What changed in this filing

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Item 9A. Controls and Procedures

2021-03-01 compared with 2020-02-24 · 505 added, 453 removed, 838 unchanged (53% of the section changed)

2 unchanged sentences

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the

end of the year covered by this report.

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Inte rnal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

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Shareholders and Board of Directors

Retrophin, Inc.

Travere Therapeutics, Inc.

San Diego, California

Opinion on Internal Control over Financial Reporting

We have audited Retrophin, Inc.

We have audited Travere Therapeutics, Inc.

and its subsidiaries’ (the “Company’s”) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company and subsidiaries as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and our report dated February 24, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company and subsidiaries as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated March 1, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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San Diego, California

February 24, 2020

March 1, 2021

OTHER INFORMATION

On February 24, 2020, we entered into an Open Market Sale Agreement (the “Sales 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.

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

We will also file a prospectus supplement with the Securities and Exchange Commission in connection with the offer and sale of the ATM Shares.

Under the Sales Agreement, Jefferies may sell the ATM Shares by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the Nasdaq Stock Market, on any other existing trading market for our common stock or to or through a market maker.

In addition, under the Sales Agreement, Jefferies may sell the ATM Shares by any other method permitted by law.

We may instruct Jefferies not to sell the ATM Shares if the sales cannot be effected at or above the price designated by us from time to time.

We are not obligated to make any sales of the ATM Shares under the Sales Agreement.

The offering of the ATM Shares pursuant to the Sales Agreement will terminate upon the earlier of (a) the sale of all of the ATM Shares subject to the Sales Agreement or (b) the termination of the Sales Agreement by Jefferies or us, as permitted therein.

The Sales Agreement contains customary representations, warranties and agreements by us, and customary indemnification and contribution rights and obligations of the parties.

We will pay Jefferies a sales commission of 3.0% of the aggregate gross proceeds from each sale of the ATM Shares.

We will also reimburse Jefferies for certain specified expenses in connection with entering into the Sales Agreement.

The Sales Agreement is filed as Exhibit 1.1 to this report, and the description of the terms of the Sales Agreement is qualified in its entirety by reference to such exhibit.

A copy of the opinion of Cooley LLP relating to the legality of the issuance and sale of the ATM Shares is attached as Exhibit 5.1 hereto.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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The exhibits to this report are listed in the exhibit index below.

Open Market Sales Agreement, dated February 24, 2020, by and between Retrophin, Inc.

and Jefferies LLC.

Asset Purchase Agreement, dated May 22, 2015, by and between Retrophin, Inc.

and Sanofi (incorporated by reference to Exhibit 2.1 to the Company's Current report on Form 8-K filed with the SEC on May 27, 2015).

1.1 Open Market Sales Agreement, dated February 24, 2020, by and between the Company and Jefferies LLC.

(incorporated by reference to Exhibit 1.1 to the Company's Annual Report on Form 10-K filed with the SEC on February 24, 2020).

2.1+ Asset Purchase Agreement dated January 10, 2015 by and between the Company and Asklepion Pharmaceuticals, LLC (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2015).

2.2+ Asset Purchase Agreement dated as of June 9, 2016 between the Company and Asklepion Pharmaceuticals, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 5 , 2016).

2.3+ Stock Purchase Agreement, dated October 21, 2020, by and among the Company, Orphan Technologies Limited and Citco Trustees (Cayman) Limited acting solely in its capacity as the sole trustee of The Fuhrer Family Trust (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 18, 2020).

3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to Amendment No.

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3.2 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 11, 2015).

Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the SEC on June 11, 2015).

3.3 Certificate of Amendment of Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.

2 to the Company’s Current Report on Form 8-K, filed with the SEC on November 16, 2020).

3.4 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.

1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 16, 2020).

4.1 Reference is made to Exhibits to 3.1 , 3.2 , 3.3 and 3.4 .

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Bank National Association, as Trustee (including the form of 2.50% Convertible Senior Note due 2025) (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on September 10, 2018).

Opinion of Cooley LLP.

Trademark License and Supply Agreement, dated May 29, 2014, by and between Retrophin, Inc.

and Mission Pharmacal Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 4, 2014).

First Amendment to Trademark License and Supply Agreement, effective as of July 28, 2014, by and between Mission Pharmacal Company and Retrophin, Inc.

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 29, 2014).

10.1 Trademark License and Supply Agreement, dated May 29, 2014, by and between the Company and Mission Pharmacal Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 4, 2014).

10.2 First Amendment to Trademark License and Supply Agreement, effective as of July 28, 2014, by and between Mission Pharmacal Company and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 29, 2014).

10.3 International Rights Purchase Agreement, dated as of March 26, 2014, by and between Manchester Pharmaceuticals LLC and Retrophin Therapeutics International, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 31, 2014).

Sublicense Agreement, dated February 16, 2012, by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation, Pharmacopeia, Inc., a Delaware limited liability company, and Retrophin, LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 19, 2012).

Employment Agreement, dated March 2, 2015, by and between Retrophin, Inc.

10.4+ Sublicense Agreement, dated February 16, 2012, by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation, Pharmacopeia, Inc., a Delaware limited liability company, and the Company, a Delaware limited liability company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on December 19, 2012).

10.5† Employment Agreement, dated March 2, 2015, by and between the Company and Laura M.

Clague (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 11, 2015).

Retrophin, Inc.

2014 Incentive Compensation Plan as amended (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 9, 2015).

10.6† The Company's 2014 Incentive Compensation Plan as amended (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 9, 2015).

10.7+ Amendment No.

4 to Sublicense Agreement dated as of September 17, 2015, between Retrophin, Inc.

and Ligand Pharmaceuticals Incorporated (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q/A, filed with the SEC on December 22, 2015).

4 to Sublicense Agreement dated as of September 17, 2015, between the Company and Ligand Pharmaceuticals Incorporated (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q/A, filed with the SEC on December 22, 2015).

10.8 Addendum to Trademark License and Supply Agreement, dated October 19, 2015, by and between to Company and Mission Pharmacal (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on November 6, 2015).

Asset Purchase Agreement dated as of January 9, 2015, between Retrophin, Inc.

and Turing Pharmaceuticals AG (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2015).

Asset Purchase Agreement dated as of February 12, 2015, among Retrophin, Inc., Manchester Pharmaceuticals LLC and Turing Pharmaceuticals AG (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2015).

10.9+ Amendment No.

3 to Sublicense Agreement dated as of February 27, 2015, between Retrophin, Inc.

and Ligand Pharmaceuticals Incorporated (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2015).

Asset Purchase Agreement dated January 10, 2015 by and between Retrophin, Inc.

and Asklepion Pharmaceuticals, LLC (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2015).

3 to Sublicense Agreement dated as of February 27, 2015, between the Company and Ligand Pharmaceuticals Incorporated (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2015).

10.10+ Amendment One to the Third Amendment to Trademark License and Supply Agreement, dated September 12, 2016, by and between the Company and Mission Pharmacal Company (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on November 4, 2016).

10.11+ Amendment Two to the Third Amendment to Trademark License and Supply Agreement, dated November 3, 2017, by and between the Company and Mission Pharmacal Company (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K, filed with the SEC on February 27, 2018).

Third Amendment to Trademark License and Supply Agreement dated as of March 17, 2016, between Retrophin Inc.

and Mission Pharmacal.

10.12+ Third Amendment to Trademark License and Supply Agreement dated as of March 17, 2016, between the Comp any and Mission Pharmacal.

(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 5, 2016).

Fourth Amendment to Trademark License and Supply Agreement dated as of November 28, 2018, between Retrophin Inc.

and Mission Pharmacal (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2019).

Asset Purchase Agreement dated as of June 9, 2016 between Retrophin, Inc.

and Asklepion Pharmaceuticals, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 4, 2016).

Retrophin, Inc.

2015 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.1 to the Company's current report on Form 8-K, filed with the SEC on May 18, 2017).

Amendment to Employment Agreement, entered into as of April 11, 2017 and modifies the Employment Agreement dated March 2, 2015, by and between Retrophin, Inc.

10.13 Fourth Amendment to Trademark License and Supply Agreement dated as of November 28, 2018, between the Company and Mission Pharmacal (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2019).

10.14+ Fifth Amendment to Trademark License and Supply Agreement dated as of September 30, 2020, between the Company and Mission Pharmacal Company (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on November 5, 2020).

10.15 The Company's 2015 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.1 to the Company's current report on Form 8-K, filed with the SEC on May 18, 2017).

10.16† Amendment to Employment Agreement, entered into as of April 11, 2017 and modifies the Employment Agreement dated March 2, 2015, by and between the Company and Laura M.

Clague (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 5, 2017).

Retrophin, Inc.

2017 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.2 to the Company's current report on Form 8-K, filed with the SEC on May 18, 2017)

10.17 The Company's 2017 Employee Stock Purchase Plan (incorporated by reference to Exhibit 99.2 to the Company's current report on Form 8-K, filed with the SEC on May 18, 2017)

10.18 Form of Stock Option Grant Notice, Option Agreement and Notice of Exercise for Inducement Grant Outside of 2015 Equity Incentive Plan (incorporated by reference to Exhibit 99.3 to the Company's current report on Form S-8, filed with the SEC on June 8, 2017).

10.19 Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement for Inducement Grant Outside of 2015 Equity Incentive Plan(incorporated by reference to Exhibit 99.4 to the Company's current report on Form S-8, filed with the SEC on June 8, 2017).

Retrophin, Inc.

2018 Equity Incentive Plan, Form of Stock Option Grant Notice, Option Agreement and Exercise Notice, Form of Restricted Stock Unit Award Agreement for use thereunder.

10.2† The Company's 2018 Equity Incentive Plan, Form of Stock Option Grant Notice, Option Agreement and Exercise Notice, Form of Restricted Stock Unit Award Agreement for use thereunder.

(incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 10, 2018)

Retrophin, Inc.

2018 Equity Incentive Plan, as amended, and, Form of Stock Option Grant Notice, Option Agreement and Exercise Notice, Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement for use thereunder (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No.

10.21† The Company's 2018 Equity Incentive Plan, as amended, and, Form of Stock Option Grant Notice, Option Agreement and Exercise Notice, Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement for use thereunder (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No.

333-232857), filed with the SEC on July 26, 2019).

10.22† The Company's 2018 Equity Incentive Plan, as amended, and, Form of Stock Option Grant Notice, Option Agreement and Exercise Notice, Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement for use thereunder (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the SEC on May 19, 2020).

10.23 Form of Stock Option Grant Notice, Option Agreement and Notice of Exercise for Inducement Grant Outside of 2018 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 (File No.

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Reed (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 1, 2018)

2019 Retrophin, Inc.

Executive Officer Annual Bonus Plan.

(incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2019).

10.29† Retirement Agreement, dated January 4, 2019, by and between the Company and Stephen Aselage (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2019).

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(incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2019).

Separation Agreement, dated April 19, 2019, by and between the Company and Neil McFarlane (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 19, 2019).

10.32† Office Lease, effective April 12, 2019, between the Company and Kilroy Realty, L.P.

(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on August 6, 2019).

10.33 First Amendment to Office Lease, dated November 7, 2019, between the Company and Kilroy Realty, L.P.

(incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the SEC on June 8, 2020).

10.34 Third Amendment to Existing Office Lease and Second Amendment to Long Term Lease, dated May 29, 2020, between the Company and Kilroy Realty, L.P.

(incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed with the SEC on June 8, 2020).

10.35† Non-Employee Director Compensation Program.

(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 11, 2020).

10.36† Employment Agreement, dated October 1, 2019, by and between the Company and Peter Heerma (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 5, 2020).

10.37¥* Master Manufacturing Supply Agreement, dated September 30, 2020, between the Company and STA Pharmaceutical Hong Kong Limited, a subsidiary of WuKi AppTec (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on November 5, 2020).

10.38† The Company's 2021 Executive Officer Annual Bonus Plan.

21.1 List of subsidiaries of the Company.

23.1 Consent of BDO USA, LLP.

Consent of Cooley LLP (included in Exhibit 5.1)

24.1 Power of Attorney (see signature page hereto).

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32.2 Chief Financial Officer’s Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002.

Inline XBRL Instance Document.

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

Taxonomy Extension Presentation Linkbase Document.

101.INS Inline XBRL Instance Document.

101.SCH Inline XBRL Taxonomy Extension Schema Document.

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE Taxonomy Extension Presentation Linkbase Document.

104 The cover page to this Annual Report on Form 10-K has been formatted in Inline XBRL.

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† Indicates management contract or compensatory plan.

¥ Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

The Company undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.

* Certain portions of this exhibit are omitted because they are not material and would likely cause competitive harm to the Company if publicly disclosed.

FORM 10-K SUMMARY

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

February 24, 2020

RETROPHIN, INC.

March 1, 2021 Travere Therapeutics, Inc.

Chief Executive Officer

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Chief Executive Officer and Director (Principal Executive Officer)

February 24, 2020

/s/ Laura Clague

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

February 24, 2020

/s/ Stephen Aselage

Stephen Aselage

February 24, 2020

/s/ Timothy Coughlin

Timothy Coughlin

February 24, 2020

/s/ Gary Lyons

February 24, 2020

Signature Title Date

Dube Chief Executive Officer and Director (Principal Executive Officer)

Dube March 1, 2021

/s/ Laura Clague Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Laura Clague March 1, 2021

/s/ Stephen Aselage Director

Stephen Aselage March 1, 2021

Baynes Director

Baynes March 1, 2021

/s/ Suzanne Bruhn Director

Suzanne Bruhn March 1, 2021

/s/ Timothy Coughlin Director

Timothy Coughlin March 1, 2021

/s/ Gary Lyons Director

Gary Lyons March 1, 2021

/s/ Jeffrey A.

February 24, 2020

Meckler Director

Meckler March 1, 2021

Orwin Director

Orwin March 1, 2021

/s/ Sandra E.

February 24, 2020

/s/ Ron Squarer

February 24, 2020

RETROPHIN, INC.

Poole Director

Poole March 1, 2021

/s/ Ron Squarer Director

Ron Squarer March 1, 2021

TRAVERE THERAPEUTICS, INC.

AND SUBSIDIARIES

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Shareholders and Board of Directors

Retrophin, Inc.

Travere Therapeutics, Inc.

San Diego, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Retrophin, Inc.

We have audited the accompanying consolidated balance sheets of Travere Therapeutics, Inc.

(the “Company”) and subsidiaries as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 24, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2021 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases, and its method of accounting for certain financial instruments with down round features in 2018 due to the adoption of Accounting Standards Update 2017-11, Earnings Per Share (Topic 260);

Distinguishing Liabilities from Equity (Topic 480);

Derivatives and Hedging (Topic 815):

(Part I) Accounting for Certain Financial Instruments with Down Round Features.

As discussed in Note 18 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

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(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Contingent Consideration

As described in Note 8 to the consolidated financial statements, 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.

The Company recorded contingent consideration liabilities at their fair value on the acquisition date and revalues them at the end of each reporting period.

We identified the determination of the contingent consideration liabilities’ fair value as a critical audit matter.

The determination of the contingent consideration liabilities’ fair value requires management to make significant judgments including the appropriateness of the valuation model and the reasonableness of estimates and assumptions included in the forecasts of future net sales and the discount rates applied to such forecasts.

Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities.

Auditing these elements involved especially challenging auditor judgment due to the subjectivity and the nature and extent of audit effort required to address the matter, including the extent of specialized skill or knowledge needed.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Business Combination-Related Contingent Consideration

The Company recorded business combination-related contingent consideration liabilities at their fair value on the acquisition date and revalues them at the end of each reporting period.

We identified the determination of the fair value of business combination-related contingent consideration as a critical audit matter.

The determination of the fair value of business combination-related contingent consideration requires management to make significant judgments including the appropriateness of the valuation model selected, the reasonableness of estimates and assumptions utilized in forecasts of future net sales and the discount rates applied to such forecasts.

Changes in these judgments could have a significant impact on the fair value of the business combination-related contingent consideration.

Auditing these elements involved especially challenging auditor judgment due to the subjectivity, nature and extent of auditor effort required to address the matter, including the extent of specialized skills and knowledge needed.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of certain controls over the development of the significant assumptions used in the valuation model, including controls over assumptions related to:

(i) estimates in the forecasts of future net sales and (ii) discount rates applied to the forecasts.

Assessing the reasonableness of certain significant assumptions used in the valuation model, through:

(i) reviewing the products’ historical performance, (ii) evaluating the reasonableness of significant assumptions (including revenue projections) against budgets and the current performance of the Company, and (iii) performing sensitivity analyses to test the potential effect of changes in certain assumptions on the valuation.

Utilizing professionals with specialized skills and knowledge to assist in evaluating the appropriateness of the valuation models utilized by management and to assess the reasonableness of certain estimates and assumptions used by management to develop the discount rates applied to the net sales forecasts.

/s/ BDO USA, LLP

• Testing the design and operating effectiveness of certain controls over the development of the significant assumptions used in the valuation model selected, including controls over assumptions related to:

(i) forecasts of future net sales and (ii) discount rates applied to the forecasts.

• Assessing the reasonableness of certain significant assumptions used in the valuation model, by:

(i) reviewing the products’ historical performance, (ii) evaluating the reasonableness of significant assumptions (including net sales projections) against budgets and the current performance of the Company, and (iii) performing sensitivity analyses to test the potential effect of changes in certain assumptions on the valuation.

• Utilizing professionals with specialized skills and knowledge in valuation to assist in evaluating the appropriateness of the valuation models utilized by management and to assess the reasonableness of certain estimates and assumptions used by management to develop the discount rates applied to the net sales forecasts.

We have served as the Company’s auditor since 2014.

/s/ BDO USA, LLP

San Diego, California

February 24, 2020

RETROPHIN, INC.

March 1, 2021

TRAVERE THERAPEUTICS, INC.

AND SUBSIDIARIES

1 unchanged sentence

(In thousands, except share and per share amounts)

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Current assets:

Cash and cash equivalents $ 84,772 $ 62,436

Marketable securities

Available-for-sale debt securities, at fair value (amortized cost $ 276,111 , allowance for credit losses of $ 0 as of December 31, 2020;

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

276,817 336,088

Accounts receivable, net 15,925 18,048

1 unchanged sentence

Prepaid expenses and other current assets 8,143 5,015

Prepaid taxes

Tax receivable 17,142 1,395

Total current assets 410,407 429,064

Property and equipment, net 9,418 2,891

Investment-equity

Other assets 33,489 14,709

Intangible assets, net 153,189 157,200

Goodwill 936 936

Total assets $ 607,439 $ 604,800

Liabilities and Stockholders' Equity

4 unchanged sentences

Business combination-related contingent consideration 17,400 8,500

Convertible debt

Total current liabilities 92,660 95,449

Convertible debt 215,339 204,861

Other noncurrent liabilities

Other non-current liabilities 40,527 20,894

Business combination-related contingent consideration, less current portion 47,700 62,400

Total liabilities 396,226 383,604

Commitments and Contingencies (See Note 11)

Stockholders' Equity:

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20,000,000 shares authorized;

0 issued and outstanding as of December 31, 2019 and 2018, respectively

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

Common stock $ 0.0001 par value;

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Accumulated deficit ( 585,875 ) ( 416,444 )

Accumulated other comprehensive income (loss)

Accumulated other comprehensive (loss) income ( 902 ) 726

Total stockholders' equity 211,213 221,196

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

RETROPHIN, INC.

TRAVERE THERAPEUTICS, INC.

AND SUBSIDIARIES

2 unchanged sentences

Years Ended December 31,

2020 2019 2018

Net product sales $ 198,321 $ 175,338 $ 164,246

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Restructuring — — ( 242 )

Legal fee settlement

Impairment of L-UDCA IPR&D intangible asset — 25,500 —

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

Acquired IPR&D expense 97,131 — —

Impairment of long-term investment — 15,000 —

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Loss on extinguishment of debt — — ( 17,042 )

Change in fair value of derivative instruments

Total other expense, net ( 12,627 ) ( 9,087 ) ( 21,827 )

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Income tax benefit (provision) 19,359 21 ( 811 )

Net loss $ ( 169,431 ) $ ( 146,427 ) $ ( 102,678 )

Basic and diluted net loss per common share $ ( 3.56 ) $ ( 3.46 ) $ ( 2.54 )

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Comprehensive loss:

Foreign currency translation gain (loss)

Unrealized gain (loss) on marketable securities

Net loss $ ( 169,431 ) $ ( 146,427 ) $ ( 102,678 )

Foreign currency translation (loss) gain ( 1,452 ) 92 39

Unrealized (loss) gain on debt securities ( 176 ) 2,163 ( 553 )

Comprehensive loss $ ( 171,059 ) $ ( 144,172 ) $ ( 103,192 )

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

RETROPHIN, INC.

TRAVERE THERAPEUTICS, INC.

AND SUBSIDIARIES

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(In thousands, except share amounts)

Additional Paid in Capital

Accumulated Other Comprehensive Income (Loss)

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

Deficit Total

Stockholders'

Shares Amount

BALANCE - DECEMBER 31, 2017 39,373,745 $ 4 $ 471,800 $ ( 1,015 ) $ ( 177,655 ) $ 293,134

Adoption of ASU 2016-16 required de-recognition of intra-company deferred tax assets

Adoption of ASU 2017-11 - reclassification of derivative liability of warrants with down round provisions — — 5,394 — 10,316 15,710

Share based compensation — — 19,494 — — 19,494

Exercise of warrants and reclassification of derivative liability

Unrealized gain/(loss) on marketable securities

Exercise of warrants 1,036,054 — 5,305 — — 5,305

Unrealized gain/(loss) on debt securities — — — ( 553 ) — ( 553 )

Foreign currency translation adjustments — — — 39 — 39

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

892,713 — 10,588 — — 10,588

ESPP stock purchase and expense 87,012 — 2,269 — — 2,269

Convertible debt issue — — 74,945 — — 74,945

Net loss — — — — ( 102,678 ) ( 102,678 )

BALANCE - DECEMBER 31, 2018 41,389,524 $ 4 $ 589,795 $ ( 1,529 ) $ ( 270,017 ) $ 318,253

Adoption of ASU 2017-11 - reclassification of derivative liability of warrants with down round provisions

Share based compensation — — 20,463 — — 20,463

Exercise of warrants

Unrealized gain/(loss) on marketable securities

Unrealized gain/(loss) on debt securities — — — 2,163 — 2,163

Foreign currency translation adjustments — — — 92 — 92

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

272,730 — 1,618 — — 1,618

ESPP stock purchase and expense 129,324 — 2,444 — — 2,444

Convertible debt issue 1,297,343 — 22,590 — — 22,590

Net loss — — — — ( 146,427 ) ( 146,427 )

BALANCE - DECEMBER 31, 2019 43,088,921 $ 4 $ 636,910 $ 726 $ ( 416,444 ) $ 221,196

Share based compensation — — 22,733 — — 22,733

Unrealized gain/(loss) on marketable securities

Issuance of common stock under the equity incentive plan and proceeds from exercise 649,075 — 3,895 — — 3,895

Issuance of common stock under equity offering and proceeds 7,475,000 1 108,691 — — 108,692

Issuance of common stock under At-The-Market offering and proceeds 867,806 — 22,828 22,828

Unrealized gain/(loss) on debt securities — — — ( 176 ) — ( 176 )

Foreign currency translation adjustments — — — ( 1,452 ) — ( 1,452 )

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

ESPP stock purchase and expense 167,629 — 2,928 — — 2,928

Convertible debt issue

Net loss — — — — ( 169,431 ) ( 169,431 )

BALANCE - DECEMBER 31, 2020 52,248,431 $ 5 797,985 $ ( 902 ) $ ( 585,875 ) $ 211,213

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

RETROPHIN, INC.

TRAVERE THERAPEUTICS, INC.

AND SUBSIDIARIES

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For the year ended December 31,

2020 2019 2018

Cash Flows from Operating Activities:

Net loss $ ( 169,431 ) $ ( 146,427 ) $ ( 102,678 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

Deferred income tax

Settlement expense

Share based compensation 23,614 21,105 19,774

Other operating activities 851 ( 51 ) ( 396 )

Loss on impairment of long-term investment — 15,000 —

Loss on extinguishment of debt — — 17,042

Impairment of intangible assets

Loss on allowance for inventory 2,225 1,468 2,457

Loss on impairment of long-term investment

Accretion of notes receivable

Accretion of contingent consideration

Amortization of debt discount and deferred financing costs

Amortization of (discounts) premiums on investments

Share based compensation

Lease expense 1,209 56 456

Impairment of intangible assets — 25,500 —

Foreign currency transaction (gain) loss ( 934 ) 112 464

Acquired IPR&D expense 97,131 — —

Depreciation and amortization 24,579 20,408 18,668

Change in estimated fair value of contingent consideration 3,655 ( 2,948 ) 11,590

Payments from change in fair value of contingent consideration ( 12,407 ) ( 5,661 ) ( 8,085 )

Change in estimated fair value of liability classified warrants

Foreign currency transaction gain

Other operating activities

Changes in operating assets and liabilities, net of business acquisitions:

Amortization of debt discount and deferred financing costs 10,478 9,903 3,398

Amortization of premiums (discounts) on investments 703 ( 788 ) 382

Accretion of contingent consideration 1,626 1,485 1,357

Changes in operating assets and liabilities, net of asset acquisition:

Accounts receivable 2,301 ( 5,184 ) 152

Inventory ( 5,067 ) ( 1,958 ) ( 2,773 )

Prepaid expenses and other current assets ( 4,314 ) 208 ( 1,358 )

Prepaid income taxes

Tax receivable ( 15,746 ) 555 1,126

Change in lease assets and liabilities, net ( 1,203 ) ( 4,854 ) —

Accounts payable ( 6,036 ) 9,255 ( 2,708 )

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Investment - Equity — — ( 15,000 )

Proceeds from the sale/maturity of marketable securities

Proceeds from the sale/maturity of debt securities 273,482 259,140 162,755

Purchase of marketable securities ( 214,964 ) ( 223,712 ) ( 331,345 )

Proceeds from the maturity of notes receivable

Purchased IPR&D, net of cash acquired ( 95,279 ) — —

Net cash provided by (used in) investing activities ( 61,327 ) 19,863 ( 203,291 )

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Proceeds from exercise of stock options 3,895 1,618 10,588

Proceeds from the issuance of common stock in At-the-Market equity offering 22,828 — —

Proceeds from the issuance of common stock in underwritten public offering 108,692 — —

Proceeds from issuance of 2025 convertible senior notes — — 276,000

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Payment of debt issuance and financing costs — — ( 8,820 )

Other financing activities

Proceeds from the issuance of common stock under the employee stock purchase program 2,046 1,777 1,714

Net cash provided by (used in) financing activities 127,713 ( 2,077 ) 231,863

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Cash paid for interest $ 6,901 $ 7,669 $ 1,880

Cash paid for income taxes

Cash refunded (paid) for income taxes $ 3,373 $ ( 656 ) $ ( 218 )

Non-cash Investing and financing activities:

Reclassification of derivative liability to equity due to exercise of warrants

Accrued Capital Expenditure $ 1,856 $ — $ —

Accrued royalty in excess of minimum payable to the sellers of Thiola $ 18,168 $ 15,815 $ 14,572

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

RETROPHIN, INC.

TRAVERE THERAPEUTICS, INC.

AND SUBSIDIARIES

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Organization and Description of Business

Retrophin, Inc.

(“we”, “our”, “us”, “Retrophin” and the “Company”) refers to Retrophin, Inc., a Delaware corporation, as well as our direct and indirect subsidiaries.

Retrophin is a fully integrated biopharmaceutical company headquartered in San Diego, California focused on identifying, developing and delivering life-changing therapies to people with rare diseases.

Travere Therapeutics, Inc.

(“we”, “our”, “us”, “Travere” and the “Company”) refers to Travere Therapeutics, Inc., a Delaware corporation, as well as our direct and indirect subsidiaries.

In November 2020, we changed our name to Travere Therapeutics, Inc.

from Retrophin, Inc.

Travere is a fully integrated biopharmaceutical company headquartered in San Diego, California focused on identifying, developing and delivering life-changing therapies to people with rare diseases.

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.

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 twelve months ended December 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.

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

The Company is continuing to monitor the events and circumstances surrounding the COVID-19 pandemic, which may require adjustments to the Company’s estimates and assumptions in the future.

Clinical Programs:

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IgAN is the most common primary glomerular disease.

Chenodal ® has also been the standard of care for cerebrotendinous xanthomatosis (“CTX”) patients for more than three decades but is not currently labeled for this indication.

In January 2020, we randomized the first patients in a Phase 3 clinical trial to evaluate the effects of Chenodal in adult and pediatric patients with CTX.

The pivotal study, known as the RESTORE study, is intended to support a new drug application (“NDA”) submission for marketing authorization of Chenodal for CTX in the United States.

Cooperative Research and Development Agreements ("CRADAs"):

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.

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.

TVT-058 ( previously OT-58) is a novel investigational human enzyme replacement candidate being evaluated for the treatment of classical homocystinuria (HCU).

Classical HCU is a rare metabolic disorder characterized by elevated levels of plasma homocysteine that can lead to vision, skeletal, circulatory and central nervous system issues.

TVT-058 is currently being tested in a Phase 1/2 double blind, randomized, placebo-controlled dose escalation study to assess its safety, tolerability, pharmacokinetics, pharmacodynamics and clinical effects in patients with classical HCU.

TVT-058 has been granted Rare Pediatric Disease and Fast Track designations by the FDA, as well as orphan drug designation in the United States and Europe.

We acquired TVT-058 as part of the November 2020 acquisition of Orphan Technologies Limited.

Chenodal (chenodeoxycholic acid or CDCA) is a naturally occurring bile acid that is approved for the treatment of people with radiolucent stones in the gallbladder.

CTX is a rare, progressive and underdiagnosed bile acid synthesis disorder affecting many parts of the body.

In January 2020, we randomized the first patients in our Phase 3 RESTORE Study to evaluate the effects of Chenodal in adult and pediatric patients with CTX, and the study continues to enroll.

The pivotal study is intended to support an NDA submission for marketing authorization of Chenodal for CTX in the United States.

Preclinical Programs:

The Company is a participant in two Cooperative Research and Development Agreements ("CRADAs"), which form a multi-stakeholder approach to pool resources with leading experts, and incorporate the patient perspective early in the therapeutic identification and development process.

We have partnered with the National Institutes of Health’s National Center for Advancing Translational Sciences ("NCATS") and leading patient advocacy organizations, CDG Care and Alagille Syndrome Alliance, 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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• Chenodal (chenodiol tablets) is approved in the United States for the treatment of patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age.

Chenodal has been the standard of care for CTX patients for more than three decades.

• Cholbam ® (cholic acid capsules) is approved in the United States for the treatment of bile acid synthesis disorders due to single enzyme defects and is further indicated for adjunctive treatment of patients with peroxisomal disorders.

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Changes in Development Activities:

In November 2020, the Company completed the acquisition of Orphan Technologies Limited (“Orphan”), which included Orphan’s rare metabolic disorder drug OT-58.

The Company acquired Orphan by purchasing all of the outstanding shares (see Note 5).

The Company plans to continue the development of OT-58, which is currently being evaluated in Phase 1/2 development for the treatment of classical homocystinuria ("HCU"), under the name TVT-058.

In January 2020, the Company randomized the first patients in the Phase 3 RESTORE Study to evaluate the effects of Chenodal in adult and pediatric patients with CTX.

In August 2019, the Company announced that the Phase 3 FORT Study evaluating the safety and efficacy of fosmetpantotenate compared to placebo in patients with pantothenate kinase-associated neurodegeneration ("PKAN") did not meet its primary endpoint and did not demonstrate a difference between treatment groups.

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The Company impaired the related $ 15 million long-term investment during the third quarter of 2019.

During the first quarter of 2019, the Company elected to discontinue development of the L-UDCA program, resulting in impairment of the intangible asset of $ 25.5 million , originally recorded in 2016, and the related $ 18.0 million in contingent liability.

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

During the first quarter of 2019, the Company elected to discontinue development of the liquid ursodeoxycholic acid ("L-UDCA") program, resulting in impairment of the intangible asset of $ 25.5 million, originally recorded in 2016, and the related $ 18.0 million in contingent liability.

This resulted in a net $ 7.5 million non-cash charge to operations in 2019.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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On an ongoing basis, the Company evaluates its estimates and assumptions.

These estimates and assumptions include revenue recognition, valuing equity securities in share-based payments, estimating expenses of contracted research organizations, estimating fair value of equity instruments recorded as derivative liabilities, estimating the useful lives of depreciable and amortizable assets, goodwill impairment, estimating the fair value of contingent consideration, estimating of valuation allowances and uncertain tax positions, and estimates associated with the assessment of impairment for long-lived assets.

These estimates and assumptions include revenue recognition, valuing equity securities in share-based payments, estimating expenses of contracted research organizations, estimating the useful lives of depreciable and amortizable assets, goodwill impairment, estimating the fair value of contingent consideration, estimating of valuation allowances and uncertain tax positions, and estimates associated with the assessment of impairment for long-lived assets.

Revenue Recognition

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(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

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Research and Development Costs

Research and development includes expenses related to sparsentan, fosmetpantotenate and our other pipeline programs.

Research and development includes expenses related to sparsentan, fosmetpantotenate, TVT-058, and our other pipeline programs.

We expense all research and development costs as they are incurred.

Our research and development costs are comprised of salaries and bonuses, benefits, non-cash share-based compensation, license fees, milestones under license agreements, costs paid to third-party contractors to perform research, conduct clinical trials, and develop drug materials and delivery devices, and associated overhead expenses and facilities costs.

Our research and development costs are comprised of salaries and bonuses, benefits, share-based compensation, license fees, milestones under license agreements, costs paid to third-party contractors to perform research, conduct clinical trials, and develop drug materials and delivery devices, and associated overhead expenses and facilities costs.

We charge direct internal and external program costs to the respective development programs.

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

Employee Stock-Based Compensation

Share-Based Compensation

The Company recognizes all employee share-based compensation as a cost in the financial statements.

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Forfeitures are accounted for as they occur.

Stock Options

Restricted Stock Units

Stock Options 3 to 4 years

Restricted Stock Units 1 to 4 years

Earnings (Loss) Per Share

We calculate our basic earnings per share by dividing net income by the weighted average number of shares outstanding during the period.

The diluted earnings per share computation includes the effect, if any, of shares that would be issuable upon the exercise of outstanding stock options, derivative warrant liability, convertible debt and RSUs, reduced by the number of shares which are assumed to be purchased by the Company from the resulting proceeds at the average market price during the year, when such amounts are dilutive to the earnings per share calculation.

We calculate our basic earnings per share by dividing net income/(loss) by the weighted average number of shares outstanding during the period.

The diluted earnings/(loss) per share computation includes the effect, if any, of shares that would be issuable upon the exercise of outstanding stock options, derivative warrant liability, convertible debt and RSUs, reduced by the number of shares which are assumed to be purchased by the Company from the resulting proceeds at the average market price during the year, when such amounts are dilutive to the earnings per share calculation.

Cash and Cash Equivalents

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Due to the short-term maturity of such investments, the carrying amounts are a reasonable estimate of fair value.

Marketable Securities

The Company accounts for marketable securities held as “available-for-sale” in accordance with ASC 320, “Investments Debt and Equity Securities” (“ASC 320”).

The Company maintains its cash and cash equivalents at insured financial institutions, the balances of which may, at times, exceed federally insured limits.

Generally, these deposits may be redeemed upon demand, and the Company believes there is minimal risk of losses on such balances.

Debt Securities

The Company accounts for debt securities held as “available-for-sale” in accordance with ASC 320, “Investments - Debt Securities” (“ASC 320”).

The Company classifies these investments as current assets and carries them at fair value.

Unrealized gains and losses on debt securities are recorded as a separate component of stockholders’ equity as accumulated other comprehensive loss.

Realized gains or losses on marketable security transactions are reported in the Consolidated Statements of Operations and Comprehensive Loss.

Marketable securities are maintained at one financial institution and are governed by the Company’s investment policy as approved by the Company's Board of Directors.

Unrealized gains and losses on debt securities are recorded as a separate component of stockholders’ equity as accumulated other comprehensive 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.

Realized gains or losses on debt security transactions and declines in value that are determined to be the result of credit losses, if any, are reported in the Consolidated Statements of Operations and Comprehensive Loss.

Debt securities are maintained at one financial institution and are governed by the Company’s investment policy.

See Note 6 for further discussion.

Trade Receivables, Net

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The allowance for doubtful accounts was zero at both December 31, 2020 and 2019, respectively.

For the years ended December 31, 2019 , 2018 and 2017 , bad debt expense recorded in the Statement of Operations and Comprehensive Loss was approximately $ 0.1 million , zero and $ 0.2 million , respectively.

For the years ended December 31, 2020, 2019 and 2018, bad debt expense recorded in the Statement of Operations and Comprehensive Loss was approximately $ 0.1 million, $ 0.1 million and zero , respectively.

Expected credit losses on our trade receivables are estimated to be immaterial.

Inventory, Related Reserves and Cost of Goods Sold

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Raw material $ 3,219 $ 2,713

Finished goods 4,389 3,369

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Segment Information

The Company currently operates in one business segment focused on the development and commercialization of innovative therapies for people with serious and life-threatening rare diseases and medical conditions.

The Company currently operates in one operating segment focused on the development and commercialization of innovative therapies for people with serious and life-threatening rare diseases and medical conditions.

The Company is not organized by market and is managed and operated as one business.

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The major classifications of property and equipment, including their respective expected useful lives, consists of the following:

Computers and equipment

Furniture and fixtures

Leasehold improvements

Shorter of length of lease or life of the asset

Computers and equipment 3 years

Furniture and fixtures 7 years

Leasehold improvements Shorter of length of lease or life of the asset

Intangible Assets, Net

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Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives and are reviewed periodically for impairment.

Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.

Intangible assets related to in-process research and development (IPR&D) projects are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.

During the period the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment.

If and when development is complete, which generally occurs when regulatory approval to market a product is obtained, the associated assets are deemed finite-lived and are amortized over a period that best reflects the economic benefits provided by these assets.

Acquired IPR&D

We assess whether IPR&D assets acquired from others in an asset acquisition have alternative future use (in research and development projects or otherwise) at the acquisition date.

If such assets have alternative future use, they are capitalized and recognized as an intangible asset.

If such assets do not have alternative use, nor is there an alternative indication that the Company plans to pursue, the upfront consideration transferred, including any contingent consideration that is probable and reasonably estimable, is charged to expense at the acquisition date.

Goodwill represents the excess of purchase price over fair value of net assets acquired in a business combination and is not amortized.

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Impairment of Long-Lived Assets

Our long-lived assets are primarily comprised of intangible assets and property and equipment.

We evaluate our finite-lived intangible assets, other than goodwill and property and equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable.

Our long-lived assets are primarily comprised of intangible assets, right-of-use assets, and property and equipment.

We evaluate our finite-lived intangible assets, right-of-use assets, and property and equipment for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable.

If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the use and eventual disposition of the asset group.

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During the first quarter of 2019, the Company elected to discontinue development of the L-UDCA program, resulting in the write off of the IPR&D intangible asset, see Note 5 for further discussion.

There were no impairments related to intangible assets in the years ended December 31, 2018 and 2017 .

There were no impairments related to finite-lived intangible assets in the years ended December 31, 2020, 2019 and 2018.

Contingent Consideration

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On a quarterly basis, we revalue these obligations and record increases or decreases from their fair value as an adjustment to the consolidated statement of operations.

Changes to contingent consideration obligations can result from changes to discount rates, accretion of the liability due to the passage of time, changes in revenue forecasts and changes in our estimates of the likelihood or timing of achieving commercial revenue milestones.

contingent consideration obligations can result from changes to discount rates, accretion of the liability due to the passage of time, changes in revenue forecasts and changes in our estimates of the likelihood or timing of achieving commercial revenue milestones.

The Company follows ASC 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.

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The Company’s policy is to record estimated interest and penalty related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision.

Foreign Currency Translation

Functional and presentation currency

Items included in the financial statements of each entity comprising the Company are measured using the currency of the primary economic environment in which the entity operates (the functional currency).

Transactions and balances

Foreign currency transactions in each entity comprising the Company are remeasured into the functional currency of the entity using the exchange rates prevailing at the respective transaction dates.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized within Other operating expense, net except for changes related to the liability related to the sale of future royalties which are recorded in Other non-operating (income) expense, net in the Consolidated Statements of Operations.

The results and financial position of the Company that have a functional currency different from the US dollar are translated as follows:

assets and liabilities presented are translated at the closing exchange rate as of December 31, 2020 and 2019;

income and expenses for the statements of operations and comprehensive loss are translated at average exchange rates that are relevant for the respective periods for which the income and expenses occurred;

significant transactions use the exchange rate on the date of the transaction;

All resulting exchange differences arising from such translations are recognized directly in other comprehensive income (loss) and presented as a separate component of equity.

Reclassifications

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The Company also expenses costs associated with maintaining and defending patents subsequent to their issuance in the period incurred.

Derivative Financial Instruments, Warrants

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.

However, since 2013, the Company has issued five tranches of common stock purchase warrants to secure financing, remediate covenant violations and provide consideration for amendments with respect to a credit facility extinguished in 2015.

Historically, the Company accounted for these instruments, which did not have fixed settlement provisions, as derivative instruments in accordance with FASB ASC 815-40, Derivative and Hedging - Contracts in Entity’s Own Equity.

This was due to an anti-dilution provision for the warrants that provided for a reduction to the exercise price if the Company issued equity or equity linked instruments in the future at an effective price per share less than the exercise price then in effect for the warrant ("down round provision").

As such, the warrants were re-measured at each balance sheet date based on estimated fair value.

Changes in estimated fair value were recorded as non-cash adjustments within other income (expenses), net, in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) .

As of January 1, 2018, the Company early adopted ASU 2017-11, which revised the guidance for instruments with down round provisions.

As such the Company treats outstanding warrants as free-standing equity linked instruments that will be recorded to equity in the Consolidated Balance Sheet.

The fair value of the derivative liability balance as of December 31, 2017 of $ 15.7 million was reclassified by means of a cumulative-effect adjustment to equity as of January 1, 2018.

Restructuring

On March 7, 2017, the Company initiated a plan to consolidate its operations to its corporate headquarters in San Diego, California.

The Company adjusted employee related separation charges by $ 0.2 million and $ 3.6 million in 2018 and 2017 as a result of this consolidation.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02, Leases.

The new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

See Note 18 for further discussion.

In May 2014, the FASB issued ASU No.

2014-09, Revenue from Contracts with Customers.

Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration for which the entity expects to be entitled for that specific good or service.

Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption.

The Company adopted the new standard on January 1, 2018 using the full retrospective approach and there was no impact on timing or recognition of revenue.

See Note 3 for further discussion.

In October 2016, the FASB issued ASU No.

2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other Than Inventory.

The new guidance changes the accounting for income tax effects of intra-entity transfers of assets other than inventory.

Under the new guidance, the selling (transferring) entity is required to recognize a current tax expense or benefit upon transfer of the asset.

Similarly, the purchasing (receiving) entity is required to recognize a deferred tax asset or deferred tax liability, as well as the related deferred tax benefit or expense, upon receipt of the asset.

As of January 1, 2017, the Company reversed the balance of $ 4.9 million in its prepaid tax asset account as a charge to retained earnings.

In July 2017, the FASB issued ASU No.

2017-11, Earnings Per Share (Topic 260);

Distinguishing Liabilities from Equity (Topic 480);

Derivatives and Hedging (Topic 815):

(Part I) Accounting for Certain Financial Instruments with Down Round Features.

These amendments simplify the accounting for certain financial instruments with down round features.

The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification.

Legal Contingencies

The Company may, from time to time, be involved in various claims and legal actions that arise in the ordinary course of business.

The Company accrues for legal contingencies when it is determined probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

See Note 11 for further discussion.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business.

The new guidance dictates that, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, it should be treated as an acquisition or disposal of an asset.

The guidance was adopted as of January 1, 2018.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies.

Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.

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

The Company evaluated the adoption of the new standard and it will not have a material effect on its consolidated financial statements and related disclosures.

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 on January 1, 2020 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 December 31, 2020, the Company held $ 15.9 million in trade receivables and $ 276.8 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 December 31, 2020.

See Note 6 for further discussion.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies.

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.

The Company's assessment of the impact of the new standard on the Company's financial statements is ongoing.

REVENUE RECOGNITION

Product Revenue, Net

Product sales for the year ended December 31, 2019 consisted of sales of Bile Acid products (Chenodal and Cholbam) and Tiopronin products (Thiola and Thiola EC).

Prior to 2019 product sales consisted of Chenodal, Cholbam and Thiola.

Product sales consist of Bile Acid products (Chenodal and Cholbam) and Tiopronin products (Thiola and Thiola EC).

The Company sells its products through direct-to-patient distributors worldwide, with more than 99 % of the revenue generated in North America.

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Deductions from Revenue

Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and co-pay assistance that is offered to its customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products.

Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and co-pay assistance that are offered to its customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products.

These provisions are based on the amounts earned or to be claimed on the related sales and are classified as a reduction of accounts receivable (if the amount is payable to the customer) or as a current liability (if the amount is payable to a party other than a customer).

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We calculate the rebates that we incur due to contracts with certain commercial payors and deduct these amounts from our gross product sales at the time the revenues are recognized.

Allowances for commercial rebates are established based on actual payer information, which is reasonably estimated at the time of delivery.

Allowances for commercial rebates are established based on actual payer information,

which is reasonably estimated at the time of delivery.

Rebate discounts are included in accrued expenses in the accompanying consolidated balance sheets.

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Twelve Months Ended December 31,

2020 2019 2018

Tiopronin products $ 108,883 $ 95,638 $ 89,176

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Censa Pharmaceuticals Inc.

In December 2017, the Company entered into a Future Acquisition Right and Joint Development Agreement (the “Option Agreement”) with Censa, which became effective in January 2018.

In December 2017, the Company entered into a Future Acquisition Right and Joint Development Agreement (the “Option Agreement”) with Censa.

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.

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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.

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

The Company impaired the $ 15 million long-term investment during the third quarter of 2019.

If the Company had exercised the Option, the Company would have acquired Censa for an additional $ 65.0 million , which would have been reduced by up to $ 2.8 million of development funding ("creditable"), paid as a combination of 20 % in cash and 80 % in shares of the Company’s common stock, valued at a fixed price of $ 21.40 per share;

provided, however, that Censa could have elected on behalf of its equity holders to receive the upfront consideration in 100 % cash if the average price per share of the Company’s common stock for the ten trading days ending on the date the Company provided notice of interest to exercise the Option was less than $ 19.26 .

In addition, if the Company had exercised the Option and acquired Censa, the Company would have been required to make further cash payments to Censa’s equity holders of up to an aggregate of $ 25.0 million if the CNSA-001 program had achieved specified development and commercial milestones.

ACQUISITIONS AND DISPOSITIONS

Amendment to Trademark License and Supply Agreement

In November 2017, the Company amended their agreement with the manufacturer of Thiola to extend the term of the current exclusive U.S.

and Canada licensing agreement by an additional five years , to 2029.

The royalty rate and guaranteed minimum payment were also extended through the new agreement term.

In November 2018, the license agreement was amended to extend the territorial rights beyond the United States and Canada.

As consideration for the expanded territory the Company paid an up-front fee of $ 0.3 million and will pay guaranteed minimum royalties equaling the greater of $ 0.1 million or 20 % of our Thiola net sales generated from outside of the United States during each calendar year.

Upon execution of the amendment, the Company capitalized an additional $ 1.0 million in intangible assets and recorded a guaranteed minimum liability of $ 0.7 million related to this amendment.

Acquisition and disposition of Liquid Ursodeoxycholic Acid (L-UDCA)

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During the first quarter of 2019, the Company elected to discontinue development of the L-UDCA program and wrote off the $ 25.5 million intangible asset and related contingent consideration liability of $ 18 million.

MARKETABLE SECURITIES

The Company's marketable securities as of December 31, 2019 and 2018 were comprised of available-for-sale marketable debt securities which are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss).

The amortized cost of debt securities in this category are adjusted for amortization of premiums and accretion of discounts to maturity.

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

Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income or expense.

Acquisition of Orphan Technologies Limited

On November 12, 2020, the Company completed the acquisition of Orphan Technologies Limited (“Orphan”), including Orphan’s rare metabolic disorder drug OT-58.

The Company acquired Orphan by purchasing all of the outstanding shares.

In exchange for the shares, the Company made an upfront cash payment at closing of $ 90.0 million plus closing adjustments, net liabilities assumed, and transaction expenses of $ 1.2 million, $ 1.8 million, and $ 4.2 million, respectively.

Under the Agreement, the Company has also agreed to make contingent cash payments up to an aggregate of $ 427.0 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 Company has applied the principles of ASC 805 in determining the proper accounting treatment for the acquisition.

Substantially all of the value of the assets acquired is concentrated within OT-58, and as of the acquisition date, the Company does not anticipate any economic benefit to be derived from OT-58 other than the primary indication.

Accordingly, the transaction is treated as an asset acquisition with amounts charged to expense for the acquired IPR&D on the date of acquisition.

In accordance with ASC 450, contingent cash payments will be accrued for when it is probable that a liability has been incurred and the amount can be reasonably estimated.

As of December 31, 2020, no contingent cash payments have been accrued.

For the year ended December 31, 2020 the Company has incurred $ 97.1 million in expenses related to the Orphan acquisition.

DEBT SECURITIES

The Company's debt securities as of December 31, 2020 and 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 (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.

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.

Unrealized losses that are determined to be credit-related are also recorded as an allowance against the amortized cost basis.

The cost of securities sold is based on the specific identification method.

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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.

Marketable securities consist of the following ( in thousands ):

Debt securities consist of the following ( in thousands ):

As of December 31,

Marketable Securities:

Debt securities:

Commercial paper $ 135,145 $ 17,152

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Securities of government sponsored entities 43,026 12,500

Total Marketable Securities:

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

Contractual Maturity (in years)

Amortized Cost

Unrealized Gains

Unrealized Losses

Aggregate Estimated Fair Value

Marketable Securities:

Commercial paper

Corporate debt securities

Total debt securities $ 276,817 $ 336,088

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

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

Debt securities:

Commercial paper Less than 1 $ 135,161 $ 1 $ ( 17 ) $ 135,145

Corporate debt securities Less than 1 92,906 723 93,629

Securities of government-sponsored entities Less than 1 43,031 — ( 5 ) 43,026

Total maturity less than 1 year 271,098 724 ( 22 ) 271,800

Corporate debt securities

Securities of government-sponsored entities

Corporate debt securities 1 to 2 5,013 4 5,017

Total maturity 1 to 2 years 5,013 4 — 5,017

Total available-for-sale securities

The following is a summary of short-term marketable securities classified as available-for-sale as of December 31, 2018 ( in thousands ):

Contractual Maturity (in years)

Amortized Cost

Unrealized Gains

Unrealized Losses

Aggregate Estimated Fair Value

Marketable Securities:

Commercial paper

Corporate debt securities

Total available-for-sale debt securities $ 276,111 $ 728 $ ( 22 ) $ 276,817

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

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

Debt securities:

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

Total available-for-sale securities

During 2019 and 2018 , the Company had no realized gains or losses on marketable securities.

The Company received proceeds from the sale or maturity of marketable securities of $ 259.1 million , $ 162.8 million and $ 114.5 million for 2019 , 2018 and 2017 , respectively.

Total available-for-sale debt securities $ 335,206 $ 949 $ ( 67 ) $ 336,088

During 2020 and 2019, the Company had $ 0.1 million in net realized gains and zero realized gains or losses on debt securities, respectively.

The Company received proceeds from the sale or maturity of debt securities of $ 273.5 million, $ 259.1 million and $ 162.8 million for 2020, 2019 and 2018, respectively.

The primary objective of the Company’s investment portfolio is to enhance overall returns while preserving capital and liquidity.

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 for other-than-temporary declines in fair value below cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable.

This evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below the cost basis and adverse conditions related specifically to the security, including any changes to the credit rating of the security, and the intent to sell, or whether the Company will more likely than not be required to sell the security before recovery of its amortized cost basis.

The assessment of whether a security is other-than-temporarily impaired could change in the future due to new developments or changes in assumptions related to any particular security.

As of December 31, 2019 and 2018 , the Company believed the cost basis for available-for-sale investments were recoverable in all material respects.

For both December 31, 2019 and 2018 , any investments in an unrealized loss position for longer than 12 months were immaterial.

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.

If either are true, the amortized cost basis of the security is written down to its fair value at the reporting date.

If neither circumstance holds true, the Company assesses whether any portion of the unrealized loss is a result of a credit loss.

Any amount deemed to be attributable to credit loss is recognized in the income statement, with the amount of the loss limited to the difference between fair value and amortized cost and recorded as an allowance for credit losses.

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 December 31, 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 $ 112,148 $ 17 $ — $ — $ 112,148 $ 17

Corporate debt securities — — — — — —

Securities of government-sponsored entities 43,026 5 — — 43,026 5

Total $ 155,174 $ 22 $ — $ — $ 155,174 $ 22

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 Total

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

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

Corporate debt securities 74,151 64 7,509 2 81,660 66

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

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

As of December 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 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 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.

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.

Uncertainty surrounding the COVID-19 pandemic, as well as other factors unknown to us at this time, may cause actual results to differ and require adjustments to the Company’s estimates and assumptions in the future.

CONVERTIBLE SENIOR NOTES

Convertible Senior Notes Due 2025

On September 10, 2018, the Company completed its registered underwritten public offering of $ 276 million aggregate principal amount of 2.50 % Convertible Senior Notes due 2025 ("2025 Notes") and entered into a base indenture and supplemental indenture agreement ("2025 Indenture") with respect to the 2025 Notes.

On September 10, 2018, the Company completed its registered underwritten public offering of the "2025 Notes" and entered into a base indenture and supplemental indenture agreement ("2025 Indenture") with respect to the 2025 Notes.

The 2025 Notes will mature on September 15, 2025 ("Maturity Date”), unless earlier repurchased, redeemed, or converted.

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

2.50 % convertible senior notes due 2025

$ 276,000 $ 276,000

Unamortized debt discount ( 56,384 ) ( 65,963 )

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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.

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.

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.

As of December 31, 2020, the 2025 Notes had a market price of $ 1,035 per $1,000 or $ 285.7 million principal amount.

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The initial carrying value of the liability component was $ 198.6 million.

The equity component of $ 77.4 million , representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2025 Notes and is recorded in additional paid-in capital on the consolidated balance sheet at the issuance date.

The equity component of $ 77.4 million, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2025 Notes and was recorded in additional paid-in capital on the consolidated balance sheet at the issuance date.

That equity component is treated as a discount on the liability component of the 2025 Notes, which is amortized over the seven-year term of the 2025 Notes using the effective interest rate method.

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The 2019 Notes bore interest at a rate of 4.5 % per annum, payable semiannually in arrears on May 15 and November 15 of each year, beginning on November 15, 2014.

The 2019 Notes had a maturity date of May 30, 2019.

The 2019 Notes

had a maturity date of May 30, 2019.

The aggregate carrying value of the 2019 Notes on their issuance was $ 43 million, which was net of the $ 3 million debt discount.

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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 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.

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In estimating the fair value of the Company’s contingent consideration, the Company uses a Monte Carlo Simulation.

The determination of the contingent consideration liabilities requires significant judgments including the appropriateness of the valuation model and reasonableness of estimates and assumptions included in the forecasts of future net sales and the discount rates applied to such sales.

Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities.

Based on the fair value hierarchy, the Company classified contingent consideration within Level 3 because valuation inputs are based on projected revenues discounted to a present value

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

The following table presents the Company’s asset and liabilities that are measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of December 31, 2019 (in thousands):

As of December, 2019

Fair Value Hierarchy at December 31, 2019

Discount rates used to determine the fair value at December 31, 2020 and 2019 are as follows:

Revenue Discount Payment Discount

Cholbam Chenodal

December 31, 2020 6.5 % 8.5 % 7.45 %

December 31, 2019 6.5 % 8.5 % 7.47 %

Based on the fair value hierarchy, the Company classified the fair value of contingent consideration within Level 3 because valuation inputs are based on projected revenues discounted to a present value.

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 December 31, 2020, the fair value of the Company's 2.5 % Convertible Senior Notes due 2025 was $ 285.7 million, which was estimated utilizing market quotations, and are considered Level 2.

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

As of December 31, 2020 Fair Value Hierarchy at December 31, 2020

Total carrying and

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Cash and Cash Equivalents $ 84,772 $ 84,772 $ — $ —

Marketable securities, available-for-sale

Debt securities, available-for-sale 276,817 — 276,817 —

Total $ 361,589 $ 84,772 $ 276,817 $ —

Business combination-related contingent consideration $ 65,100 $ — $ — $ 65,100

Total $ 65,100 $ — $ — $ 65,100

The following table presents the Company’s assets and liabilities that are measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of December 31, 2019 (in thousands):

As of December, 2018

Fair Value Hierarchy at December 31, 2018

As of December 31, 2019 Fair Value Hierarchy at December 31, 2019

Total carrying and

estimated fair value

Quoted prices in

estimated fair value Quoted prices in

active markets

Significant other

(Level 1) Significant other

observable inputs

(Level 2) Significant

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

Total $ 70,900 $ — $ — $ 70,900

The following table sets forth a summary of changes in the estimated fair value of the Company's Level 3 business combination-related contingent consideration for the years ended December 31, 2020 and 2019 (in thousands) :

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L-UDCA write-off — ( 18,000 )

Increase from revaluation of contingent consideration

Changes in the fair value of contingent consideration 3,655 15,051

Contractual payments ( 7,003 ) ( 6,696 )

Contractual Payments accrued at December 31

Contractual payments included in accrued liabilities at December 31 ( 2,488 ) ( 12,253 )

Foreign currency impact 36 ( 202 )

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The initial term of the license is 10 years and will automatically renew thereafter for periods of one year .

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.

The Company paid Mission an up-front license fee of $ 3 million and will pay guaranteed minimum royalties during each calendar year the greater of $ 2 million or twenty percent ( 20 %) of the Company’s net sales of Thiola through May 28, 2024.

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In 2020 the Company added $ 18.2 million to the intangible asset related to the royalties in excess of the minimum.

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 December 31, 2020, as such royalties are not yet probable and estimable.

There are 8.4 years remaining in the term of the license agreement.

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The purchase included $ 25.5 million for an intangible asset with a definite life related to product rights for the U.S.

The useful life related to the acquired product rights is expected to be approximately 17 years once the NDA is approved by the FDA.

During the first quarter of 2019, the Company elected to discontinue development of the L-UDCA program, resulting in the write off of the intangible asset of $ 25.5 million.

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Amortizable intangible assets as of December 31, 2020 ( in thousands ):

Gross Carrying

Net Book Value

Useful Life Gross Carrying

Amount Accumulated

Amortization Net Book Value

Chenodal Product Rights 16 $ 67,849 $ ( 28,700 ) $ 39,149

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Internal use software 5 207 ( 157 ) 50

Total $ 264,676 $ ( 111,487 ) $ 153,189

Amortizable intangible assets as of December 31, 2019 ( in thousands ):

Gross Carrying

Net Book Value

Useful Life Gross Carrying

Amount Accumulated

Amortization Net Book Value

Chenodal Product Rights 16 $ 67,849 $ ( 24,451 ) $ 43,398

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Economic Interest - International revenue Cholbam 10 7,544 ( 3,585 ) 3,959

Economic Interest - L-UDCA (acquired IPR&D)

Ligand License 11 7,900 ( 3,555 ) 4,345

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Internal use software 5 207 ( 116 ) 91

Total $ 245,802 $ ( 88,602 ) $ 157,200

The following table summarizes amortization expense for the twelve months ended December 31, 2020, 2019 and 2018 ( in thousands ):

2020 2019 2018

Research and development $ 1,162 $ 1,158 $ 976

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Total amortization expense $ 22,437 $ 19,707 $ 18,028

As of December 31, 2019 , amortization expense for the next five years is expected to be as follows ( in thousands ):

As of December 31, 2020, amortization expense for the next five years and thereafter is expected to be as follows ( in thousands ):

2021 $ 24,144

Thereafter 48,694

Total $ 153,189

ACCRUED EXPENSES

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Research and development 10,166 16,067

Government rebate reserves

Government rebates payable 10,707 6,584

Selling, general and administrative 3,944 3,552

Royalty/contingent consideration

Miscellaneous accrued expenses

Accrued royalties and contingent consideration 7,857 7,272

Miscellaneous accrued 6,207 4,225

Total accrued expenses $ 56,793 $ 51,745

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Legal Proceedings

In August 2017, Martin Shkreli, the Company’s former Chief Executive Officer, was convicted on securities fraud charges.

Shkreli's conviction was subsequently affirmed upon appeal.

In connection with the trial and appeal proceedings, the Company advanced a portion of Mr.

Shkreli's legal fees, of which $ 3.8 million was reimbursed by its directors’ and officers’ insurance carriers.

Pending the outcome of Mr.

Shkreli's appeal, the insurance carriers reserved their rights to assert that certain of the advanced funds pertain to claims excluded from coverage under the relevant

insurance policy and are therefore recoverable by the carriers, and therefore the final amount of the reimbursement from the insurance carriers is not currently estimable.

In October 2018, Spring Pharmaceuticals, LLC (Spring) filed a lawsuit against the Company, Martin Shkreli, Mission Pharmacal Company and Alamo Pharma Services, Inc.

in the United States District Court for the Eastern District of Pennsylvania alleging that the Company violated various federal and state antitrust and unfair competition laws by allegedly refusing to sell samples of the Thiola ® brand drug so that Spring can conduct the bioequivalence testing needed to submit an ANDA to the FDA for approval to market a generic version of the product.

The lawsuit sought injunctive relief and damages.

In December 2019, the Court granted the Company's motion to dismiss the lawsuit, but granted Spring permission to amend its complaint.

On February 10, 2020, Spring filed an amended complaint.

Spring’s amended complaint seeks injunctive relief and damages.

The Company intends to vigorously defend against Spring’s claims.

No amounts have been accrued related to this matter and the outcome cannot be determined.

The Company is not aware of any other proceedings or claims that could have, individually or in the aggregate, a material adverse effect on its results of operations or financial condition.

STOCKHOLDERS’ EQUITY / DEFICIT

From time to time in the normal course of business, the Company is subject to various legal matters such as threatened or pending claims or litigation.

Although the results of claims and litigation cannot be predicted with certainty, the Company does not believe it is a party to any claim or litigation the outcome of which, if determined adversely to it, would individually or in the aggregate be reasonably expected to have a material adverse effect on its results of operations or financial condition.

STOCKHOLDERS’ EQUITY

The Company is currently authorized to issue up to 100,000,000 shares of $ 0.0001 par value common stock.

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On May 9, 2019, the Company’s stockholders approved an amendment to the 2018 Plan that increased the number of authorized shares issuable under the 2018 Plan by 2.0 million shares.

On May 15, 2020, the Company's stockholders approved an amendment to the 2018 Plan that increased the number of authorized shares issuable under the 2018 Plan by 2.4 million shares.

2017 Employee Stock Purchase Plan

The 2017 Employee Stock Purchase Plan ("2017 ESPP") originated with 380,000 shares of common stock available for issuance.

Beginning on January 1, 2018, and ending on (and including) January 1, 2026, the number of shares of common stock available for issuance under the 2017

ESPP shall increase by an amount equal to the lesser of (i) one percent ( 1 % ) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year and (ii) 300,000 shares of common stock.

Beginning on January 1, 2018, and ending on (and including) January 1, 2026, the number of shares of common stock available for issuance under the 2017 ESPP shall increase by an amount equal to the lesser of (i) one percent ( 1 %) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year and (ii) 300,000 shares of common stock.

Substantially all employees are eligible to participate and, through payroll deductions, can purchase shares on established dates semi-annually.

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Twelve Months Ended December 31,

2020 2019 2018

Risk free rate 1.50 % 2.30 % 2.80 %

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The risk-free interest rate was based on rates established by the Federal Reserve.

The Company’s expected volatility was based on analysis of the Company’s volatility, as well as the volatilities of guideline companies.

The expected life of the Company’s options was determined using the simplified method as a result of limited historical data regarding the Company’s exercise activity.

The Company’s expected volatility was based on analysis of the Company’s volatility.

In years prior to 2020, the assessment also took into account the volatilities of guideline companies due to limited history of the Company's own activity.

The expected life of the Company’s options was determined using the Company's historical exercise activity.

In years prior to 2020, the Company applied the simplified method as a result of limited historical data regarding the Company’s exercise activity.

The dividend yield is based upon the fact that the Company has not historically paid dividends, and does not expect to pay dividends in the foreseeable future.

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

Granted 1,582,875 16.08 — —

Forfeited and expired ( 455,500 ) 19.80 — —

Exercised ( 256,112 ) 15.21 — 1,810

Outstanding at December 31, 2020 8,242,996 $ 18.97 6.43 $ 71,641

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(in thousands)

2018 4,834,781 $ 16.81 5.98 $ 35,387

2019 4,936,995 $ 18.93 5.62 $ 4,490

2020 5,488,207 $ 19.37 5.36 $ 46,626

The weighted average grant date fair value of options granted was $ 9.54 , $ 12.11 , and $ 16.21 during the years ended December 31, 2020, 2019 and 2018, respectively.

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Unvested December 31, 2019 763,728 $ 19.64

Granted 722,338 16.23

Vested ( 287,213 ) 18.43

Forfeited/cancelled ( 88,911 ) 18.31

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Unvested December 31, 2019 233,500 $ 20.90

Granted 150,000 15.46

Vested ( 105,750 ) 21.58

Forfeited/cancelled ( 110,250 ) 19.56

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Twelve Months Ended December 31,

2020 2019 2018

Selling, general and administrative expenses $ 14,247 $ 14,195 $ 13,550

Research and development expenses 9,367 6,910 6,224

Total $ 23,614 $ 21,105 $ 19,774

Exercise of Warrants

During the twelve months ended December 31, 2018 and 2017 , the Company issued the following shares of common stock upon the exercise of warrants for cash received by the Company:

( in thousands except share amounts )

Shares Issued

Cash Received

Derivative Liability Reclassified as Equity

Change in Fair Value Expense

During the twelve months ended December 31, 2020, 2019 and 2018, the Company issued the following shares of common stock upon the exercise of warrants for cash received by the Company ( in thousands except share amounts ):

Shares Issued Cash Received Derivative Liability Reclassified as Equity Change in Fair Value Expense

2018 1,036,054 $ 5,305 n/a n/a

2019 n/a n/a n/a n/a

2020 n/a n/a n/a n/a

As of December 31, 2020, there are no warrants for common shares outstanding.

See Note 15 for further discussion.

LOSS PER SHARE

Basic earnings (loss) per share (“EPS”) represents net income (loss) attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period.

Diluted EPS represents net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period using the treasury stock method.

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

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) :

For the year ended December 31,

Basic and dilutive loss per share

2020 2019 2018

Shares Net loss EPS Shares Net loss EPS Shares Net loss EPS

Basic and diluted loss per share 47,539,631 $ ( 169,431 ) $ ( 3.56 ) 42,339,961 $ ( 146,427 ) $ ( 3.46 ) 40,433,171 $ ( 102,678 ) $ ( 2.54 )

For the years ended December 31, 2020, 2019 and 2018, the following shares were excluded because they were anti-dilutive:

For the year ended December 31,

2020 2019 2018

Convertible debt 7,113,402 7,632,414 8,410,932

Restricted stock 1,368,096 599,298 395,034

Options 8,349,310 7,644,251 7,210,576

Warrants — — 282,807

Total anti-dilutive shares 16,830,808 15,875,963 16,299,349

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Year Ended December 31,

2020 2019 2018

United States $ ( 65,881 ) $ ( 129,452 ) $ ( 87,573 )

The components of the provision (benefit) for income taxes, in the Consolidated Statement of Operations are as follows ( in thousands ):

Foreign* $ ( 122,909 ) ( 16,996 ) ( 14,294 )

Total $ ( 188,790 ) $ ( 146,448 ) $ ( 101,867 )

*Foreign losses in 2020 include charges relate to IPR&D.

See Note 5 for further discussion.

The components of the (benefit) provision for income taxes, in the Consolidated Statement of Operations are as follows ( in thousands ):

2020 2019 2018

Federal $ ( 19,436 ) $ ( 319 ) $ 698

State 74 298 113

Foreign 3 — —

( 19,359 ) ( 21 ) 811

Federal — — —

Total tax provision (benefit) $ ( 19,359 ) $ ( 21 ) $ 811

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate expressed as a percentage of loss before income taxes:

2020 2019 2018

Statutory rate - federal ( 21.00 ) % ( 21.00 ) % ( 21.00 ) %

State taxes, net of federal benefit ( 1.57 ) % ( 4.35 ) % ( 4.44 ) %

Change in FV of derivative liability (warrants)

Change in federal tax rate

Foreign rate differential 6.65 % — % — %

IPR&D 6.50 % — % — %

Federal IRS Audit settlement 1.62 % — % — %

Convertible debt — % — % 21.77 %

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Other permanent differences 0.09 % 0.24 % 0.10 %

Tax credits ( 4.49 ) % ( 15.17 ) % ( 11.86 ) %

Return to provision adjustments and other true-ups 4.88 % 0.44 % 1.42 %

CARES Act-Net operating loss carryback ( 9.58 ) % — % — %

Other ( 0.10 ) % 2.32 % 1.06 %

Change in valuation allowance 6.75 % 37.50 % 9.79 %

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Charitable Contributions 2,575 1,256

Intangible assets greater than book 45,520 —

Interest expense limitation 1,659 345

Tax basis depreciation greater than book depreciation 76 —

161,694 104,124

Deferred Tax Liabilities:

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Tax basis depreciation less than book depreciation — ( 448 )

( 13,868 ) ( 19,379 )

Net deferred tax assets before valuation allowance 147,826 84,745

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The Company has established a full valuation allowance against its U.S.

federal and state deferred tax assets due to the uncertainty surrounding the realization of such assets in future periods.

federal, state, and foreign deferred tax assets due to the uncertainty surrounding the realization of such assets in future periods.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible.

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The Company has recorded a valuation allowance of $ 147.8 million as of December 31, 2020 to reflect the estimated amount of deferred tax assets that may not be realized.

The Company increased its valuation allowance by $ 48.6 million for the year ended December 31, 2019.

The Company increased its valuation allowance by $ 63.1 million and $ 48.6 million for the years ended December 31, 2020 and 2019, respectively.

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

The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows net operating losses incurred in tax 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 income tax benefit of $ 18.1 million related to this legislation.

At December 31, 2020, the Company had available unused U.S.

federal and state net operating loss (“NOL”) carryforwards of $ 28.5 million and $ 102.4 million, respectively, all of which are fully offset by a valuation allowance.

Additionally, the Company had an interest expense limitation carryforward of $ 7.4 million that is fully offset by a valuation allowance.

The federal NOL and interest expense limitation carryforward have an indefinite life.

The state NOL carryforwards will begin to expire in 2022.

In addition, at December 31, 2019, the Company had federal orphan drug tax credit carryforwards of $ 28.5 million that begin to expire in 2037 unless utilized, federal research and development tax credit carryforwards of $ 3.3 million that begin to expire in 2038 unless utilized and California Competes tax credit carryforwards of $ 2.0 million that begin to expire in 2022.

The Company has international subsidiaries whose operations are not material for the year ended December 31, 2019.

In addition, at December 31, 2020, the Company had federal orphan drug tax credit carryforwards of $ 38.7 million that begin to expire in 2035 unless utilized, federal research and development tax credit carryforwards of $ 5.4 million that begin to expire in 2033 unless utilized, state research and development tax credit carryforwards of $ 7.1 million that begin to expire in 2030 unless utilized, and California Competes tax credit carryforwards of $ 2.0 million that begin to expire in 2022.

Pursuant to Internal Revenue Code Sections 382 and 383, use of the Company’s federal net operating loss and credit carryforwards may be limited upon a cumulative change in ownership of more than 50% within a three-year period.

At December 31, 2020, the Company had Irish NOL carryforwards of $ 12.5 million which are fully offset by a valuation allowance and have an indefinite life.

The Company also had Swiss NOL carryforwards of $ 44.3 million which are fully offset by a valuation allowance and begin to expire in 2023 as well as Federal Act on Tax Reform and AHV Financing (“TRAF”) cantonal tax benefits of $ 526.2 million which expire in 2029.

The Company accounts for uncertain tax benefits in accordance with the provisions of ASC 740-10 of the Accounting for Uncertainty in Income Taxes .

A s of December 31, 2019 the Company had $ 0.2 million in unrecognized tax benefits.

As of December 31, 2020, the Company had $ 5.2 million in unrecognized tax benefits of which $ 5.0 million related to orphan drug and research and development tax credits which was recorded as a reduction to the deferred tax assets with a corresponding reduction in the Company’s valuation allowance of $ 5.0 million.

The Company does not anticipate that the amount of unrecognized tax benefits as of December 31, 2020 will change materially within the following 12 months.

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Balance as of December 31:

$ 5,193 $ 235

The Company files income tax returns in the U.S.

federal jurisdiction, various state and local, and foreign jurisdictions.

The Company’s income tax returns are open to examination by federal, state and foreign tax authorities, generally for the years ended December 31, 2016 and later.

The Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision.

During the years ended 2019, 2018 and 2017, the Company did not recognize any interest or penalties in its Consolidated Statements of Operations and Comprehensive Loss and there were no accruals recorded for interest or penalties at December 31, 2019 and 2018.

DERIVATIVE FINANCIAL INSTRUMENTS

Since 2013, the Company has issued 5 tranches of common stock purchase warrants to secure financing, remediate covenant violations related to a credit facility and provide consideration for credit facility amendments.

Historically, the Company accounted for these instruments, which do not have fixed settlement provisions, as derivative instruments in accordance with FASB ASC 815-40, Derivative and Hedging - Contracts in Entity’s Own Equity.

This was due to an anti-dilution provision for the warrants that provides for a reduction to the exercise price if the Company issues equity or equity linked instruments in the future at an effective price per share less than the exercise price then in effect for the warrant ("down round provision").

As such, the warrants were re-measured at each balance sheet date based on estimated fair value.

Changes in estimated fair value were recorded as non-cash adjustments within other income (expenses), net, in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss).

As of January 1, 2018, the Company early adopted ASU 2017-11, which revised the guidance for instruments with down round provisions.

As such the Company treats outstanding warrants as free-standing equity linked instruments that will be recorded to equity in the Consolidated Balance Sheet.

The fair value of the derivative liability balance as of December 31, 2017 of $ 15.7 million was reclassified by means of a cumulative-effect adjustment to equity as of January 1, 2018.

The following table presents the Company’s derivative warrant issuances and balances outstanding during the year ended December 31, 201 8:

Weighted Average

Exercise Price

Outstanding at December 31, 2017

Outstanding at December 31, 2018

As of December 31, 2019 and 2018, there were no outstanding warrants.

With few exceptions, the Company’s income tax returns are open to examination by federal, state and foreign tax authorities for the years ended December 31, 2016 and forward.

During the years ended 2020, 2019 and 2018, the Company did no t recognize any interest or penalties in its Consolidated Statements of Operations and Comprehensive Loss and there were no accruals recorded for interest or penalties at December 31, 2020 and 2019.

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 of $ 15.50 per share.

The net proceeds to the Company from the offering, after deducting the underwriting discounts and offering expenses, were $ 108.7 million.

At-the-Market Equity Offering

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 December 31, 2020, the Company has sold 867,806 shares under the ATM Agreement, resulting in net proceeds of $ 22.8 million.

As of December 31, 2020, an aggregate amount of $ 76.5 million remained eligible for sale under the facility.

RETIREMENT PLAN

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The Company has not capitalized interest related to the property and equipment purchases.

As of January 1, 2019, the Company adopted ASU No.

2016-02, Leases, using a modified retrospective basis method under which prior comparative periods are not restated.

The new standard establishes an ROU model that requires a lessee to record an ROU asset and a lease liability on its balance sheet for all leases with terms longer than 12 months.

Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement.

In addition, the FASB issued ASU No.

2018-10, Codification Improvements to Topic 842, ASU No.

2018-11, Targeted Improvements, and ASU No.

2018-20, Narrow-Scope Improvements for Lessors, to clarify and amend the guidance in ASU No.

The Company has elected the following as practical expedients from within these ASUs:

1) an entity need not reassess whether any expired or existing contracts are or contain leases;

2) an entity need not reassess the lease classification for any expired or existing leases;

and 3) an entity need not reassess initial direct costs for any existing leases.

As of January 1, 2019, the Company had a single operating lease for its office located in San Diego, California.

The lease was originally signed in July 2016, and was amended in July 2017 to add office space in adjacent buildings.

The term of the original lease is 7 years, 7 months , and is coterminous for all space occurring in July 2024.

Under the terms of the lease, the Company will pay base annual rent (subject to an annual fixed percentage increase), plus property taxes and other normal and necessary expenses, such as utilities, repairs, security and maintenance.

Certain incentives were included in the lease, including rent abatement and approximately $ 2.3 million in tenant improvement allowances.

The Company has the right to extend the lease for five years .

As of January 1, 2019, the Company's remaining minimum lease payments and unamortized lease incentives were approximately $ 14.0 million and $ 1.8 million , respectively.

Using a discount rate equal to our borrowing rate of 7.7 % and a remaining term of 5 years, 7 months , the Company determined the ROU asset and lease liability as of adoption were $ 7.9 million and $ 11.3 million , respectively.

There was no cumulative adjustment to our beginning accumulated deficit balance.

In March 2019, the Company amended the existing office lease to add office space in adjacent buildings.

The total additional space is expected to be utilized through August 2020 and has future minimum lease payments of approximately $ 1.0 million .

The Company determined the ROU asset and lease liability were each $ 0.4 million for the lease space that has commenced and was occupied as of September 30, 2019.

On April 23, 2019, the Company entered into an office lease with an effective date of April 12, 2019 with Kilroy Realty, L.P.

(the "Landlord").

The Company expects to use the premises as its new principal corporate offices and plans to consolidate its corporate headquarters into the premises from the current location of multiple suites.

Under the terms of the lease, the Company will have the one-time right of first offer on the suites it currently occupies and a general right of first offer to lease additional space from the Landlord in the development.

The commencement date of the lease is expected to be October 1, 2020.

The initial term of the 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 Company adopted ASU No.

2016-02, Leases, as of January 1, 2019 using a modified retrospective basis method under which prior comparative periods are not restated.

As of December 31, 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 certain 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, which was subsequently amended in May 2020, for office space in an adjacent building located in San Diego, California.

The Company has begun 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.

On February 7, 2020, the Company elected to forgo this continuation option by notifying the Landlord of its intention to vacate the premises of its existing lease.

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 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 ("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 $ 7.4 million adjustment to the lease liability and ROU asset.

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 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 and September 2020, the Landlord delivered possession of the new lease spaces for the purpose of construction of leasehold improvements.

Coinciding with our ability to direct the use of the respective spaces, and utilizing a discount rate equal to our borrowing rate at the time of measurement, the Company has established ROU assets totaling $ 34.6 million and lease liabilities totaling $ 34.5 million.

The total resulting ROU asset and lease liability are each offset by lease incentives associated with tenant improvement allowances totaling $ 7.9 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.

The aggregate base rent due over the initial term of the lease is approximately $ 49.5 million.

The Company is conducting a tenant build improvement project to ensure that space requirements are met.

Following is a schedule of the future minimum rental commitments for our commenced operating lease reconciled to the lease liability and ROU assets as of December 31, 2019 ( in thousands ):

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

December 31, 2020

Thereafter 18,535

Total undiscounted future minimum payments 46,131

Lease incentives payable by lessor ( 6,873 )

Present value discount ( 10,565 )

Total lease liability 28,693

Lease incentives

Straight line lease expense in excess of cash payments

Unamortized lease incentives, less incentives payable by lessor ( 731 )

Cash payments in excess of straight-line lease expense ( 2,287 )

Total ROU asset $ 25,675

As of December 31, 2020, the ROU asset of $ 25.7 million was recorded to the Consolidated Balance Sheets as non-current Other Assets.

The current and non-current portions of the lease liability were recorded to the Consolidated Balance Sheets as follows ( in thousands ):

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

December 31, 2020

2 unchanged sentences

Total lease liabilities $ 28,693

For the twelve months ended December 31, 2019 , the Company recorded $ 2.7 million in expense related to operating leases.

For the twelve months ended December 31, 2020, 2019 and 2018 the Company recorded $ 2.0 million, $ 2.4 million, and $ 1.8 million, respectively, in expense related to operating leases, including amortized tenant improvement allowances.

Supplemental cash flow information related to leases is as follows ( in thousands ):

December 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flow for operating leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases 1

1 Includes leases that commenced during the year ended December 31, 2019, as well as balances related to leases in existence as of the date of the adoption of Topic 842.

Noncash amounts included in the measurement of lease liabilities:

Remeasurement for existing lease abandonment ( 7,430 )

Initial measurement of new lease spaces 34,488

Total noncash amounts included in the measurement of lease liabilities $ 27,058

Noncash amounts included in the measurement of ROU assets:

Remeasurement for existing lease abandonment ( 7,424 )

Initial measurement of new lease spaces 34,612

Total noncash amounts included in the measurement of ROU assets $ 27,188

SUBSEQUENT EVENTS

On February 7, 2020, the Company notified its landlord, Kilroy Realty, L.P., of its intention to vacate the premises of its existing office leases.

The abandonment of this leased office space coincides with the Company’s expected occupancy of the new office lease space in the adjacent building per the office lease made effective April 12, 2019.

The expiration of the existing leases is estimated to occur in the third quarter of 2020, depending on the ability of the current tenant to vacate the new leased premises, through which date, the Company is obligated to pay all base rent, operating expenses and other obligations due under the existing lease.

The impending expiration of the existing lease will result in an adjustment to the ROU asset and lease liability in the first quarter of 2020, with acceleration of certain costs through the expiration date, at which time the carrying amounts for the ROU asset and related lease liability will be reduced to zero.

The ROU asset and lease liability related to the new office lease will be established when the Company is granted access to the premise and has the ability to direct its use.

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.

At-The-Market Equity Offering Program

On February 24, 2020, we 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

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

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

Equity Offerings

2021 Underwritten Public Offering of Common Stock

In February 2021, the Company sold an aggregate of 7.5 million shares of its common stock in an underwritten public offering, at a price of $ 26.75 per share.

The net proceeds to the Company from the offering, after deducting the underwriting discounts and offering expenses, was $ 189.0 million.

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table presents selected consolidated statements of operations data for each quarter for the fiscal years ended December 31, 2020 and 2019 (unaudited, in thousands, except for per share data) :

Second Quarter

Second Quarter First

For the year ended December 31, 2020:

6 unchanged sentences

Net income (loss) $ ( 121,622 ) $ ( 22,549 ) $ ( 26,068 ) $ 808

Net Loss per common share

Net income (loss) per common share

Basic and diluted $ ( 2.37 ) $ ( 0.44 ) $ ( 0.58 ) $ 0.02

9 unchanged sentences

Basic and diluted $ ( 0.70 ) $ ( 0.85 ) $ ( 0.92 ) $ ( 0.99 )

1 In November 2020, the Company completed the acquisition of Orphan Technologies Limited (“Orphan”), including Orphan’s rare metabolic disorder drug OT-58.

The transaction is treated as an asset acquisition with amounts charged to expense on the date of acquisition.

For the year ended December 31, 2020 the Company has incurred $ 97.1 million in expense charges related to the Orphan acquisition.

2 In March 2020, the CARES Act was enacted in response to the COVID-19 pandemic.

The Company recorded a discrete income tax benefit of $ 18.1 million related to this legislation in the first quarter of 2020.

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

2 unchanged sentences

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

3 During the third quarter of 2018, the Company's operating expenses increased due to the ramp up in on-going Phase 3 clinical trials for fosmetpantotenate in PKAN and sparsentan in FSGS, and changes in fair value of contingent consideration.

4 In September 2018, the Company executed a partial repurchase of the 2019 Notes that resulted in a $ 17.0 million loss on early extinguishment of debt.

See Note 7 for further discussion.

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-K

Item 9A. Controls and Procedures