was primarily due to higher interest earned on our cash equivalents and investment balances largely due to higher money market yields and higher invested balances. 31 Table of Contents Interest Expense Interest expense was $7.1 million for the six months ended June 30, 2024, a decrease of $0.8 million compared to the six months ended June 30, 2023. For the six months ended June 30, 2024, interest expense consisted of $7.1 million related to our convertible notes. For the six months ended June 30, 2023, interest expense consisted of $2.9 million related to our convertible notes issued during the period and $5.1 million related to the RIPA prior to extinguishment. Other Income (Expense), Net Other income (expense), net was income of $2.1 million for the six months ended June 30, 2024, compared to expense of $1.1 million for the six months ended June 30, 2023. The income for the six months ended June 30, 2024 was primarily attributable to unrealized currency gains on net assets and liabilities denominated in foreign currency. The expense for the six months ended June 30, 2023 primarily related to fair value remeasurement of liabilities associated with our acquisition of Satiogen. Liquidity and Capital Resources Overview Since inception, we have funded our operations primarily through debt, equity, revenue interest financings and, to a lesser extent, cash from our product sales and license and collaboration revenue. We had $295.4 million of unrestricted cash, cash equivalents and investments as of June 30, 2024, compared to cash and cash equivalents of $286.3 million as of December 31, 2023. Since inception, we have incurred operating losses and negative cash flows from operations. As of June 30, 2024, we had an accumulated deficit of $606.2 million, compared to $556.2 million as of December 31, 2023. On August 31, 2023, we completed the Bile Acid Portfolio Acquisition for an aggregate purchase price of up to $445.0 million in cash, with $210.4 million paid at the Closing and up to $235.0 million upon achievement of certain milestones based on specified amounts of annual net sales (tiered from $125.0 million to $500.0 million) of the Bile Acid Medicines. In connection with and immediately prior to the closing of the Bile Acid Portfolio Acquisition, we completed the private placement of 8,000,000 shares of our common stock at a price per share of $26.25, resulting in net proceeds of approximately $202.2 million, which we used to finance the upfront payment at the closing of the Bile Acid Portfolio Acquisition. On April 17, 2023, we completed an offering of $316.3 million aggregate principal of 4.00% Convertible Senior Notes due 2029 (the “Notes”), which includes the exercise of the initial purchasers’ option in full. The offering resulted in net proceeds of $305.3 million after deducting the initial purchasers’ discounts and commissions and offering expenses. The terms of the convertible Notes are further described in Note 10 to our unaudited condensed consolidated financial statements. We used a portion of the net proceeds to repurchase the revenue interests from the Purchasers at a call price of $192.7 million. Upon repurchase of the revenue interests from the Purchasers, the RIPA, in accordance with its terms, was terminated with no further payments due to the Purchasers and the $100.0 million of our previously restricted cash equivalents was no longer restricted from use. In September 2022, we 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 we registered for sale from time to time in one or more offerings an unlimited amount of any combination of our common stock, preferred stock, debt securities and warrants, so long as we continue 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, we have not issued any securities pursuant to the 2022 Shelf Registration. On November 2, 2023, we entered into a Sales Agreement (the “2023 Sales Agreement”) with Leerink and Cantor Fitzgerald & Co. (the “Sales Agents”), pursuant to which we may, from time to time, sell up to an aggregate amount of $200.0 million of our common stock through the Sales Agents in an “at-the-market” offering (the “ATM Offering”) pursuant to the 2022 Shelf Registration. We are not required to sell shares under the 2023 Sales Agreement. Sales of our 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. We 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 it pursuant to the 2023 Sales Agreement. As of June 30, 2024, we have not issued any securities pursuant to the 2023 Sales Agreement. In August 2020, the SEC declared effective the 2020 Shelf Registration covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into the 2020 Sales Agreement with Leerink pursuant to which we could issue and sell, in an at the market offering, 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 32 Table of Contents 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. Based on our current and anticipated level of operations and cash generated from sales of our approved medicines, we believe our existing unrestricted cash, cash equivalents and investments will be sufficient to fund current operations through at least the next 12 months from the filing of this Quarterly Report on Form 10-Q and beyond. We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, continue commercialization activities for our approved medicines and potentially expand into additional markets, hire additional staff, including clinical, scientific, operational, financial and management personnel and pay potential development and commercial and sales based milestones. Our primary use of cash is to fund operating expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Although Livmarli has been approved for the treatment of cholestatic pruritus in patients with ALGS in the U.S. and various other countries around the world and for cholestatic pruritus in patients with PFIC in the U.S. and PFIC in the EU and we expect product revenues to increase as we continue commercial activities, Livmarli may not achieve commercial success. Certain of our approved medicines, including the Bile Acid Medicines, are subject to immediate competition from compounded and generic entrants, as the ANDA and NDA for these drug products have no remaining or current patent or non-patent exclusivity. In addition, Chenodal is approved for radiolucent stones in the gallbladder yet is used primarily as standard of care for CTX. The FDA has provided a letter acknowledging Chenodal as a medical necessity for CTX, but prescriptions for this indication are not on label. As such, any change in this view from the FDA could adversely affect our ability to sell Chenodal in this indication. Unless and until Chenodal is approved for CTX, we cannot market or promote Chenodal for CTX which limits its growth potential. Our principal source of liquidity is product revenue from sales of approved medicines, and, to a lesser extent, from our license and collaboration agreements. Until such time, if ever, as we can generate sufficient product revenue from sales of our approved medicines, our current product candidates or any future product candidates, if approved, to fund operations, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license or development agreements. Our primary cash needs are for day-to-day operations and to fund our working capital requirements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. Additionally, if the equity and credit markets deteriorate from adverse geopolitical and macroeconomic developments or otherwise, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Material Cash Requirements In addition to ongoing capital needs to fund our ongoing operations, our material cash requirements include the following contractual and other obligations. In April 2023, we completed an offering of $316.3 million aggregate principal of the Notes, which includes the exercise of the initial purchasers’ option in full. The offering resulted in net proceeds of $305.3 million after deducting the initial purchasers’ discounts and commissions and offering expenses. The Notes are our senior, unsecured obligations and accrue interest at a rate of 4.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year. The Notes will mature on May 1, 2029, unless earlier converted, redeemed or repurchased by us. The terms of these Notes are further described in Note 10 to our unaudited condensed consolidated financial statements. We used a portion of the net proceeds from the Notes to repurchase the revenue interests from the Purchasers at a call price of $192.7 million. Upon repurchase of the revenue interests from the Purchasers, the RIPA, in accordance with its terms, was terminated with no further payments due to the Purchasers. 33 Table of Contents Under the Shire License Agreement and the Asset Purchase Agreement with Travere, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. The amount and timing of milestone obligations are unknown or uncertain as we are unable to estimate the timing or likelihood of achieving the milestone events. Additionally, the amount of royalty payments are based upon future product sales, which we are unable to predict with certainty. These potential obligations are further described in Note 7 to our unaudited condensed consolidated financial statements. We additionally have contractual obligations for our operating leases for our corporate headquarters. These obligations are further described in Note 9 to our unaudited condensed consolidated financial statements. We are party to certain license and collaboration agreements, which contain a number of contractual obligations. Those contractual obligations may entitle us to receive, or may obligate us to make, certain payments. The amount and timing of those payments are unknown or uncertain as we are unable to estimate the timing or likelihood of the events that will obligate those payments. We enter into contracts in the normal course of business with clinical research organizations and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancellable contracts. We enter into commercial inventory supply agreements that obligate us to firm commitments for the purchase of minimum order quantities, which may be material to our financial statements. Cash Flows The following table provides a summary of the net cash flow activity for the periods indicated (in thousands): Six Months Ended June 30, 2024 2023 Net cash provided by (used in) operating activities $ 11,409 $ (36,105) Net cash (used in) provided by investing activities (72,730) 77,562 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 Net Cash Provided by (Used in) Operating Activities Net cash provided by operating activities was $11.4 million for the six months ended June 30, 2024, reflecting our net loss of $49.9 million partially offset by non-cash adjustments of $40.4 million. Non-cash adjustments consisted primarily of $23.3 million of stock-based compensation, $11.5 million of depreciation and amortization of our intangible assets and fixed assets, $4.6 million related to the cost of sale of inventory acquired in the Bile Acid Portfolio Acquisition and a $1.7 million charge associated with excess and obsolete inventory and firm commitment losses, offset by $2.1 million of unrealized foreign exchange gains. Additionally, cash provided by operating activities reflected changes in net operating assets of $20.9 million, consisting primarily of a $7.5 million decrease in accounts receivable due to timing of payments received related to sales of our approved medicines, a $18.2 million increase in accounts payable, accrued expenses and other liabilities resulting primarily from a $13.6 million increase in accrued sales deductions due to our product sales in the six months ended June 30, 2024, a $2.3 million decrease in prepaid and other current assets and payments made for the purchase of inventory amounting to $6.6 million. Net cash used in operating activities was $36.1 million for the six months ended June 30, 2023, reflecting our net loss of $104.2 million partially offset by non-cash items of $74.2 million. Non-cash items consisted primarily of $16.9 million of stock-based compensation, $5.1 million of effective interest expense in connection with the RIPA, $2.7 million of depreciation and amortization of our intangible assets and fixed assets, $0.8 million net accretion of discounts on our investments and $0.5 million expense related to the change in fair value of liabilities arising from our acquisition of Satiogen having to do with certain purchase price adjustments and indemnification obligations and common stock to be issued as contingent consideration upon achievement of a certain milestone. Additionally, cash used in operating activities reflected changes in net operating assets of $6.1 million, consisting primarily of a $8.0 million decrease in accounts payable, accrued expenses and other liabilities, a $11.3 million increase in accounts receivable related to sales of Livmarli, 34 Table of Contents a $1.8 million increase in inventory, a $0.2 million decrease in other assets and a $0.4 million decrease in operating lease liability. Net Cash (Used in) Provided by Investing Activities Net cash used in investing activities was $72.7 million for the six months ended June 30, 2024, primarily due to $61.9 million used in purchases of investments and $10.0 million for a milestone payment 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. Net cash provided by investing activities was $77.6 million for the six months ended June 30, 2023, primarily due to proceeds of $120.0 million from maturities of investments, partially offset by $27.3 million used in purchases of investments and $15.0 million for a milestone payment 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. Net Cash Provided by Financing Activities Net cash provided by financing activities was $8.5 million for the six months ended June 30, 2024, due to proceeds from employee equity award exercises. Net cash provided by financing activities was $127.7 million for the six months ended June 30, 2023, primarily due to net proceeds of $305.3 million from the issuance of convertible notes, net proceeds of $14.5 million from the issuance and sale of common stock under the Sales Agreement with Leerink, pursuant to which we issued and sold an aggregate of 658,206 shares of common stock at a weighted-average price of $22.79 per share, and proceeds of $3.5 million from employee equity award exercises, partially offset by $195.6 million of revenue interest payments made under the RIPA.