What changed in this filing

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Item 1. Financial Statements

2020-07-30 compared with 2020-05-07 · 166 added, 108 removed, 397 unchanged (41% of the section changed)

6 unchanged sentences

Short-term investments

Receivable related to Daiichi Sankyo license agreement

Receivable related to Daiichi Sankyo license agreements

Accounts receivable, net

20 unchanged sentences

Preferred stock — 25,000,000 shares authorized;

nil outstanding as of March 31, 2020 and

nil outstanding as of June 30, 2020 and

December 31, 2019

1 unchanged sentence

60,413,756 and 57,838,220 shares issued

and outstanding as of March 31, 2020 and December 31, 2019, respectively

and outstanding as of June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Accumulated deficit

5 unchanged sentences

(In thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Collaboration and license

10 unchanged sentences

Change in fair value of investment in Arcturus equity securities

Non-cash interest expense on liability related to the sale of future royalties

Other expense

Loss before income taxes

Non-cash interest expense on liability related to the sale of future

Other income (expense)

Income (loss) before income taxes

Provision for income taxes

Net loss per share, basic and diluted

Shares used in computing net loss per share, basic and diluted

Net income (loss)

Net income (loss) per share:

Weighted-average shares used in computing net income (loss)

See accompanying notes.

ULTRAGENYX PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended March 31,

Other comprehensive income (loss):

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Other comprehensive income:

Foreign currency translation adjustments

Unrealized gain (loss) on available-for-sale securities

Other comprehensive income (loss)

Total comprehensive loss

Unrealized gain on available-for-sale securities

Other comprehensive income

Total comprehensive income (loss)

See accompanying notes.

5 unchanged sentences

Income (Loss)

Balance as of March 31, 2020

Issuance of common stock in connection with

at-the-market offering, net of issuance costs

Employee stock-based compensation

Issuance of common stock under equity

plan awards, net of tax

Other comprehensive income

Balance as of June 30, 2020

Comprehensive

Stockholders'

Income (Loss)

Balance as of December 31, 2019

Issuance of common stock in connection

with license agreement, net of issuance

Issuance of common stock in connection with

license agreement, net of issuance costs

at-the-market offering, net of issuance costs

Employee stock-based compensation

Issuance of common stock under exercise of

warrants and equity plan awards, net of tax

Other comprehensive loss

Issuance of common stock upon exercise of

warrants and under equity plan awards, net

Other comprehensive income

Balance as of June 30, 2020

Comprehensive

Stockholders'

Income (Loss)

Balance as of March 31, 2019

Issuance of common stock in connection with

at-the-market offering, net of issuance costs

Employee stock-based compensation

Issuance of common stock under equity plan

awards, net of tax

Other comprehensive income

Balance as of June 30, 2019

ULTRAGENYX PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

Comprehensive

11 unchanged sentences

Other comprehensive income

Balance as of March 31, 2019

Balance as of June 30, 2019

See accompanying notes.

2 unchanged sentences

(In thousands)

Three Months Ended March 30,

Six Months Ended June 30,

Operating activities:

3 unchanged sentences

Depreciation and amortization

Foreign currency remeasurement loss

Foreign currency remeasurement (gain) loss

Change in fair value of investment in Arcturus equity securities

13 unchanged sentences

Purchase of investments

Purchase of investment in Arcturus equity securities

Proceeds from the sale of investments

22 unchanged sentences

The Company is focused on the identification, acquisition, development, and commercialization of novel products for the treatment of serious rare and ultra-rare genetic diseases.

The Company has two approved therapies.

The Company has four approved therapies.

Crysvita ® (burosumab) is approved in the United States by the U.S.

1 unchanged sentence

In Brazil, Crysvita is approved for treatment of XLH in adult and pediatric patients one year of age and older.

Crysvita was approved by the FDA on June 18, 2020 for the treatment of FGF23-related hypophosphatemia in tumor-induced osteomalacia (TIO), associated with phosphaturic mesenchymal tumors that cannot be curatively resected or localized in adults and pediatric patients 2 years of age and older.

The Company has also received FDA approval for Mepsevii™ (vestronidase alfa), the first medicine approved for the treatment of children and adults with mucopolysaccharidosis VII (MPS VII), also known as Sly syndrome.

1 unchanged sentence

In Brazil, Mepsevii is approved for the treatment of MPS VII for patients of all ages.

In addition to the approved treatments for XLH and MPS VII, the Company has four ongoing clinical development programs.

Crysvita is being studied for the treatment of tumor induced osteomalacia (TIO), a rare disease that impairs bone mineralization.

UX007 is being studied in patients severely affected by long-chain fatty acid oxidation disorders (LC-FAOD), a genetic disorder in which the body is unable to convert long chain fatty acids into energy.

The Company has two gene therapy pipeline candidates:

Dojolvi, formerly known as UX007, was approved by FDA on June 30, 2020 for the treatment of pediatric and adult patients severely affected by long-chain fatty acid oxidation disorders (LC-FAOD).

In addition to the approved treatments, the Company has two ongoing clinical development programs.

DTX301 is an adeno-associated virus 8 (AAV8) gene therapy product candidate in development for the treatment of patients with ornithine transcarbamylase (OTC) deficiency, the most common urea cycle disorder;

4 unchanged sentences

Management recognizes that we will likely need to raise additional capital to fully implement its business plans.

Through March 31, 2020, the Company has relied primarily on the proceeds from equity offerings and its sale of future royalties to finance its operations.

Through June 30, 2020, the Company has relied primarily on the proceeds from equity offerings and its sale of future royalties to finance its operations.

The Company will likely raise additional capital through the issuance of equity, borrowings, or strategic alliances with partner companies.

8 unchanged sentences

These financial statements should be read in conjunction with the audited financial statements and notes thereto for the preceding fiscal year contained in the Company’s Annual Report on Form 10-K filed on February 14, 2020 with the United States Securities and Exchange Commission (SEC).

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

The Condensed Consolidated Balance Sheet as of December 31, 2019 has been derived from audited financial statements at that date, but does not include all of the information required by GAAP for complete financial statements.

25 unchanged sentences

The Company considered the current and expected future economic and market conditions surrounding the novel coronavirus (COVID-19) pandemic and determined that the estimate of credit losses was not significantly impacted.

The adoption of ASU 2016-13 did not have a material impact on the Condensed Consolidated Financial Statements and related disclosures and there was no allowance for losses on available-for-sale debt securities which were attributable to credit risk for the three months ended March 31, 2020.

Revenue Recognition

29 unchanged sentences

Non-cash collaboration royalty revenue

Effective January 1, 2020, the Company sold the right to receive certain royalty payments arising from the net sales of Crysvita to RPI Finance Trust (RPI), an affiliate of Royalty Pharma, as further described in Note 7.

The Company will continue to record the royalty revenue rising from the net sales of Crysvita in the applicable European territories as non-cash royalty revenue in the Consolidated Statements of Operations over the term of the arrangement.

Effective January 1, 2020, the Company sold the right to receive certain royalty payments from net sales of Crysvita to RPI Finance Trust (RPI), an affiliate of Royalty Pharma, as further described in Note 7.

The Company records the royalty revenue from the net sales of Crysvita in the applicable European territories on a prospective basis as non-cash royalty revenue in the Consolidated Statements of Operations over the term of the arrangement.

Financial Instruments

8 unchanged sentences

The following tables set forth the fair value of the Company’s financial assets remeasured on a recurring basis based on the three-tier fair value hierarchy (in thousands):

March 31, 2020

June 30, 2020

Money market funds

4 unchanged sentences

Government Treasury and agency securities

Investment in Arcturus equity securities

Investment in Arcturus equity security

December 31, 2019

8 unchanged sentences

The Company determined the fair value of the Arcturus Therapeutics Holdings Inc.

(Arcturus) common stock by using the quoted market price on March 31, 2020, which is a Level 1 fair value measurement.

The change in fair value of the Arcturus common stock for the three months ended March 31, 2020 and 2019 was $ 6.5 million and none , respectively, which was recognized in the Condensed Consolidated Statements of Operations.

(Arcturus) common stock by using the quoted market price on June 30, 2020, which is a Level 1 fair value measurement.

T he fair value of the option to purchase additional shares of Arcturus common stock was based on unobservable inputs that are significant to the measurement of the fair value of the asset and is supported by little or no market data;

accordingly, the fair value of the option is considered a Level 3 financial asset.

The Company measures the Level 3 financial asset by applying the Black-Scholes option pricing method and utilizes the following inputs:

The Company measured the fair value of the option by applying the Black-Scholes option pricing method and utilizing the following inputs:

stock price, strike price, volatility, risk-free interest rate, and expected term.

The expected term is the Company’s estimated period to purchase additional stock.

The change in fair value of the option to purchase additional Arcturus common stock for the three months ended March 31, 2020 and 2019 was $ 1.1 million and none , respectively, which was recognized in the Condensed Consolidated Statements of Operations.

License and Research Agreements” for additional details on the Arcturus transaction.

The expected term was the Company’s estimated period to purchase additional stock.

In May 2020, the Company exercised its option to purchase additional shares of Arcturus common stock.

See Note 6 for additional details on the Arcturus transaction.

Balance Sheet Components

Cash Equivalents and Investments

The fair values of cash equivalents and short-term investments classified as available-for-sale securities consisted of the following (in thousands):

March 31, 2020

The fair values of cash equivalents and investments classified as available-for-sale securities consisted of the following (in thousands):

June 30, 2020

Gross Unrealized

14 unchanged sentences

Government Treasury and agency securities

At March 31, 2020, the remaining contractual maturities of available-for-sale securities were less than two years .

There have been no realized gains or losses on available-for-sale securities for the three months ended March 31, 2020 and 2019, respectively.

All marketable securities with unrealized losses at March 31, 2020 have been in a loss position for less than twelve months.

At June 30, 2020, the remaining contractual maturities of available-for-sale securities were less than two years .

There have been no realized gains or losses on available-for-sale securities for the three and six months ended June 30, 2020 and 2019.

All marketable securities with unrealized losses at June 30, 2020 have been in a loss position for less than twelve months.

Based on the Company’s application of its expected loss allowance methodology, it is probable that the principal and interest will be collected in accordance with the contractual terms, and that the unrealized loss on these securities were not attributable to credit risk.

8 unchanged sentences

Total accrued liabilities

The following table disaggregates total revenues from external customers (in thousands):

Three Months Ended March 31,

The following table disaggregates total revenues from customers (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Collaboration and license revenue:

Crysvita collaboration revenue in profit-share

Crysvita collaboration revenue in profit-

share territory

Royalty revenue in European territory

Daiichi Sankyo

Total collaboration and license revenue

4 unchanged sentences

The following table disaggregates total revenues based on geographic location (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

United States

1 unchanged sentence

The following table presents changes in the contract assets (liabilities) (in thousands):

Three Months Ended March 30,

Six Months Ended June 30,

Balance of contract assets (liabilities) at beginning of period

Balance of contract liabilities at end of period

The Company’s largest accounts receivable balance accounted for 93 % and 87 % of the total accounts receivable balance as of March 31, 2020 and December 31, 2019, respectively, and was due from a collaboration partner.

See Note 6 for additional details on contract assets (liabilities) activities.

The Company’s largest accounts receivable balance accounted for 79 % and 87 % of the total accounts receivable balance as of June 30, 2020 and December 31, 2019, respectively, and was due from a collaboration partner.

License and Research Agreements

6 unchanged sentences

the Company is also the lead party for core development activities conducted in Japan and Korea, for which the core development plan is limited to clinical trials mutually agreed to by the Company and KKC.

The Company shares the costs for development activities in the profit-share territory and the European territory conducted pursuant to the development plan before the applicable transition date equally

KKC is responsible for 100 % of the costs for development activities in Japan and Korea.

14 unchanged sentences

Prior to the Company’s sale of the royalty, the Company received a royalty of up to 10 % on net sales in the European territory, which was recognized as the underlying sales occur.

Beginning in 2020, the Company is recording the royalty revenue as non-cash royalty revenues .

Beginning in 2020, the Company records the royalty revenue as non-cash royalty revenues.

During the three months ended June 30, 2020, there was a change in estimate of the revenue reserves related to sales made prior to January 1, 2020, as a result of which, the Company recorded $ 1.5 million as royalty revenue in European territory.

The Company’s share of collaboration and royalty revenue related to Crysvita was as follows (in thousands):

Three Months Ended March 31,

Company's share of revenue in profit share territory

Three Months Ended June 30,

Six Months Ended June 30,

Company's share of revenue in profit-

share territory

Royalty revenue in European territory

Non-cash royalty revenue in European territory

Non-cash royalty revenue in European

Product revenue related to sales in other territories

2 unchanged sentences

Accordingly, the Company records revenue on a gross basis related to the sale of Crysvita once the product is delivered and the risk and title of the product is transferred to the distributor.

For the three months ended March 31, 2020 and 2019, the Company recorded product sales of $ 1.6 million and $ 0.6 million, respectively, net of estimated product returns and other deductions.

The Company recorded product sales of $ 2.5 million and $ 4.2 million for the three and six months ended June 30, 2020, respectively, and $ 1.0 million and $ 1.6 million for the three and six months ended June 30, 2019, respectively, net of estimated product returns and other deductions.

KKC has the option to assume responsibility for commercialization efforts in Turkey from the Company, after a certain minimum period.

4 unchanged sentences

As a result, the Company was reimbursed for these costs and operating expenses were reduced as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

1 unchanged sentence

Collaboration receivable

The Company had accounts receivable from KKC in the amount of $ 27.4 million and $ 28.5 million from profit-share revenue and royalties and other receivables recorded in prepaid and other current assets of $ 17.0 million and $ 17.8 million and accrued

liabilities of $ 1.0 million and $ 0.9 million from commercial and development activity reimbursements, as of March 31, 2020 and December 31, 2019 , respectively.

The Company had accounts receivable from KKC in the amount of $ 11.8 million and $ 28.5 million from profit-share revenue and royalties and other receivables recorded in prepaid and other current assets of $ 8.2 million and $ 17.8 million and accrued liabilities of $ 1.3 million and $ 0.9 million from commercial and development activity reimbursements, as of June 30, 2020 and December 31, 2019, respectively.

Bayer HealthCare LLC

The Company has an agreement with Bayer Healthcare LLC (Bayer) to research, develop and commercialize AAV gene therapy products for treatment of hemophilia A (DTX 201).

The Company has an agreement with Bayer Healthcare LLC (Bayer) to research, develop and commercialize AAV gene therapy products for the treatment of hemophilia A (DTX 201).

Under this agreement, Bayer has been granted an exclusive license to develop and commercialize one or more novel gene therapies for hemophilia A.

1 unchanged sentence

Bayer will have worldwide rights to commercialize the potential future product.

Bayer is responsible to fund certain research and development services performed by the Company in the performance of its obligations under the annual research plan and budget.

Bayer is responsible for funding certain research and development services performed by the Company in the performance of its obligations under the annual research plan and budget.

Under the terms of the agreement with Bayer, the Company is eligible to receive development and commercialization milestone payments of up to $ 232.0 million, as well as, royalty payments ranging in the high single-digit to low double-digit percentages, not exceeding the mid-teens, of net sales of licensed products.

The Company achieved the first milestone in December 2017, the second milestone in April 2018, and has received $ 15.0 million for such milestones to date.

The Company’s obligations under the contract were completed by end of December 31, 2019 and as a result, no revenue was recorded for the three months ended March 31, 2020.

The Company will record future milestone payments as revenue, when it is probable that a significant reversal in the amount of revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved.

The Company’s obligations under the contract were completed by end of December 31, 2019 and as a result, no revenue was recorded for the three and six months ended June 30, 2020.

The Company recorded revenue of $ 0.1 million and $ 0.4 million for the three and six months ended June 30, 2019, respectively.

The Company may record future milestone payments as revenue, if it becomes probable that a significant reversal in the amount of revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved.

The Company has a Research Collaboration and License Agreement with Arcturus to research and develop therapies for select rare diseases.

Pursuant to the agreement, the Company incurred no ne and $ 0.2 million for the three months ended March 31, 2020 and 2019, respectively, in research and development expense for the funding of certain research services received from Arcturus.

The Company owns 2,400,000 shares of Arcturus’ common stock, or 18.2 % of Arcturus’ outstanding common stock as of the purchase date.

The Company also has an option to purchase an additional 600,000 shares of Arcturus’ common stock at $ 16.00 per share, which is exercisable until June 18, 2021, which is the two year anniversary of the agreement effective date.

The Arcturus common stock is also restricted for sale or transfer by the Company for two years from the purchase date, subject to certain conditions.

In the event the option to purchase an additional 600,000 shares of Arcturus common stock is exercised, the restriction is reduced to six months from the exercise date, subject to certain conditions.

Pursuant to the agreement, the Company incurred $ 0.4 million and $ 0.6 million for the three and six months ended June 30, 2019, respectively, in research and development expense for the funding of certain research services received from Arcturus.

No research and development expenses were recognized in 2020 related to the Arcturus agreement.

In May 2020, the Company exercised an option to purchase 600,000 shares of Arcturus’ common stock at $ 16.00 per share, or a total purchase price of $ 9.6 million.

Accordingly, after the exercise of the option, the Company owned 3,000,000 shares, or 14.6 %, of Arcturus’ then outstanding common stock.

The purchase was made pursuant to the equity purchase agreement between the parties entered into in June 2019 in connection with the amendment to the research collaboration and license agreement.

The Arcturus common stock is restricted from sale or transfer by the Company for six months from the exercise date, subject to certain conditions.

The Company has elected to apply the fair value option to account for the equity investment in Arcturus.

The Company also accounts for the option to purchase additional shares of Arcturus common stock at fair value based on the Black-Scholes option pricing method.

The Company had accounted for the option to purchase additional shares of Arcturus common stock at fair value based on the Black-Scholes option pricing method.

The changes in the fair value of the Company’s investment in Arcturus securities were as follows (in thousands):

1 unchanged sentence

Fair value of option to purchase additional shares of Arcturus common stock

December 31, 2018

Acquisition of investment in Arcturus securities

Acquisition of investment in Arcturus

securities in June 2019

Change in fair value

1 unchanged sentence

Change in fair value

March 31, 2020

Transfer of value upon option exercise

June 30, 2020

In August 2019, the Company entered into a Program Agreement and a Unitholder Option Agreement with GeneTx Biotherapeutics, LLC (GeneTx) to collaborate on the development of GeneTx’s GTX-102, an antisense oligonucleotide (ASO) for the treatment of Angelman syndrome.

Pursuant to the terms of the Unitholder Option Agreement, the Company made an upfront payment of $ 20.0 million for an exclusive option to acquire GeneTx, which was exercisable any time prior to 30 days following FDA acceptance of the IND for GTX-102.

Pursuant to the agreement, upon acceptance of IND, the Company elected to extend the option period by paying an option extension payment of $ 25.0 million (option extension premium) during the quarter ended March 31, 2020.

The Company has a right to acquire GeneTx for a payment of $ 125.0 million, at any time, until the earlier of 30 months from the first dosing of a patient in a planned Phase 1/2 study (subject to extensions) or 90 days after results are available from that study.

This exclusive option to acquire

GeneTx can be extended under certain circumstances, by up to four additional three-month periods, by paying an additional extension fee for each three-month period .

This exclusive option to acquire GeneTx can be extended under certain circumstances, by up to four additional three-month periods, by paying an additional extension fee for each three-month period.

During the exclusive option period, GeneTx is responsible for conducting the program based on the development plan agreed between the parties and, subject to the terms in the Program Agreement, has the decision-making authority on all matters in connection with the research, development, manufacturing and regulatory activities with respect to the Program.

5 unchanged sentences

Prior to product regulatory approval, all consideration paid to GeneTx represents rights to potential future benefits associated with GeneTx’s in-process research and development activities, which have not reached technological feasibility and have no alternative future use.

Accordingly, for the three months ended March 31, 2020, the Company recorded the option extension payment of $ 25.0 million as an in-process research and development expense.

Accordingly, for the three and six months ended June 30, 2020, the Company recorded the option extension payment of none and $ 25.0 million as an in-process research and development expense.

REGENXBIO, Inc.

1 unchanged sentence

(REGENEX), for an exclusive, sublicensable, worldwide license to REGENX’s NAV AAV8 and AAV9 Vectors for the development and commercialization of gene therapy treatments for a rare metabolic disorder.

In return for these rights, the Company made an upfront payment of $ 7.0 million, which was recorded as an in-process research and development expense for the three months ended March 31, 2020.

In return for these rights, the Company made an upfront payment of $ 7.0 million, which was recorded as an in-process research and development expense during the prior quarter ended March 31, 2020.

The Company will pay certain annual fees of $ 0.1 million, milestone payments of up to $ 14.0 million, and royalties on any net sales of products incorporating the licensed intellectual property that range from a high single-digit to low double-digit royalty .

Daiichi Sankyo

In March 2020, the Company executed a License and Technology Access Agreement (License Agreement) with Daiichi Sankyo Co., Ltd.

In March 2020, the Company executed a License and Technology Access Agreement (the License Agreement) with Daiichi Sankyo Co., Ltd.

(Daiichi Sankyo).

8 unchanged sentences

Daiichi Sankyo will reimburse the Company for all costs associated with the transfer of the manufacturing technology.

The Company also entered into a Stock Purchase Agreement (SPA) with Daiichi Sankyo, pursuant to which Daiichi Sankyo purchased 1,243,913 shares in exchange for $ 75.0 million in cash.

The Company also entered into a Stock Purchase Agreement (SPA) with Daiichi Sankyo, pursuant to which Daiichi Sankyo purchased 1,243,913 shares in exchange for $ 75.0 million in cash during the first quarter of 2020.

The fair market value of the common stock issued to Daiichi Sankyo was $ 55.3 million based on the stock price of $ 44.43 on the date of issuance, resulting in a $ 19.7 million premium on the SPA.

Daiichi Sankyo is also subject to a three-year standstill and restrictions on sale of the shares (subject to customary exceptions or release).

The License Agreement and the SPA are being accounted for as one arrangement because they were entered into at the same time with interrelated financial terms.

The Company evaluated the license agreement under ASC 606 and determined that the performance obligations under the agreement are (i) intellectual property with respect to its HeLa PCL and HEK293 transient transfection manufacturing technology platforms together with related the initial technical assistance and technology transfer services, which are expected to be completed over a period of 18 months, and (ii) the transfer of any know-how and improvements after the completion of the initial technology transfer through the end of the three year technology transfer period.

The Company determined that the total transaction price of the License Agreement was $ 173.4 million which was comprised of the $ 19.7 million premium from the SPA, the $ 125.0 million upfront payment, the $ 25.0 million in unconstrained milestone payments, and the $ 3.7 million estimated reimbursement of delivering the license and technology services.

In June 2020, the Company executed a subsequent license agreement (the Sublicense Agreement) with Daiichi Sankyo for transfer of certain technology in consideration for an upfront payment of $ 8.0 million and annual maintenance fees, milestone payments, and royalties on any net sales of products incorporating the licensed intellectual property.

The License Agreement, the Sublicense Agreement, and the SPA are being accounted for as one arrangement because they were entered into at or near the same time and negotiated in contemplation of one another.

The Company evaluated the License Agreement and the Sublicense Agreement under ASC 606 and determined that the performance obligations under the agreements are (i) intellectual property with respect to its HeLa PCL and HEK293 transient transfection manufacturing technology platforms together with the initial technical assistance and technology transfer services, which are expected to be completed over a period of 18 months, and (ii) the transfer of any know-how and improvements after the completion of the initial technology transfer through the end of the three year technology transfer period.

The Company determined that the total transaction price of the License Agreement was $ 183.8 million which was comprised of the $ 19.7 million premium from the SPA, the $ 125.0 million upfront payment, the $ 25.0 million in unconstrained milestone payments, $ 8.0 million from the Sublicense Agreement, and the $ 5.5 million estimated reimbursement amount for delivering the license and technology services.

The Company allocated the total transaction price to the two performance obligations on a relative stand-alone selling price basis.

Revenue allocated to the intellectual property and the technology transfer services will be recognized over an initial estimated period of 18 months, measuring the progress toward complete satisfaction of the individual performance obligation using an input measure.

Revenue allocated to the intellectual property and the technology transfer services will be recognized over an initial estimated period of 18 to 21 months, measuring the progress toward complete satisfaction of the individual performance obligation using an input measure.

Revenue for know-how and improvements after the completion of technology transfer will be recognized over the remaining technology transfer period (i.e., months 19-36) on a straight-line basis, as it is expected that Daiichi Sankyo will receive and consume the benefits consistently throughout the period.

2 unchanged sentences

Royalties from commercial sales will be accounted for as revenue upon achievement of such sales, assuming all other revenue recognition criteria are met.

No revenue was recognized for the quarter ended March 31, 2020 as the efforts to begin the transfer of the technology had not begun.

Accordingly, the Company had recorded $ 107.3 million as short-term contract liability and $ 38.0 million as long- term contract liability as of March 31, 2020.

The Company had a receivable related to the License Agreement of $ 125.6 million as of March 31, 2020, which was subsequently received in April 2020.

The technology transfer services were initiated during the second quarter of 2020, as such the Company began recognizing revenue during the period.

For the three and six months ended June 30, 2020, the Company recognized $ 18.9 million in revenue related to this arrangement.

Accordingly, the Company had recorded $ 131.6 million as short-term contract liability and $ 3.3 million as long- term contract liability as of June 30, 2020.

The Company had a receivable related to the above agreements of $ 8.5 million as of June 30, 2020.

Liability Related to the Sale of Future Royalties

5 unchanged sentences

In order to determine the amortization of the liability, the Company is required to estimate the total amount of future royalty payments to be received by the Company and paid to RPI, subject to the capped amount, over the life of the arrangement.

The excess of future estimated royalty payments (subject to the capped amount), over the $ 314.2 million of net proceeds, will be recorded as non-cash interest expense over the life of the arrangement.

The excess of future estimated royalty payments (subject to the capped amount), over the $ 314.2 million of net proceeds, is recorded as non-cash interest expense over the life of the arrangement.

Consequently, the Company estimates an imputed interest on the unamortized portion of the liability and records interest expense relating to the transaction.

The Company records the royalty revenue rising from the net sales of Crysvita in the applicable European territories as non-cash royalty revenue in the Consolidated Statements of Operations.

The Company records the royalty revenue from the net sales of Crysvita in the applicable European territories as non-cash royalty revenue in the Consolidated Statements of Operations.

The Company periodically assesses the expected royalty payments using a combination of historical results, internal projections and forecasts from external sources.

To the extent such payments are greater or less than the Company’s initial estimates or the timing of such payments is materially different than its original estimates, the Company will prospectively adjust the amortization of the liability and the effective interest rate.

The Company’s effective annual interest rate was approximately 10.2 % and 10.1 % as of March 31, 2020 and December 31, 2019, respectively.

The Company’s effective annual interest rate was approximately 10.3 % and 10.1 % as of June 30, 2020 and December 31, 2019, respectively.

There are a number of factors that could materially affect the amount and timing of royalty payments from KKC in the applicable European territories, most of which are not within the Company’s control.

4 unchanged sentences

Liability related to the sale of future royalties

December 31, 2018

Proceeds from sale of future royalties

Proceeds from sale of future royalties in December 2019

Non-cash interest expense

2 unchanged sentences

Non-cash interest expense

March 31, 2020

June 30, 2020

Stock-Based Awards

The 2014 Incentive Plan (the 2014 Plan) provides for automatic annual increases in shares available for grant, beginning on January 1, 2015 through January 1, 2024 .

As of March 31, 2020 , there were 3,424,900 shares reserved under the 2014 Plan for the future issuance of equity awards and 3,361,224 shares reserved for the 2014 Employee Stock Purchase Plan.

As of June 30, 2020 , there were 3,304,531 shares reserved under the 2014 Plan for the future issuance of equity awards and 3,287,825 shares reserved for the 2014 Employee Stock Purchase Plan.

The table below sets forth the stock-based compensation expense for the periods presented (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of sales

2 unchanged sentences

Total stock-based compensation expense

Net Loss Per Share

Basic net loss per share has been computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period.

Diluted net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock and potential dilutive securities outstanding during the period.

The following weighted-average outstanding common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

Three Months Ended March 31,

Options to purchase common stock and restricted stock units

Net Income (Loss) Per Share

Basic net income (loss) per share has been computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock and potential dilutive securities outstanding during the period.

For the six months ended June 30, 2020 and the three and six months ended June 30, 2019, there were no differences between basic and diluted net loss per share since the effect of the dilutive securities would have been antidilutive and therefore were excluded from the diluted net loss per share calculation.

The following table sets forth the computation of the basic and diluted net income (loss) per share (in thousands, except share and per share data):

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss), basic and diluted

Weighted-average shares used in computing net income

(loss) per share, basic

Weighted-average effect of dilutive securities:

Options to purchase common stock and RSUs

Weighted-average shares used in computing net income

(loss) per share, diluted

Net income (loss) per share:

The following weighted-average outstanding common stock equivalents were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been antidilutive:

Three Months Ended June 30,

Six Months Ended June 30,

Options to purchase common stock and

restricted stock units

Employee stock purchase plan

1 unchanged sentence

Equity Transactions

In July 2017, the Company entered into an At-The-Market, or ATM, sales agreement with Cowen and Company, LLC (Cowen), whereby the Company can sell up to $ 150.0 million in aggregate proceeds of common stock from time to time, through with Cowen as its sales agent.

During the three months ended March 31, 2020 and 2019, the Company sold none and 379,707 shares of common stock, resulting in net proceeds of none and $ 19.3 million, respectively, after commissions and other offering costs.

In July 2017, the Company entered into an At-The-Market, or ATM, sales agreement with Cowen and Company, LLC (Cowen), whereby the Company could sell up to $ 150.0 million in aggregate proceeds of common stock from time to time, with Cowen as its sales agent.

During the three and six months ended June 30, 2020, the Company sold 283,333 shares of common stock, resulting in net proceeds of $ 20.4 million, after commissions and other offering costs.

During the three and six months ended June 30, 2019, the Company sold 88,978 and 468,685 shares of common stock, respectively, resulting in net proceeds of approximately $ 5.5 million and $ 24.8 million, respectively, after commissions and other offering costs.

As of June 30, 2020 , the Company had completed the sale of all available amounts under the ATM facility.

In February 2019, the Company completed an underwritten public offering in which 5,833,333 shares of common stock were sold, which included 760,869 shares purchased by the underwriters pursuant to an option granted to them in connection with the offering, at a public offering price of $ 60.00 per share.

The total proceeds that the Company received from the offering were approximately $ 330.4 million, net of underwriting discounts and commissions.

Accumulated Other Comprehensive Loss

Total accumulated other comprehensive loss consisted of the following (in thousands):

Accumulated Other Comprehensive Income (Loss)

Total accumulated other comprehensive income (loss) consisted of the following (in thousands):

Foreign currency translation adjustments

Unrealized gain (loss) on securities available-for-sale

Total accumulated other comprehensive loss

Unrealized gain on securities available-for-sale

Total accumulated other comprehensive income

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements