What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-07-31 compared with 2020-05-11 · 210 added, 186 removed, 427 unchanged (48% of the section changed)

4 unchanged sentences

(in thousands, except par value and share amounts)

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Assets (unaudited)

Current assets:

Cash and cash equivalents $ 237,170 $ 62,436

Available-for-sale debt securities, at fair value (amortized cost $290,977, allowance for credit losses of $0 as of March 31, 2020;

Available-for-sale debt securities, at fair value (amortized cost $218,596, allowance for credit losses of $0 as of June 30, 2020;

amortized cost $335,206, allowance for credit losses of $0 as of December 31, 2019) 220,206 336,088

7 unchanged sentences

Intangible assets, net 155,371 157,200

Goodwill 936 936

Total assets $ 678,694 $ 604,800

Liabilities and Stockholders' Equity

12 unchanged sentences

20,000,000 shares authorized;

0 issued and outstanding as of March 31, 2020 and December 31, 2019

0 issued and outstanding as of June 30, 2020 and December 31, 2019

Common stock $0.0001 par value;

100,000,000 shares authorized;

43,153,215 and 43,088,921 issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

50,902,874 and 43,088,921 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 758,945 636,910

Accumulated deficit ( 441,704 ) ( 416,444 )

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income 1,399 726

Total stockholders' equity 318,645 221,196

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,

2020 2019 2020 2019

Net product sales $ 48,430 $ 44,707 $ 96,199 $ 84,277

9 unchanged sentences

Other income (expenses), net:

Other expense, net

Other income (expense), net 426 125 235 ( 177 )

Interest income 1,316 2,589 3,291 5,408

2 unchanged sentences

Loss before income taxes ( 26,003 ) ( 38,632 ) ( 44,171 ) ( 79,208 )

Income tax benefit (expense)

Net income (loss)

Net income (loss) per common share, basic

Net income (loss) per common share, diluted

Weighted average common shares outstanding, basic

Weighted average common shares outstanding, diluted

Income tax (expense) benefit ( 65 ) ( 69 ) 18,911 ( 470 )

Net loss $ ( 26,068 ) $ ( 38,701 ) $ ( 25,260 ) $ ( 79,678 )

Basic and diluted net loss per common share $ ( 0.58 ) $ ( 0.92 ) $ ( 0.57 ) $ ( 1.91 )

Basic and diluted weighted average common shares outstanding 44,763,843 41,957,860 43,943,370 41,685,599

Comprehensive loss:

Net income (loss)

Net loss $ ( 26,068 ) $ ( 38,701 ) $ ( 25,260 ) $ ( 79,678 )

Foreign currency translation ( 247 ) ( 91 ) ( 56 ) 27

Unrealized gain (loss) on marketable securities

Unrealized gain on debt securities 3,146 815 729 2,284

Comprehensive loss $ ( 23,169 ) $ ( 37,977 ) $ ( 24,587 ) $ ( 77,367 )

4 unchanged sentences

(unaudited, in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash Flows From Operating Activities:

Net income (loss)

Net loss $ ( 25,260 ) $ ( 79,678 )

Adjustments to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Non-cash interest expense 893 798

(Accretion) amortization of discounts/premiums on investments, net

Amortization (accretion) of discounts/premiums on investments, net 337 ( 580 )

Amortization of debt discount and issuance costs 5,147 4,933

1 unchanged sentence

Share-based compensation 11,474 11,947

ESPP expense 390 345

Change in fair value of contingent consideration 2,363 ( 11,478 )

1 unchanged sentence

Write off of IPR&D intangible assets — 25,500

Unrealized foreign currency transaction gain (loss) ( 222 ) 14

Changes in operating assets and liabilities:

Accounts receivable 3,979 ( 2,396 )

Inventory ( 875 ) 918

Tax receivable ( 18,714 ) —

6 unchanged sentences

Cash paid for intangible assets ( 8,532 ) ( 7,347 )

Proceeds from the sale/maturity of marketable securities

Purchase of marketable securities

Net cash provided by (used in) investing activities

Proceeds from the sale/maturity of debt securities 153,146 115,998

Purchase of debt securities ( 36,743 ) ( 94,812 )

Net cash provided by investing activities 107,353 13,818

Cash Flows From Financing Activities:

2 unchanged sentences

Proceeds from exercise of stock options 431 317

Net cash used in financing activities

Proceeds from issuance of common stock, net of issuance costs 108,644 —

Proceeds from issuances under employee stock purchase plan 1,098 1,005

Net cash provided by (used in) financing activities 103,022 ( 1,434 )

Effect of exchange rate changes on cash ( 33 ) 1

7 unchanged sentences

(unaudited, in thousands, except share amounts )

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Additional Paid in Capital

Accumulated Other Comprehensive Income (Loss)

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019

Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Deficit Total

Stockholders'

Additional Paid in Capital

Accumulated Other Comprehensive Income (Loss)

Equity Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Deficit Total

Stockholders'

Shares Amount Shares Amount

Balance - March 31 43,153,215 $ 4 $ 642,880 $ ( 1,500 ) $ ( 415,636 ) $ 225,748 41,438,020 $ 4 $ 596,644 $ 57 $ ( 310,994 ) $ 285,712

Share based compensation 5,760 5,760 5,577 5,577

Issuance of common stock under the equity incentive plan and proceeds from exercise 177,115 371 371 100,151 12 12

Equity offering 7,475,000 1 108,643 108,644

Unrealized gain on debt securities 3,146 3,146 815 815

Foreign currency translation adjustments ( 247 ) ( 247 ) ( 91 ) ( 91 )

Issuance of common stock from maturity of the 2019 Convertible debt outstanding 1,297,343 22,590 22,590

ESPP stock purchase and expense 97,544 1,291 1,291 63,804 1,176 1,176

Net loss ( 26,068 ) ( 26,068 ) ( 38,701 ) ( 38,701 )

Balance - June 30 50,902,874 $ 5 $ 758,945 $ 1,399 $ ( 441,704 ) $ 318,645 42,899,318 $ 4 $ 625,999 $ 781 $ ( 349,695 ) $ 277,089

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019

Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Deficit Total

Stockholders'

Equity Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Deficit Total

Stockholders'

Shares Amount Shares Amount

Balance - December 31 43,088,921 $ 4 $ 636,910 $ 726 $ ( 416,444 ) $ 221,196 41,389,524 $ 4 $ 589,795 $ ( 1,529 ) $ ( 270,017 ) $ 318,253

Share based compensation 11,474 11,474 11,947 11,947

Issuance of common shares under the equity incentive plan and proceeds from exercise

Unrealized gain (loss) on marketable securities

Issuance of common stock under the equity incentive plan and proceeds from exercise 241,409 431 431 148,647 317 317

Equity offering 7,475,000 1 108,643 108,644

Unrealized gain on debt securities 729 729 2,284 2,284

Foreign currency translation adjustments ( 56 ) ( 56 ) 26 26

Issuance of common stock from maturity of the 2019 Convertible debt outstanding 1,297,343 22,590 22,590

ESPP stock purchase and expense 97,544 1,487 1,487 63,804 1,350 1,350

Net income (loss)

Balance - March 31

Net loss ( 25,260 ) ( 25,260 ) ( 79,678 ) ( 79,678 )

Balance - June 30 50,902,874 $ 5 $ 758,945 $ 1,399 $ ( 441,704 ) $ 318,645 42,899,318 $ 4 $ 625,999 $ 781 $ ( 349,695 ) $ 277,089

The accompanying notes are an integral part of these condensed consolidated financial statements.

11 unchanged sentences

The outbreak of COVID-19 has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders and extended shutdown of certain businesses around the world.

While the impact of the COVID-19 pandemic did not have a material adverse effect on our financial position or results of operations for the fiscal quarter ended March 31, 2020, these governmental actions and the widespread economic disruption arising from the pandemic have the potential to materially impact our business and influence our business decisions.

While the impact of the COVID-19 pandemic did not have a material adverse effect on our financial position or results of operations for the three and six months ended June 30, 2020, these governmental actions and the widespread economic disruption arising from the pandemic have the potential to materially impact our business and influence our business decisions.

The extent and duration of the pandemic is unknown, and the future effects on our business are uncertain and difficult to predict.

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The Company is a participant in two CRADAs, which form a multi-stakeholder approach to pool resources with leading experts, and incorporates the patient perspective early in the identification and development process.

Retrophi n has partnered with the National Institutes of Health’s National Center for Advancing Translational Sciences ("NCATS") and leading patients advocacy organizations, NGLY1.org and Alagille Syndrome Alliance ("ALGSA") , aimed at the identification of potential small molecule therapeutics for NGLY1 deficiency and Alagille syndrome, respectively.

Retrophin has partnered with the National Institutes of Health’s National Center for Advancing Translational Sciences ("NCATS") and leading patient advocacy organizations, NGLY1.org and Alagille Syndrome Alliance ("ALGSA"), aimed at the identification of potential small molecule therapeutics for NGLY1 deficiency and Alagille syndrome, respectively.

There are no treatment options currently approved for these diseases.

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The December 31, 2019 balance sheet information was derived from the audited financial statements as of that date.

Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation.

A summary of the significant accounting policies applied in the preparation of the accompanying condensed consolidated financial statements follows:

37 unchanged sentences

This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company's adoption of

this standard has had an immaterial impact on our condensed consolidated financial statements, and there was no recorded impact to our opening accumulated deficit balance for the cumulative-effect adjustment.

As of March 31, 2020, the Company held $ 18.1 million in trade receivables and $ 289.4 million in available-for-sale debt securities.

Expected credit losses on our trade receivables are estimated to be immaterial and the Company has zero recorded allowances for expected credit losses on the available-for-sale debt securities held as of March 31, 2020.

The Company's adoption of this standard has had an immaterial impact on our condensed consolidated financial statements, and there was no recorded impact to our opening accumulated deficit balance for the cumulative-effect adjustment.

As of June 30, 2020, the Company held $ 14.1 million in trade receivables and $ 220.2 million in available-for-sale debt securities.

See Note 16 and Note 4 for further discussion.

29 unchanged sentences

The calculation of the accrual for co-pay assistance is based on an identification of claims and the cost per claim associated with product that has been recognized as revenue.

The following table summarizes net product revenues for the three months ended March 31, 2020 and 2019 ( in thousands ):

Three Months Ended March 31,

The following table summarizes net product revenues for the three and six months ended June 30, 2020 and 2019 ( in thousands ):

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Bile acid products $ 21,573 $ 20,929 $ 43,854 $ 39,319

1 unchanged sentence

Total net product revenue $ 48,430 $ 44,707 $ 96,199 $ 84,277

MARKETABLE SECURITIES

The Company's marketable securities as of March 31, 2020 and December 31, 2019 were comprised of available-for-sale marketable securities.

These securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss), unless an im

pairment is determined to be the result of credit-related factors or the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery.

DEBT SECURITIES

The Company's debt securities as of June 30, 2020 and December 31, 2019 were comprised of available-for-sale corporate and govenrment debt securities.

These securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss), unless an impairment is determined to be the result of credit-related factors or the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity.

Such amortization and accretion is included in interest income (loss).

Such amortization and accretion is included in interest income.

Realized gains and losses and declines in value that are determined to be the result of credit losses, if any, on available-for-sale securities are included in other income or expense.

3 unchanged sentences

All available-for-sale securities are classified as current assets, even if the maturity when acquired by the Company is greater than one year due to the ability to liquidate within the next 12 months.

During the three months ended March 31, 2020 , investment activity for the Company included $ 49.2 million in maturities and $ 5.0 million in purchases, all relating to debt based marketable securities.

Marketable securities consisted of the following ( in thousands ):

March 31, 2020

December 31, 2019

During the six months ended June 30, 2020, investment activity for the Company included $ 153.3 million in maturities and $ 36.7 million in purchases, all relating to debt based marketable securities.

Debt securities consisted of the following ( in thousands ):

June 30, 2020 December 31, 2019

Commercial paper $ — $ 17,152

1 unchanged sentence

Securities of government sponsored entities 10,001 12,500

Total marketable securities:

The following is a summary of short-term marketable securities classified as available-for-sale as of March 31, 2020 ( in thousands ):

Total debt securities:

$ 220,206 $ 336,088

The following is a summary of short-term debt securities classified as available-for-sale as of June 30, 2020 ( in thousands ):

Remaining Contractual Maturity

Amortized Cost

Unrealized Gains

Unrealized Losses

Aggregate Estimated Fair Value

Commercial paper

Corporate debt securities

(in years) Amortized Cost Unrealized Gains Unrealized Losses Aggregate Estimated Fair Value

Commercial paper Less than 1 $ — $ — $ — $ —

Corporate debt securities Less than 1 132,352 770 — 133,122

Total maturity less than 1 year 132,352 770 — 133,122

Corporate debt securities

Securities of government-sponsored entities

Corporate debt securities 1 to 2 76,244 848 ( 9 ) 77,083

Securities of government-sponsored entities 1 to 2 10,000 1 — 10,001

Total maturity 1 to 2 years 86,244 849 ( 9 ) 87,084

Total available-for-sale securities $ 218,596 $ 1,619 $ ( 9 ) $ 220,206

The following is a summary of short-term marketable securities classified as available-for-sale as of December 31, 2019 ( in thousands ):

The following is a summary of short-term debt securities classified as available-for-sale as of December 31, 2019 ( in thousands ):

Remaining Contractual Maturity

Amortized Cost

Unrealized Gains

Unrealized Losses

Aggregate Estimated Fair Value

Commercial paper

Corporate debt securities

(in years) Amortized Cost Unrealized Gains Unrealized Losses Aggregate Estimated Fair Value

Commercial paper Less than 1 $ 17,136 $ 16 $ — $ 17,152

Corporate debt securities Less than 1 191,770 582 ( 10 ) 192,342

Total maturity less than 1 year 208,906 598 ( 10 ) 209,494

Corporate debt securities

Securities of government-sponsored entities

Corporate debt securities 1 to 2 113,799 351 ( 56 ) 114,094

Securities of government-sponsored entities 1 to 2 12,501 — ( 1 ) 12,500

Total maturity 1 to 2 years 126,300 351 ( 57 ) 126,594

2 unchanged sentences

The Company’s investment policy limits interest-bearing security investments to certain types of instruments issued by institutions with primarily investment grade credit ratings and places restrictions on maturities and concentration by asset class and issuer.

The Company reviews the available-for-sale investments declines in fair value below the cost basis each quarter.

The Company reviews the available-for-sale debt securities for declines in fair value below the cost basis each quarter.

For any security whose fair value is below its amortized cost basis, the Company first evaluates whether it intends to sell the impaired security, or will otherwise be more likely than not required to sell the security before recovery.

3 unchanged sentences

The portion of the unrealized loss related to factors other than credit losses is recognized in other comprehensive income (loss).

The following is a summary of available-for-sale debt securities in an unrealized loss position with no credit losses reported as of March 31, 2020 ( in thousands ):

Less Than 12 Months

12 Months or Greater

Description of Securities

Unrealized Losses

The following is a summary of available-for-sale debt securities in an unrealized loss position with no credit losses reported as of June 30, 2020 ( in thousands ):

Less Than 12 Months 12 Months or Greater Total

Description of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

Commercial paper $ — $ — $ — $ — $ — $ —

1 unchanged sentence

Securities of government-sponsored entities — — — — — —

Total $ 5,015 $ 9 $ — $ — $ 5,015 $ 9

The following is a summary of available-for-sale debt securities in an unrealized loss position with no credit losses reported as of December 31, 2019 ( in thousands ):

Less Than 12 Months

12 Months or Greater

Description of Securities

Unrealized Losses

Less Than 12 Months 12 Months or Greater Total

Description of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

Commercial paper $ — $ — $ — $ — $ — $ —

1 unchanged sentence

Securities of government-sponsored entities 5,000 1 — — 5,000 1

As of March 31, 2020 and December 31, 2019 , the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis.

The Company believes the unrealized losses incurred during the period are related to economic circumstances surrounding the COVID-19 pandemic, reflecting current liquidity issues as opposed to credit-related factors.

Total $ 79,151 $ 65 $ 7,509 $ 2 $ 86,660 $ 67

As of June 30, 2020 and December 31, 2019, the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis.

The Company does not believe the unrealized losses incurred during the period are due to credit-related factors.

Liquidity issues that arose from economic circumstances surrounding the COVID-19 pandemic have begun to ease and unrealized losses observed in the first quarter 2020 have been substantially recovered.

The credit ratings of the securities held remain of the highest quality, and while certain securities in the portfolio may be downgraded momentarily, the Federal Reserve has allowed institutions to continue to issue debt where there is need, with the government itself purchasing such securities.

Changes to leverage requirements for banks and other government relief efforts have helped to improve liquidity in the market.

While securities issued by institutions in certain industries may be impacted more significantly than others, our investment holdings are primarily with institutions that are less impacted by the pandemic.

Moreover, the Company continues to receive payments of interest and principal as they become due, and our expectation is that those payments will continue to be received timely.

4 unchanged sentences

The Company made an upfront payment of $ 10.0 million, agreed to fund certain development activities of Censa’s CNSA-001 program which were approximately $ 19.9 million through proof of concept, and paid $ 5.0 million related to a development milestone for the right, but not the obligation, to acquire Censa (the “Option”) on the terms and subject to the conditions set forth in a separate Agreement and Plan of Merger.

The Company capitalized the upfront and milestone payments and expensed the development funding as incurred.

The Company treated the upfront payment and milestone payments as an equity investment and expensed the development funding as incurred.

The Company treated the upfront payment and milestone payment, both of which were consideration for the Option, as a cost-method investment with a carrying value of $ 15.0 million .

The Company determined that Censa was a variable interest entity ("VIE"), and concluded that the Company was not the primary beneficiary of the VIE.

As such, the Company did not consolidate Censa’s results into its consolidated financial statements.

The Company treated the upfront payment and milestone payment, both of which were consideration for the Option, as a cost-method investment with a carrying value of $ 15.0 million and expensed the development funding as incurred.

In August 2019, following a strategic review of the CNSA-001 program in patients with phenylketonuria (PKU), the Company made the decision to decline to exercise its option to acquire Censa Pharmaceuticals and discontinue its joint development program for CNSA-001.

The Company wrote off the $ 15.0 million long term investment.

As of March 31, 2020 , the Company had two operating leases with Kilroy Realty, L.P.

As of June 30, 2020, the Company had two operating leases with Kilroy Realty, L.P.

(the "Landlord") for office space located in San Diego, California.

The Company currently occupies the office space subject to the first lease, originally signed in July 2016 and later amended in July 2017 and March 2019.

In April 2019, the Company entered into a second office lease with the Landlord for approximately 77,000 square feet of an adjacent building located at 3611 Valley Centre Drive, San Diego, California.

The Company plans to consolidate its corporate headquarters into the new lease space in early 2021.

In April 2019, the Company entered into a second office lease with the Landlord, which was subsequently amended in May 2020, for office space in an adjacent building located in San Diego, California.

The Company plans to consolidate its corporate headquarters into the new lease space beginning in late 2020 and into early 2021.

As a condition of the new lease, the Company has been granted an existing premises continuation option to continue leasing all or a portion of the currently occupied office space, in addition to the new lease space.

1 unchanged sentence

The abandonment of this leased office space, which was originally scheduled to expire in July 2024, coincides with the Company’s expected occupancy of the new office lease space in the adjacent building per the office lease effective April 2019.

The Company estimates that it will vacate the existing leases in the first quarter of 2021, through which time the Company is obligated to pay all base rent, operating expenses and other obligations due under the existing lease.

The Company estimates that it will fully vacate the existing leases in the first quarter of 2021, through which time the Company is obligated to pay all base rent, operating expenses and other obligations due under the existing lease.

Coinciding with the notice delivered to the Landlord, the Company recorded an adjustment to the ROU asset and lease liability in February 2020 to reflect the impending expiration of the existing lease.

The remeasurement of the lease liability, which utilized a discount rate equal to our borrowing rate of 7.7 % , resulted in a $ 7.0 million adjustment to the lease liability and ROU asset.

The remeasurement of the lease liability resulted in a $ 7.0 million adjustment to the lease liability and ROU asset.

A revised timing estimate resulted in the Company recording an additional adjustment, resulting in a reduction of $ 0.5 million to the related lease liability and ROU asset in the current quarter.

The remeasured straight-line expense will be amortized over the revised lease term along with acceleration of related lease incentives.

The ROU asset and lease liability related to the new office lease will be established when the Company is granted access to the premises and has the ability to direct its use, which is expected to occur in phases during the second half of 2020 as certain spaces become available, the timing of which may be impacted due to circumstances surrounding the COVID-19 pandemic.

As such, the ROU asset for the new lease will be established prior to the extinguishment of the ROU asset and lease liability for the existing lease, resulting in an overlap of ROU assets during the interim period between inception of the new lease and the expiration of the old lease.

The ROU asset and lease liability related to the new office lease will be established when the Company is granted access to the premises and has the ability to direct its use, which is expected to occur in phases over the remainder of 2020 as certain spaces become available, the timing of which may be impacted due to circumstances surrounding the COVID-19 pandemic.

the expiration of the old lease.

In June 2020, the Landlord delivered possession of a portion of the new lease space for the purpose of construction of leasehold improvements.

Coinciding with our ability to direct the use of that space, and utilizing a discount rate equal to our borrowing rate of 6.7 %, the Company has established a ROU asset totaling $ 8.9 million and a lease liability totaling $ 8.8 million.

The ROU asset and lease liability are offset by lease incentives associated with tenant improvement allowances totaling $ 2.0 million.

Establishment of the ROU asset and lease liability for the remaining spaces under the new lease will occur upon delivery of the respective spaces.

The initial term of the new lease is 7 years, 7 months , and the Landlord has granted the Company an option to extend the term of the lease by a period of 5 years.

The aggregate base rent due over the initial term of the lease is approximately $ 36.5 million .

Following is a schedule of the future minimum rental commitments for our operating lease reconciled to the lease liability and ROU assets as of March 31, 2020 ( in thousands ):

March 31, 2020

The measurement of the lease term occurs from the planned occupancy date of the primary spaces estimated to be delivered in the latter part of 2020.

The aggregate base rent due over the initial term of the lease is approximately $ 49.5 million, which consists of $ 13.0 million for the space delivered in June 2020, and $ 36.5 million for the primary spaces yet to be delivered.

Following is a schedule of the future minimum rental commitments for our operating lease, excluding commitments related to rental spaces not yet delivered, reconciled to the lease liability and ROU assets as of June 30, 2020 ( in thousands ):

June 30, 2020

Thereafter 6,435

Total undiscounted future minimum payments 13,372

Lease incentives payable by lessor ( 1,983 )

Present value discount ( 3,121 )

Total lease liability 8,268

Lease incentives

Unamortized lease incentives, less incentives payable by lessor ( 404 )

Cash payments in excess of straight-line lease expense ( 952 )

Total ROU asset $ 6,912

As of March 31, 2020 , the ROU asset recorded to the Condensed Consolidated Balance Sheets as non-current Other Assets, was reduced to zero .

As of March 31, 2020 , the current and non-current portions of the lease liability were recorded to the Condensed Consolidated Balance Sheets as follows ( in thousands ):

March 31, 2020

As of June 30, 2020, the ROU asset of $ 6.9 million was recorded to the Condensed Consolidated Balance Sheets as non-current Other Assets .

As of June 30, 2020, the current and non-current portions of the lease liability were recorded to the Condensed Consolidated Balance Sheets as follows ( in thousands ):

June 30, 2020

Other current liabilities $ 1,379

1 unchanged sentence

Total lease liabilities $ 8,268

For the three months ended March 31, 2020 and 2019, the Company recorded $ 0.4 million and $ 0.7 million , respectively, in expense related to operating leases.

For the three and six months ended June 30, 2020 and 2019, the Company recorded a $ 0.2 million credit to expense and zero , respectively, and $ 0.6 million and $ 1.3 million, respectively, in expense related to operating leases.

FAIR VALUE MEASUREMENTS

7 unchanged sentences

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The valuation techniques used to measure the fair value of the Company’s marketable securities and all other financial instruments, all of which have counter-parties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data.

Based on the fair value hierarchy, the Company classified marketable securities within Level 2.

The valuation techniques used to measure the fair value of the Company’s debt securities and all other financial instruments, all of which have counter-parties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data.

Based on the fair value hierarchy, the Company classified debt securities within Level 2.

The Company acquired two businesses, related to the Cholbam and Chenodal products, whose purchase price included potential future payments that are contingent on the achievement of certain milestones and percentages of future net sales derived from the products acquired.

5 unchanged sentences

Financial instruments with carrying values approximating fair value include cash and cash equivalents, accounts receivable, and accounts payable, due to their short-term nature.

As of March 31, 2020 , the estimated fair value of the Company's 2.5 % Convertible Senior Notes due 2025 was $ 195.6 million , considering factors such as market conditions, prepayment and make-whole provisions, variability in pricing from multiple lenders and the term of the debt.

The following table presents the Company’s assets and liabilities, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of March 31, 2020 ( in thousands ):

As of March 31, 2020

Total carrying and estimated fair value

Quoted prices in active markets

Significant other observable inputs (Level 2)

Significant unobservable inputs (Level 3)

As of June 30, 2020, the fair value of the Company's 2.5 % Convertible Senior Notes due 2025 was $ 225.9 million, which was estimated utilizing market quotations, and are considered Level 2.

As of June 30, 2020

Total carrying and estimated fair value Quoted prices in active markets

(Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3)

Cash and Cash Equivalents $ 237,170 $ 237,170 $ — $ —

Marketable securities, available-for-sale

Debt securities, available-for-sale 220,206 — 220,206 —

Total $ 457,376 $ 237,170 $ 220,206 $ —

Business combination-related contingent consideration $ 68,600 $ — $ — $ 68,600

Total $ 68,600 $ — $ — $ 68,600

As of December 31, 2019

Total carrying and estimated fair value

Quoted prices in active markets

Significant other observable inputs (Level 2)

Significant unobservable inputs (Level 3)

Total carrying and estimated fair value Quoted prices in active markets

(Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3)

Cash and Cash Equivalents $ 62,436 $ 62,436 $ — $ —

Marketable securities, available-for-sale

Debt securities, available-for-sale 336,088 — 336,088 —

Total $ 398,524 $ 62,436 $ 336,088 $ —

Business combination-related contingent consideration 70,900 — — 70,900

The following table sets forth a summary of changes in the estimated fair value of the Company's business combination-related contingent consideration for the three months ended March 31, 2020 ( in thousands ):

Total $ 70,900 $ — $ — $ 70,900

The following table sets forth a summary of changes in the estimated fair value of the Company's business combination-related contingent consideration for the six months ended June 30, 2020 ( in thousands ):

Fair Value Measurements of Acquisition-Related Contingent Consideration

1 unchanged sentence

Changes in the fair value of contingent consideration 2,363

Contractual payments included in accrued liabilities at March 31, 2020

Contractual payments $ ( 2,125 )

Contractual payments included in accrued liabilities at June 30, 2020 ( 2,424 )

Foreign currency impact ( 114 )

Balance at March 31, 2020

Balance at June 30, 2020 $ 68,600

The key assumptions included in the calculations for contingent consideration were the future number of patients in treatment, projected revenues, discount rate, and the timing of payments.

The present value of the expected payments considers the time at which the obligations are expected to be settled and a discount rate that reflects the risk associated with the performance payments.

During the three months ended March 31, 2020 , the Company recognized $( 1.9 ) million as a reduction in operating expense on the Condensed Consolidated Statement of Operations and Comprehensive Loss for the change in fair value of the contingent consideration liabilities.

For the three months ended March 31, 2020 , $ 1.9 million of the charges were related to the change in contingent consideration liabilities for bile acid products.

The value decreased due to the timing of future payments and projected revenues .

During the three months ended March 31, 2019 , the Company incurred charges of $ 3.2 million in operating expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss for the change in fair value of the contingent consideration liabilities.

For the three months ended March 31, 2019 , $ 3.2 million of the charges were related to the increase in contingent consideration liabilities for bile acid products.

For the three and six months ended June 30, 2020, the Company incurred charges of $ 4.3 million and $ 2.4 million, respectively, in operating expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss for the change in fair value of the contingent consideration liabilities.

For the three months ended June 30, 2020, the change in fair value of contingent consideration is due to the timing of future payments and changes in market driven discount rates.

For the six months ended June 30, 2020, the change in fair value of contingent consideration is due to the timing of future payments and changes in market driven discount rates, offset by a change in revenue projections.

For the three and six months ended June 30, 2019, the Company incurred charges of $ 3.4 million and $ 6.5 million, respectively, in operating expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss for the change in fair value of the contingent consideration liabilities.

For the six months ended June 30, 2019, $ 6.5 million of the charges were related to the increase in contingent consideration liabilities for bile acid products.

The value increased due to passage of time.

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INTANGIBLE ASSETS

As of March 31, 2020 , the net book value of amortizable intangible assets was approximately $ 156.1 million .

The following table sets forth amortizable intangible assets as of March 31, 2020 and December 31, 2019 ( in thousands ):

March 31, 2020

December 31, 2019

As of June 30, 2020, the net book value of amortizable intangible assets was approximately $ 155.4 million.

The following table sets forth amortizable intangible assets as of June 30, 2020 and December 31, 2019 ( in thousands ):

June 30, 2020 December 31, 2019

Finite-lived intangible assets $ 254,443 $ 245,802

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Net carrying value $ 155,371 $ 157,200

The following table summarizes amortization expense for the three months ended March 31, 2020 and 2019 ( in thousands ):

Three Months Ended March 31,

The following table summarizes amortization expense for the three and six months ended June 30, 2020 and 2019 ( in thousands ):

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Research and development $ 289 $ 289 $ 578 $ 574

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The composition of the Company’s 2025 Notes are as follows ( in thousands ):

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

2.50% convertible senior notes due 2025 $ 276,000 $ 276,000

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(2) during the five consecutive business days immediately after any 10 consecutive trading day period (“measurement period”) if the trading price per $1,000 principal amount of 2025 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on the Company’s common stock;

(3) upon the occurrence of certain corporate events or distributions on the Company’s common

(4) if the Company calls the 2025 Notes for redemption;

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The 2025 Notes are the Company’s general unsecured obligations that rank senior in right of payment to all of its indebtedness that is expressly subordinated in right of payment to the 2025 Notes, and equal in right of payment to the Company’s unsecured indebtedness.

The 2025 Notes are classified on the Company’s Condensed Consolidated Balance Sheets at March 31, 2020 as long-term debt.

The 2025 Notes are classified on the Company’s Condensed Consolidated Balance Sheets at June 30, 2020 as long-term debt.

Under ASC 470-20, Debt with Conversion and Other Options, an entity must separately account for the liability and equity components of convertible debt instruments (such as the 2025 Notes) that may be settled entirely or partially in cash upon conversion, in a manner that reflects the issuer’s economic interest cost.

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Transaction costs attributable to the liability component are amortized to interest expense over the seven-year term of the 2025 Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity.

The effective interest rate on the liability components of the 2025 Notes for the period from the date of issuance through March 31, 2020 was 7.7 % .

The effective interest rate on the liability components of the 2025 Notes for the period from the date of issuance through June 30, 2020 was 7.7 %.

The following table sets forth total interest expense recognized related to the 2025 Notes ( in thousands ):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Contractual interest expense $ 1,725 $ 1,725 $ 3,450 $ 3,450

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ACCRUED EXPENSES

Accrued expenses at March 31, 2020 and December 31, 2019 consisted of the following ( in thousands ):

March 31, 2020

December 31, 2019

Accrued expenses at June 30, 2020 and December 31, 2019 consisted of the following ( in thousands ):

June 30, 2020 December 31, 2019

Government rebates payable $ 7,817 $ 6,584

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Total accrued expenses $ 44,379 $ 51,745

INCOME (LOSS) PER COMMON SHARE

Basic and diluted net income (loss) per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period.

The Company’s potentially dilutive shares, which include outstanding stock options, restricted stock units, warrants, and shares issuable upon conversion of the 2025 Notes, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

Basic and diluted net income (loss) per share is calculated as follows (net loss amounts are stated in thousands) :

Three Months Ended March 31,

Basic income (loss) per share

Restricted Stock

Stock Options

Diluted income (loss) per share

NET LOSS PER COMMON SHARE

Basic and diluted net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period.

The Company’s potentially dilutive shares, which include outstanding stock options, restricted stock units, warrants, and shares issuable upon conversion of the 2025 Notes, are considered to be common stock equivalents and are not included in the calculation of diluted net loss per share because their effect is anti-dilutive.

Basic and diluted net loss per share is calculated as follows (net loss amounts are stated in thousands) :

Three Months Ended June 30,

Shares Net Loss Loss per common share Shares Net Loss Loss per common share

Basic and diluted loss per share 44,763,843 $ ( 26,068 ) $ ( 0.58 ) 41,957,860 $ ( 38,701 ) $ ( 0.92 )

Six Months Ended June 30,

Shares Net Loss Loss per common share Shares Net Loss Loss per common share

Basic and diluted loss per share 43,943,370 $ ( 25,260 ) $ ( 0.57 ) 41,685,599 $ ( 79,678 ) $ ( 1.91 )

The following common stock equivalents have been excluded because they were anti-dilutive:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Restricted stock units 1,517,338 672,859 1,437,383 611,446

Convertible debt 7,113,402 7,891,920 7,113,402 8,151,426

Options 8,479,710 7,947,569 8,327,753 7,801,606

Total anti-dilutive shares 17,110,450 16,512,348 16,878,538 16,564,478

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Service Based Restricted Stock Units

The following table summarizes the Company’s service based restricted stock unit activity during the three months ended March 31, 2020 :

Number of Restricted Stock Units

Weighted Average Grant Date Fair Value

The following table summarizes the Company’s service based restricted stock unit activity during the six months ended June 30, 2020:

Number of Restricted Stock Units Weighted Average Grant Date Fair Value

Unvested December 31, 2019 763,728 $ 19.64

Granted 637,113 15.51

Vested ( 173,117 ) 21.25

Forfeited/canceled ( 68,414 ) 18.58

Unvested March 31, 2020

At March 31, 2020 , unamortized stock compensation for service based restricted stock units was $ 18.6 million , with a weighted-average recognition period of 2.9 years .

Unvested June 30, 2020 1,159,310 $ 17.19

At June 30, 2020, unamortized stock compensation for service based restricted stock units was $ 16.9 million, with a weighted-average recognition period of 2.6 years.

Performance Based Restricted Stock Units

The following table summarizes the Company’s performance based restricted stock unit activity during the three months ended March 31, 2020 :

Number of Restricted Stock Units

Weighted Average Grant Date Fair Value

The following table summarizes the Company’s performance based restricted stock unit activity during the six months ended June 30, 2020:

Number of Restricted Stock Units Weighted Average Grant Date Fair Value

Unvested December 31, 2019 233,500 $ 20.90

Granted 150,000 15.46

Vested ( 33,250 ) 25.75

Forfeited/canceled ( 31,125 ) 17.56

Unvested March 31, 2020

At March 31, 2020 , unamortized stock compensation for performance based restricted stock units was $ 2.5 million , with a weighted-average recognition period of 1.1 years .

Unvested June 30, 2020 319,125 $ 18.16

At June 30, 2020, unamortized stock compensation for performance based restricted stock units was $ 1.9 million, with a weighted-average recognition period of 1.4 years.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2020 :

Shares Underlying Options

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (years)

Aggregate Intrinsic Value (in thousands)

The following table summarizes stock option activity during the six months ended June 30, 2020:

Shares Underlying Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2019 7,371,733 $ 19.52 6.63 $ 4,906

Granted 1,390,125 $ 15.48

Exercised ( 35,042 ) $ 12.31

Forfeited/canceled ( 377,953 ) $ 18.96

Outstanding at March 31, 2020

At March 31, 2020 , unamortized stock compensation for stock options was $ 34.1 million , with a weighted-average recognition period of 2.9 years years.

At March 31, 2020 , outstanding options to purchase 5.2 million shares of common stock were exercisable with a weighted-average exercise price per share of $ 19.11 .

Outstanding at June 30, 2020 8,348,863 $ 18.90 6.79 $ 28,920

At June 30, 2020, unamortized stock compensation for stock options was $ 31.5 million, with a weighted-average recognition period of 2.8 years.

At June 30, 2020, outstanding options to purchase 5.3 million shares of common stock were exercisable with a weighted-average exercise price per share of $ 19.20 .

Share-Based Compensation

The following table sets forth total share-based compensation for the three months ended March 31, 2020 and 2019 ( in thousands ):

Three Months Ended March 31,

The following table sets forth total share-based compensation for the three and six months ended June 30, 2020 and 2019 ( in thousands ):

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Research and development $ 2,332 $ 1,896 $ 4,458 $ 3,566

Selling, general & administrative 3,622 3,852 7,406 8,702

Total $ 5,954 $ 5,748 $ 11,864 $ 12,268

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.

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In addition, the CARES Act allows net operating losses incurred in taxable years beginning after December 31, 2017, and before January 1, 2021, to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The Company has recorded an discrete income tax benefit of $ 19.0 million related to this legislation during the three months ended March 31, 2020.

We continue to evaluate the impact of the CARES Act on our financial position, results of operations and cash flows.

Inventory, net of reserves, consisted of the following at March 31, 2020 and December 31, 2019 ( in thousands ):

March 31, 2020

December 31, 2019

The Company has recorded a discrete income tax benefit of $ 18.9 million related to this legislation during the six months ended June 30, 2020.

Inventory, net of reserves, consisted of the following at June 30, 2020 and December 31, 2019 ( in thousands ):

June 30, 2020 December 31, 2019

Raw materials $ 3,037 $ 2,713

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Total inventory $ 6,286 $ 6,082

The inventory reserve was $ 3.2 million and $ 3.1 million at March 31, 2020 and December 31, 2019 , respectively.

The inventory reserve was $ 3.6 million and $ 3.1 million at June 30, 2020 and December 31, 2019, respectively.

ACCOUNTS RECEIVABLE

Accounts receivable, net of reserves for prompt pay discounts and expected credit losses, was $ 18.1 million and $ 18.0 million at March 31, 2020 and December 31, 2019 , respectively.

Accounts receivable, net of reserves for prompt pay discounts and expected credit losses, was $ 14.1 million and $ 18.0 million at June 30, 2020 and December 31, 2019, respectively.

The total reserves for both periods were immaterial.

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This resulted in a net $ 7.5 million non-cash charge to first quarter operations.

EQUITY OFFERINGS

Underwritten Public Offering of Common Stock

In June 2020, the Company sold an aggregate of 7.5 million shares of its common stock in an underwritten public offering, at a price to the public of $ 15.50 per share.

The net proceeds to the Company from the offering, after deducting the underwriting discounts and offering expenses, was $ 108.6 million.

At-the-Market Equity Offering Program

On February 24, 2020, the Company entered into an Open Market Sale Agreement with Jefferies LLC, as agent (“Jefferies”), pursuant to which we may offer and sell, from time to time through Jefferies, shares of our common stock having an aggregate offering price of up to $ 100.0 million (the “ATM Shares”).

The ATM Shares will be sold pursuant to our effective registration statement on Form S-3 (Registration Statement No.

In February 2020, the Company entered into an Open Market Sale Agreement ("ATM Agreement") with Jefferies LLC, as agent (“Jefferies”), pursuant to which the Company may offer and sell, from time to time through Jefferies, shares of its common stock having an aggregate offering price of up to $ 100.0 million.

Shares will be sold pursuant to the Company's effective registration statement on Form S-3 (Registration Statement No.

333-227182), as previously filed with the Securities and Exchange Commission.

Through the period ended March 31, 2020, the Company has sold zero shares under the ATM program.

Through the period ended June 30, 2020, the Company has not sold any shares under the ATM Agreement.

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