What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-07-31 · 128 added, 104 removed, 533 unchanged (30% of the section changed)

4 unchanged sentences

(in thousands, except par value and share amounts)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Assets (unaudited)

1 unchanged sentence

Cash and cash equivalents $ 200,481 $ 62,436

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

Available-for-sale debt securities, at fair value (amortized cost $ 254,655 , allowance for credit losses of $ 0 as of September 30, 2020;

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

255,786 336,088

Accounts receivable, net 15,025 18,048

13 unchanged sentences

Other current liabilities 6,775 8,590

Business combination-related contingent consideration 8,000 8,500

Business combination-related contingent consideration, current portion 8,900 8,500

Total current liabilities 75,426 95,449

6 unchanged sentences

20,000,000 shares authorized;

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

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

Common stock $ 0.0001 par value;

100,000,000 shares authorized;

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

51,023,187 and 43,088,921 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital 765,307 636,910

8 unchanged sentences

(in thousands, except share and per share amounts)

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

7 unchanged sentences

Write off of L-UDCA contingent consideration — — — ( 18,000 )

Impairment of long-term investment — 15,000 — 15,000

Total operating expenses 70,574 78,810 204,950 237,844

13 unchanged sentences

Foreign currency translation ( 564 ) 315 ( 620 ) 342

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

Unrealized gain (loss) on debt securities ( 480 ) 75 250 2,359

Comprehensive loss $ ( 23,593 ) $ ( 36,100 ) $ ( 48,179 ) $ ( 113,467 )

4 unchanged sentences

(unaudited, in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash Flows From Operating Activities:

11 unchanged sentences

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

Impairment of long-term investment — 15,000

Unrealized foreign currency transaction gain (loss) 117 539

29 unchanged sentences

(unaudited, in thousands, except share amounts )

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

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

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019

Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income Accumulated

Deficit Total

Stockholders'

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

Equity Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income Accumulated

Deficit Total

1 unchanged sentence

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

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

Share based compensation 5,139 5,139 4,178 4,178

1 unchanged sentence

Equity offering 48 48 —

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

Unrealized gain (loss) on debt securities ( 479 ) ( 479 ) 76 76

Foreign currency translation adjustments ( 566 ) ( 566 ) 315 315

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

ESPP stock purchase and expense 261 261 162 162

Net loss ( 22,549 ) ( 22,549 ) ( 36,490 ) ( 36,490 )

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

Balance - September 30 51,023,187 $ 5 $ 765,307 $ 354 $ ( 464,253 ) $ 301,413 42,958,401 $ 4 $ 630,966 $ 1,172 $ ( 386,185 ) $ 245,957

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019

Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income Accumulated

Deficit Total

Stockholders'

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

Equity Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income Accumulated

Deficit Total

10 unchanged sentences

Net loss ( 47,809 ) ( 47,809 ) ( 116,168 ) ( 116,168 )

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

Balance - September 30 51,023,187 $ 5 $ 765,307 $ 354 $ ( 464,253 ) $ 301,413 42,958,401 $ 4 $ 630,966 $ 1,172 $ ( 386,185 ) $ 245,957

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

8 unchanged sentences

We regularly evaluate and, where appropriate, act on opportunities to expand our product pipeline through licenses and acquisitions of products in areas that will serve patients with serious or rare diseases and that we believe offer attractive growth characteristics.

On January 30, 2020, the World Health Organization (“WHO”) declared that the recent novel coronavirus (COVID-19) outbreak was a global health emergency, which prompted national governments to begin putting actions in place to slow the spread of COVID-19.

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic.

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 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 ongoing novel coronavirus (COVID-19) pandemic 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 three and nine months ended September 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.

22 unchanged sentences

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC.

Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.

Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented.

Interim results are not necessarily indicative of the results that may be expected for any future periods.

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:

26 unchanged sentences

As such, clinical trial expenses will vary depending on all the factors set forth above and may fluctuate significantly from quarter to quarter.

Intangible Assets with Cost Accumulation Model

In 2014, the Company entered into a license agreement with Mission Pharmacal in which the Company obtained the exclusive right to license the trademark of Thiola.

The acquisition of the Thiola license qualified as an asset acquisition under the principles of ASC 805 in effect at the time of acquisition.

The license agreement requires the Company to make royalty payments based on net sales of Thiola.

The liability for royalties in excess of the annual contractual minimum is recognized in the period in which the royalties become probable and estimable, which is typically in the period corresponding with the respective sales.

The Company records an offsetting increase to the cost basis of the asset under the cost accumulation model.

The additional cost basis is subsequently amortized over the remaining life of the license agreement.

Consistent with all prior periods since Thiola was acquired, the Company has not accrued any liability for royalties in excess of the annual contractual minimum at September 30, 2020, as such royalties are not yet probable and estimable.

Adoption of New Accounting Standards

4 unchanged sentences

For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the

financial assets to present the net amount expected to be collected.

For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down.

3 unchanged sentences

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.

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 June 30, 2020.

As of September 30, 2020, the Company held $ 15.0 million in trade receivables and $ 255.8 million in available-for-sale debt securities.

See Note 16 and Note 4 for further discussion.

Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.

The ASU includes amendments to the guidance on convertible instruments and the derivative scope exception for contracts in an entity's own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20.

Additionally, the ASU will require entities to use the "if-converted" method when calculating diluted earnings per share for convertible instruments.

The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Management has not yet completed its assessment of the impact of the new standard on the Company's financial statements.

REVENUE RECOGNITION

28 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 and six months ended June 30, 2020 and 2019 ( in thousands ):

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

3 unchanged sentences

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

These securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income, 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.

5 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 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.

During the nine months ended September 30, 2020, investment activity for the Company included $ 223.3 million in maturities and $ 143.0 million in purchases, all relating to debt based marketable securities.

Debt securities consisted of the following ( in thousands ):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Commercial paper $ 63,163 $ 17,152

2 unchanged sentences

Total debt securities $ 255,786 $ 336,088

$ 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 ):

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

Remaining Contractual Maturity

2 unchanged sentences

Corporate debt securities Less than 1 91,922 619 — 92,541

Securities of government-sponsored entities Less than 1 43,081 — — 43,081

Total maturity less than 1 year 198,170 621 ( 6 ) 198,785

21 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 June 30, 2020 ( in thousands ):

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

Less Than 12 Months 12 Months or Greater Total

11 unchanged sentences

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.

As of September 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.

Liquidity issues that arose from economic circumstances surrounding the COVID-19 pandemic have continued to ease and unrealized losses observed in early 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.

8 unchanged sentences

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

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

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

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

6 unchanged sentences

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.

Coinciding with the notice delivered to the Landlord, the Company recorded an adjustment to the ROU ("Right-of-use") asset and lease liability in the first half of 2020 to reflect the impending expiration of the existing lease.

The remeasurement of the lease liability resulted in a $ 7.5 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 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.

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 is established when the Company is granted access to the premises and has the ability to direct its use, which has occurred in phases over 2020 as leased spaces became available.

As such, the ROU asset for the new lease has been 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.

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.

Coinciding with our ability to direct the use of that space, and utilizing a discount rate equal to our borrowing rate, 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 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

In September 2020, the Landlord delivered possession of the remainder of the new lease space.

Coinciding with our ability to direct the use of that additional space, and utilizing a discount rate equal to our borrowing rate, the Company established another ROU asset and lease liability, each of which totaled $ 25.7 million.

Both the ROU asset and lease liability are offset by lease incentives associated with tenant improvement allowances totaling $ 5.9 million.

The initial term of the new lease is 7 years, 7 months , through August 2028, and the Landlord has granted the Company an option to extend the term of the lease by a period of 5 years.

At this time, it is not reasonably certain that we will extend the term of the lease and therefore the renewal period has been excluded from the aforementioned ROU asset and lease liability measurements.

The measurement of the lease term occurs from the February 2021 planned occupancy date of the primary spaces delivered in September 2020.

Following is a schedule of the future minimum rental commitments for our operating leases reconciled to the lease liability and ROU asset as of September 30, 2020 ( in thousands ):

September 30, 2020

Thereafter 25,113

6 unchanged sentences

Total ROU asset $ 26,307

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

As of September 30, 2020, the ROU asset of $ 26.3 million was recorded to the Condensed Consolidated Balance Sheets as non-current Other Assets .

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

September 30, 2020

Other current liabilities $ 798

1 unchanged sentence

Total lease liabilities $ 28,720

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.

For the three and nine months ended September 30, 2020 and 2019, the Company recorded $ 0.7 million and $ 0.7 million, respectively, and $ 0.5 million and $ 1.8 million, respectively, in expense related to operating leases, including amortized tenant improvement allowances.

FAIR VALUE MEASUREMENTS

16 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 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.

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 June 30, 2020 ( in thousands ):

As of June 30, 2020

As of September 30, 2020, the fair value of the Company's 2.5 % Convertible Senior Notes due 2025 was $ 230.9 million, which was estimated utilizing market quotations, and are considered Level 2.

As of September 30, 2020

Total carrying and estimated fair value Quoted prices in active markets

14 unchanged sentences

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 ):

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 nine months ended September 30, 2020 ( in thousands ):

Fair Value Measurements of Acquisition-Related Contingent Consideration

2 unchanged sentences

Contractual payments $ ( 4,549 )

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

Contractual payments included in accrued liabilities at September 30, 2020 ( 2,454 )

Foreign currency impact ( 45 )

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.

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.

Balance at September 30, 2020 $ 71,300

For the three and nine months ended September 30, 2020, the Company incurred charges of $ 5.1 million and $ 7.4 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 September 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 nine months ended September 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 nine months ended September 30, 2019, the Company incurred income of $ 0.7 million and charges of $ 5.8 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 nine months ended September 30, 2019, $ 5.8 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.

2 unchanged sentences

INTANGIBLE ASSETS

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

As of September 30, 2020, the net book value of amortizable intangible assets was approximately $ 154.2 million.

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

September 30, 2020 December 31, 2019

Finite-lived intangible assets $ 259,537 $ 245,802

1 unchanged sentence

Net carrying value $ 154,217 $ 157,200

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

8 unchanged sentences

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

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

2.50 % convertible senior notes due 2025

$ 276,000 $ 276,000

Unamortized debt discount ( 58,848 ) ( 65,963 )

6 unchanged sentences

(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

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

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

3 unchanged sentences

If a “make-whole fundamental change” (as defined in the 2025 Indenture) occurs, then the Company will, in certain circumstances, increase the conversion rate for a specified period of time.

The 2025 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after September 15, 2022 and, in the case of any partial redemption, on or before the 40th scheduled trading day before the Maturity Date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice.

days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice.

If a fundamental change (as defined in the 2025 Indenture) occurs, then, subject to certain exceptions, holders may require the Company to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

4 unchanged sentences

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 June 30, 2020 as long-term debt.

The 2025 Notes are classified on the Company’s Condensed Consolidated Balance Sheets at September 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.

6 unchanged sentences

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 June 30, 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 September 30, 2020 was 7.7 %.

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

15 unchanged sentences

ACCRUED EXPENSES

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

June 30, 2020 December 31, 2019

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

September 30, 2020 December 31, 2019

Government rebates payable $ 11,139 $ 6,584

9 unchanged sentences

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

Three Months Ended June 30,

Three Months Ended September 30,

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

Basic and diluted loss per share 50,929,575 $ ( 22,549 ) $ ( 0.44 ) 42,943,828 $ ( 36,490 ) $ ( 0.85 )

Six Months Ended June 30,

Nine Months Ended September 30,

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

1 unchanged sentence

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

26 unchanged sentences

SHARE-BASED COMPENSATION

Restricted Shares

Restricted Stock Units

Service Based Restricted Stock Units

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

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

Number of Restricted Stock Units Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited/canceled ( 79,491 )

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.

Unvested September 30, 2020 1,160,723 $ 17.19

At September 30, 2020, unamortized stock compensation for service based restricted stock units was $ 15.1 million, with a weighted-average recognition period of 2.4 years.

Performance Based Restricted Stock Units

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

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

Number of Restricted Stock Units Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited/canceled ( 110,250 )

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.

Unvested September 30, 2020 200,000 $ 16.67

At September 30, 2020, unamortized stock compensation for performance based restricted stock units was $ 1.2 million, with a weighted-average recognition period of 1.1 years.

Stock Options

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

The following table summarizes stock option activity during the nine months ended September 30, 2020:

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

3 unchanged sentences

Forfeited/canceled ( 394,340 )

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 .

Outstanding at September 30, 2020 8,371,498 $ 18.95 6.58 $ 17,968

At September 30, 2020, unamortized stock compensation for stock options was $ 28.9 million, with a weighted-average recognition period of 2.6 years.

At September 30, 2020, outstanding options to purchase 5.4 million shares of common stock were exercisable with a weighted-average exercise price per share of $ 19.34 .

Share-Based Compensation

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

5 unchanged sentences

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 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

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

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

September 30, 2020 December 31, 2019

Raw materials $ 2,858 $ 2,713

1 unchanged sentence

Total inventory $ 7,259 $ 6,082

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

The inventory reserve was $ 3.8 million and $ 3.1 million at September 30, 2020 and December 31, 2019, respectively.

ACCOUNTS RECEIVABLE

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.

Accounts receivable, net of reserves for prompt pay discounts and expected credit losses, was $ 15.0 million and $ 18.0 million at September 30, 2020 and December 31, 2019, respectively.

The total reserves for both periods were immaterial.

The Company's adoption of ASU No.

2016-13, Financial Instruments - Credit Losses, included an assessment of our aged trade receivables balances and their underlying credit risk characteristics.

2016-13, Financial Instruments - Credit Losses, and current period evaluation included an assessment of our aged trade receivables balances and their underlying credit risk characteristics.

Our evaluation of past events, current conditions, and reasonable and supportable forecasts about the future resulted in an expectation of immaterial credit losses.

13 unchanged sentences

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

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

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

SUBSEQUENT EVENTS

On October 21, 2020, Retrophin, Inc.

(the “Company”) entered into a Stock Purchase Agreement (the “Agreement”) with Orphan Technologies Limited (“Orphan”) and Citco Trustees (Cayman) Limited (“Trustee”) acting solely in its capacity as the sole trustee of The Fuhrer Family Trust (the “Trust” and Trustee, acting in such capacity, (“Seller”), pursuant to which the Company will acquire Orphan, and its sole pharmaceutical candidate, OT-58, by purchasing all of the outstanding shares of Orphan (the “Shares”) from Seller.

In exchange for the Shares, the Company agreed to pay Seller an upfront cash payment at closing of $ 90 million.

Under the Agreement, the Company has also agreed to pay Seller contingent cash payments up to an aggregate of $ 427 million based on the achievement of certain development, regulatory and commercialization events as set forth in the Agreement, as well as additional tiered mid-single digit royalty payments based upon future net sales of any OT-58 products in the US and Europe, subject to certain reductions as set forth in the Agreement, and a contingent payment in the event a pediatric rare disease voucher for any OT-58 product is granted.

The closing payment of $ 90 million may be adjusted after the closing, pursuant to procedures set forth in the Agreement, in connection with the finalization of the closing cash, severance payments, transaction expenses, debt and working capital amounts.

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