Mirum Pharmaceuticals, Inc. (MIRM)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 “Financial Statements and Supplementary Data” and included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements based upon our current beliefs, estimates, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report.

Overview

We are a biopharmaceutical company dedicated to transforming the treatment of rare diseases. We have three approved medicines: LIVMARLI® (maralixibat) oral solution (“Livmarli”), CHOLBAM® (cholic acid) capsules (“Cholbam”), and CHENODAL® or CTEXLI® (chenodiol) tablets (“Chenodal” or “Ctexli”).

Livmarli is a novel, orally administered, minimally-absorbed ileal bile acid transporter (“IBAT”) inhibitor (“IBATi”) that is approved for the treatment of cholestatic pruritus in patients with Alagille syndrome (“ALGS”) in the United States (“U.S.”) and various other countries around the world and for cholestatic pruritus in patients with progressive familial intrahepatic cholestasis (“PFIC”) in the U.S. and for the treatment of PFIC in the European Union (“EU”). We market and commercialize Livmarli in the U.S., Canada and certain countries in Europe through our specialized and focused commercial team. We have also entered into license and distribution agreements with several rare disease companies for the commercialization of Livmarli in additional countries.

On October 22, 2024, we completed a license agreement with Enthorin Therapeutics, LLC and Dart Neuroscience LLC granting us the worldwide right to develop and commercialize MRM-3379, an allosteric inhibitor of Phosphodiasterase 4d (“PDE4D”). We intend to develop MRM-3379 for the treatment of Fragile-X Syndrome (“FXS”) and expect to initiate a Phase 2 clinical trial in 2025.

On August 31, 2023, we completed the acquisition of assets of Travere Therapeutics, Inc. (“Travere”) that are primarily related to the development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of chenodiol and Cholbam (also known as Kolbam) (and together with chenodiol, the “Bile Acid Medicines”) pursuant to an asset purchase agreement dated July 16, 2023 (such acquisition, the “Bile Acid Portfolio Acquisition”).

The FDA approved Cholbam in March 2015, as the first FDA-approved treatment for pediatric and adult patients with bile acid synthesis disorders due to single enzyme defects, and for adjunctive treatment of patients with peroxisomal disorders, including peroxisome biogenesis disorder-Zellweger spectrum disorder (“PBD-ZSD”). Chenodiol is standard of care for the treatment of cerebrotendinous xanthomatosis (“CTX”) in the United Sates with a medical necessity recognition by the FDA. Chenodiol is currently commercialized under the brand name Chenodal. We submitted an NDA for chenodiol for the treatment of CTX in 2024 and received FDA approval for the treatment of adults with CTX in February 2025, which will be commercialized under the brand name Ctexli. We currently commercialize Chenodal and Cholbam, and plan to commercialize Ctexli, in the U.S. through our specialized and focused commercial team. We have also assumed license and distribution agreements with several rare disease companies for the commercialization of Cholbam and chenodiol in additional countries.

We are developing Livmarli for certain rare cholestatic conditions through the Phase 3 EXPAND study, which we initiated in the fourth quarter of 2024. In addition, we are advancing our product candidate, volixibat, a novel, oral, minimally-absorbed agent designed to inhibit IBAT, for the treatment of adult patients with cholestatic liver diseases. We are developing volixibat in the setting of primary sclerosing cholangitis (“PSC”) and primary biliary cholangitis (“PBC”), and in October 2024, we announced that the FDA granted Breakthrough Therapy Designation for volixibat as a potential treatment for cholestatic pruritus in patients with PBC. We conducted an interim analysis of our VISTAS Phase 2b clinical trial in PSC and reported interim data from our VANTAGE Phase 2b clinical trial in PBC in June 2024. We expect the VISTAS Phase 2b clinical trial in PSC to complete enrollment in the second half of 2025, and we expect the VANTAGE Phase 2b clinical trial in PBC to complete enrollment in 2026.

To date, we have focused primarily on acquiring and in-licensing our product candidates, organizing and staffing our company, business planning, raising capital, advancing our product candidates through clinical development, preparing for commercialization of our product candidates, commercializing our approved medicines, and conducting business development activities relating to, among other things, portfolio expansion through collaborations and acquisitions.

88

Table of Contents

Financial Overview

Our net loss was $87.9 million and $163.4 million for the years ended December 31, 2024 and 2023, respectively. Our net loss for the year ended December 31, 2023 includes a $49.1 million loss related to the extinguishment of the liabilities related to the RIPA. As of December 31, 2024, we had an accumulated deficit of $644.2 million compared to $556.2 million as of December 31, 2023. As of December 31, 2024, we had cash, cash equivalents, restricted cash and investments of $293.3 million, compared to cash and cash equivalents of $286.3 million as of December 31, 2023.

We anticipate we will continue to generate net losses for the foreseeable future as we continue commercial activities for our approved medicines, conduct our ongoing and planned clinical trials, seek regulatory approvals for our product candidates and make potential milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. We expect that total product sales of our approved medicines will continue to increase on an annual basis. We have entered into license and collaboration arrangements with other companies whereby we are entitled to receive upfront and license fees, development and sales-based milestones, and tiered royalties based on sales of commercialized products. In select countries, we have entered into distribution agreements for the sale of our approved medicines and such distributors may have fluctuating purchase levels. As a result, our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

We expect to satisfy future cash needs through existing capital balances, revenue from our approved medicines and through a combination of equity offerings, debt financings or other capital sources, collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate the development of one or more of our product candidates or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

License agreement with Enthorin

On October 22, 2024, we completed the in-license of MRM-3379. We paid a one-time non-refundable license fee of $7.5 million upon closing of the transaction, and up to an additional $217.5 million is payable upon achievement of certain development, regulatory and commercial milestones.

Asset Purchase Agreement with Travere Therapeutics, Inc.

On August 31, 2023, we completed the Bile Acid Portfolio Acquisition. We paid $210.4 million upon closing of the transaction, and up to an additional $235.0 million is payable upon the achievement of certain milestones based on specified amounts of annual net sales of the Bile Acid Medicines.

In connection with and immediately prior to the closing of the Bile Acid Portfolio Acquisition, we completed the private placement of 8,000,000 shares of our common stock at a price per share of $26.25, resulting in net proceeds of approximately $202.2 million, which we used to finance the upfront payment at the closing of the Bile Acid Portfolio Acquisition.

Components of Results of Operations

Revenue

Product Sales, Net

We have three approved medicines: Livmarli, Cholbam and Chenodal or Ctexli. We expect total product sales of our approved medicines will continue to increase on an annual basis.

Our U.S. revenue from product sales, net further depends on our prescription mix of commercial payors, Medicaid and amounts of free medicines provided under our patient assistance program. We expect our prescription mix and resulting gross to net adjustment in the U.S. to remain consistent. Our rest of world revenue from product sales, net primarily depends on our contractual obligations with our distributors and results of pricing negotiations with governmental authorities in certain European countries where we launch Livmarli and expect to launch our other product candidates, if approved. In addition, in certain countries we receive large periodic orders. The timing of these orders can be inconsistent and can create quarter-to-quarter variation in revenue.

89

Table of Contents

License Revenue

Under the exclusive licensing agreements with CANbridge and GC Biopharma, we have recognized as revenue the upfront nonrefundable payments related to the licenses granted upon satisfaction of certain performance obligations. Pursuant to the agreements, we are eligible to receive future milestone payments. These milestone payments are fully constrained and will be recognized in revenue in the period when it is probable that a significant reversal of cumulative revenue recognized for the contract would not occur. We are also eligible to receive royalty payments related to the agreements, which will be recognized as the underlying product sales occur.

Our license revenue is dependent upon our licensees’ achievement of future milestones, which are not within our control, and we are unable to reliably estimate the timing of such revenues.

Operating Expenses

Cost of Sales

Cost of sales consist of raw materials, third-party manufacturing costs, personnel, facility and other costs of manufacturing commercial products, transportation and freight, amortization of finite-lived intangible assets and royalty payments payable on net sales of our approved medicines under licensing agreements. Cost of sales may also include period costs related to certain manufacturing services and charges for inventory valuation reserves. In addition, we have firm commitments for the purchase of minimum order quantities for active pharmaceutical ingredients. We periodically evaluate these firm commitments to determine if these commitments are in excess of our needs. If any net loss is determined, we record a charge to cost of sales in the period identified. As of the date of our acquisition of the Bile Acid Medicines from Travere, inventory acquired was valued at its fair value. As a result, our cost of sales exceeds the historical cost to manufacture the inventory and has a negative impact on our gross margin. As of the balance sheet date we have sold the majority of acquired inventory that is recorded at fair value.

We expect cost of sales to increase in the future mainly due to variable costs associated with increased product sales such as royalties payable and inventory costs. We expect cost of sales to remain approximately unchanged as a percent of product sales in the future.

Research and Development Expenses

Research and development expenses primarily relate to clinical development and manufacturing activities of our product candidates. Our research and development expenses include, among other things:

•salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions;

•external expenses paid to clinical trial sites, contract research organizations (“CROs”) and consultants that conduct our clinical trials;

•expenses related to drug formulation development and the production of clinical trial supplies, including fees paid to contract manufacturers;

•licensing milestone payments related to development or regulatory events;

•payments made for the acquisition or licensing of in-process research and development assets with no alternative future use;

•expenses related to non-clinical studies;

•expenses related to compliance with drug development regulatory requirements; and

•other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies.

We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Upfront payments, research and development funding and milestone payments made to third parties in connection with licenses and research and development collaborations are expensed as incurred.

We expect our research and development expense may increase in the future as we continue to develop our volixibat product candidates, execute the EXPAND label expansion study for Livmarli and initiate development of MRX-3379.

90

Table of Contents

Selling, General and Administrative Expense

Sales and marketing expense, which is a component of selling, general and administrative expense, primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. General and administrative expense, which is a component of selling, general and administrative expense, primarily consists of corporate support and other administrative expenses, including employee-related expenses.

We anticipate that our selling, general and administrative expenses will increase in the future to support our continued commercialization efforts of our approved medicines in the U.S. and internationally as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include increased costs related to hiring of additional personnel and fees to outside consultants to support further marketing, legal, tax, planning and accounting activities.

Loss from termination of revenue interest purchase agreement

Loss from termination of revenue interest purchase agreement is related to the repurchase and termination of the RIPA in the second quarter of 2023. The repurchase payment included a premium over the remaining revenue interest liability and resulted in the recognition of a loss from termination of the RIPA in our consolidated statements of operations and comprehensive loss.

Interest Income

Interest income consists of interest earned on our cash equivalents and investments.

Interest Expense

We incur interest expense on our convertible notes and incurred interest expense on the RIPA. Interest on our convertible notes consists of a 4% per annum fixed rate of interest and amortization of debt discount and amortization costs. Interest on the RIPA consisted primarily of costs associated with our liability and non-cash interest costs associated with the amortization of the related debt discount and deferred issuance costs. Prior to extinguishment of the RIPA in the second quarter of 2023, we imputed interest expense associated with this liability using the effective interest rate method which is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

Other Expense, Net

Other expense, net consists of unrealized currency gains and losses on net assets and liabilities denominated in foreign currency and gain or loss from remeasurement of the liabilities associated with the common stock issued in connection with the acquisition of Satiogen after the satisfaction of certain purchase price adjustments and indemnification obligations that may arise during the 12 month period following the asset acquisition date (“Indemnification Holdback”) and the liability associated with the common stock to be issued in connection with the acquisition of Satiogen as contingent consideration upon achievement of a certain milestone (“Contingent Milestone”) both of which were recorded in connection with our acquisition of Satiogen.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported, including the amount of assets, liabilities, expenses and the disclosure of contingent assets and liabilities. Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases its estimates on historical experience, known trends and events, and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

91

Table of Contents

Intangible Assets, Net

Intangible assets, net are measured at their fair values as of the acquisition date or, in the case of commercial milestone payments, the date they become due. Intangible assets are generally amortized on a straight-line basis over their estimated useful lives. We base the useful lives and related amortization expense on the period of time we estimate the assets will generate net product sales or otherwise be used. We also periodically review the lives assigned to our intangible assets to ensure that our initial estimates do not exceed any revised estimated periods from which we expect to realize cash flows from the technologies. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

We evaluate our intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the intangible asset may be impaired, we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the technology over the remaining amortization period, we reduce the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period.

We make significant judgments in relation to the valuation of intangible assets resulting from asset acquisitions, particularly in the forecasts of future operating results that are used in the discounted cash flow valuation models. It is possible that plans may change and estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

Product Sales, Net

Revenues from direct product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, including amounts from payors and other third parties on behalf of our customers. For revenues from partner markets, we record net product sales based on the estimated variable consideration to be received when the product is sold. The transaction price, which may include fixed or variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the product sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. We recognize our best estimate of the consideration that we expect to receive when control of the inventory is transferred to our customer and revenue is recognized. Estimates are reviewed and updated quarterly as additional information becomes known. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate Program and other foreign government programs. Our rebate calculations may require estimates based upon our actual historical experience, customer mix and payer mix current contractual and statutory obligations and revenue projections. We update estimates and assumptions on a quarterly basis and record any necessary adjustments to revenue in the period identified. Estimated rebates are recorded as a reduction of revenue in the period the related sale is recognized. To date, actual government rebates have not differed materially from our estimates.

Cost of Product Sales

Prior to receiving approval from the FDA or other foreign regulatory authorities for a new medicine or new formulation, we expense all costs incurred related to the manufacture of such medicines as research and development expense because of the inherent risks associated with the development of a drug candidate, the uncertainty about the regulatory approval process and our lack of history for regulatory approval of drug candidates. Subsequent to receiving FDA or other foreign regulatory authority approval, when commercialization is considered probable and the future economic benefit is expected to be realized, we begin capitalizing inventory costs as incurred.

Cost of product sales consist of raw materials, manufacturing costs, transportation and freight, amortization of capitalized intangible assets, royalties and indirect overhead costs associated with the manufacturing and distribution of the Company’s approved products. Cost of product sales may also include period costs related to certain manufacturing services and inventory adjustment charges.

We analyze our inventory levels quarterly for obsolescence and, if required, adjust inventory to its net realizable value for quantities in excess of expected demand. The analysis uses quantitative forecast and historical demand

92

Table of Contents

considerations in combination with shelf life and stop sell dates in our estimates to evaluate inventory that may not be sellable. The resulting adjustments are recognized as Cost of Sales.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We accrue and expense clinical trial activities performed by third parties based upon estimates of the proportion of work completed over the life of the individual study and patient enrollment rates in accordance with agreements established with clinical research organizations, clinical trial sites and other vendors associated with the clinical trials. We determine the estimates by reviewing contracts, vendor agreements and purchase orders and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

We make estimates of accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

Results of Operations for the Years Ended December 31, 2024 and 2023

In this section, we discuss the results of our operations for the year ended December 31, 2024, compared to the year ended December 31, 2023. For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K filed with the SEC on March 15, 2024.

93

Table of Contents

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023 (in thousands):

Product Sales, Net

Product sales, net was $336.4 million for the year ended December 31, 2024, compared to $178.9 million for the year ended December 31, 2023. The increase in product sales, net was a result of sales of the Bile Acid Medicines following the completion of the Bile Acid Portfolio Acquisition in August 2023 and our continued commercialization of Livmarli in the U.S. for the treatment of ALGS and PFIC, and in certain international markets directly or through partner market supply orders for the treatment of ALGS.

The following table disaggregates total Product sales, net:

License and Other Revenue

License and other revenue was $0.5 million for the year ended December 31, 2024 and $7.5 million for the year ended December 31, 2023. The decrease in license and other revenue was primarily due to the achievement of regulatory milestones by CANbridge and GC Biopharma associated with our license agreements in 2023.

Cost of Sales

Cost of sales was $81.6 million for the year ended December 31, 2024, compared to $47.0 million for the year ended December 31, 2023. The increase in cost of sales was primarily a result of increases in royalty expense of $15.6 million on net sales of Livmarli and the Bile Acid Medicines under licensing agreements, amortization expense of $12.4 million primarily due to acquired intangibles associated with our acquisition of the Bile Acid Medicines in August 2023, product cost of sales of $6.9 million related to the Bile Acid Medicines and, to a lesser extent, Livmarli and other period costs of $6.3 million associated with commercial supply chain expenses and other general expenses. These increases were

94

Table of Contents

partially offset by lower excess and obsolescence expenses of $6.6 million primarily due to a charge in the prior year related to excess inventory from certain firm minimum purchase commitments in connection with our acquired Bile Acid Medicines.

Research and Development Expenses

The following table summarizes the period-over-period changes in research and development expenses relating to our product candidates in development for the periods indicated (in thousands):

Research and development expenses were $140.6 million for the year ended December 31, 2024, an increase of $38.0 million compared to the year ended December 31, 2023. The net increase was primarily due to:

•for volixibat programs, an increase of $13.0 million, primarily due to increased expenses associated with conduct of the PSC and PBC trials;

•for MRM-3379, an increase of $7.5 million due to the upfront payment associated with the in-licensing of MRM-3379;

•for personnel related expenses, an increase of $9.6 million related to increased employee headcount to support our development pipeline;

•for stock-based compensation expense, an increase of $4.3 million associated with incremental employee equity awards; and

•for other expense, an increase of $7.4 million, primarily due to other general research and development activities, including expenses related to the Bile Acid Medicines acquired in August of 2023, partially offset by

•for Livmarli programs, a decrease of $3.8 million, primarily due to lower clinical expenses associated with completion of the MARCH Phase 3 clinical trial of Livmarli in patients with PFIC and related rollover study as well as lower costs due to discontinuation of the biliary atresia clinical trial, partially offset by increased expenses associated with the Livmarli Phase 3 EXPAND label expansion study.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $202.2 million for the year ended December 31, 2024, an increase of $56.3 million compared to the year ended December 31, 2023. The increase was primarily due to increases of $27.9 million in personnel and other compensation related expenses, including an increase of $8.2 million in stock-based compensation expense, reflecting an increase in the number of our selling, marketing and administrative employees to support commercial activities for our approved medicines, $13.3 million in marketing, advertising, promotion and medical affairs expenses associated with commercial activities for our approved medicines, $8.1 million in expenses primarily related to accounting, legal, compliance, public relations and international expansion activities and $7.0 million in other general administrative expenses.

Loss from termination of revenue interest purchase agreement

Loss from termination of RIPA was zero for the year ended December 31, 2024, compared to $49.1 million for the year ended December 31, 2023. The 2023 loss was related to the premium paid to repurchase the revenue interests pursuant to the RIPA.

95

Table of Contents

Interest Income

Interest income was $13.8 million for the year ended December 31, 2024, compared to $13.7 million for the year ended December 31, 2023.

Interest Expense

Interest expense was $14.3 million for the year ended December 31, 2024, a decrease of $0.8 million compared to the year ended December 31, 2023. For the year ended December 31, 2024, interest expense related to our convertible notes. For the year ended December 31, 2023, interest expense consisted of $10.0 million related to our convertible notes and $5.1 million related to the RIPA prior to extinguishment.

Other Income (Expense), Net

Other income (expense), net was income of $1.2 million for the year ended December 31, 2024, compared to expense of $2.8 million for the year ended December 31, 2023. For the year ended December 31, 2024, the income was primarily attributable to unrealized currency gains on net assets and liabilities denominated in foreign currency. For the year ended December 31, 2023, the expense was primarily attributable to $1.8 million in unrealized currency losses on net assets and liabilities denominated in foreign currency, $0.7 million of expense associated with the remeasurement of the Contingent Milestone liability and the Indemnification Holdback liability prior to issuance of the underlying common stock as well as $0.4 million of realized currency loss.

Liquidity and Capital Resources

Overview

Since inception, we have funded our operations primarily through debt, equity, revenue interest financings and, to a lesser extent, cash from our product sales and license and collaboration revenue. We had $292.8 million of unrestricted cash, cash equivalents and investments as of December 31, 2024, compared to cash and cash equivalents of $286.3 million as of December 31, 2023. Since inception, we have incurred operating losses. As of December 31, 2024, we had an accumulated deficit of $644.2 million, compared to $556.2 million as of December 31, 2023.

On August 31, 2023, we completed the Bile Acid Portfolio Acquisition for an aggregate purchase price of up to $445.0 million in cash, with $210.4 million paid at the closing and up to $235.0 million upon achievement of certain milestones based on specified amounts of annual net sales (tiered from $125.0 million to $500.0 million) of the Bile Acid Medicines. In connection with and immediately prior to the closing of the Bile Acid Portfolio Acquisition, we completed the private placement of 8,000,000 shares of our common stock at a price per share of $26.25, resulting in net proceeds of approximately $202.2 million, which we used to finance the upfront payment at the closing of the Bile Acid Portfolio Acquisition.

On April 17, 2023, we completed an offering of $316.3 million aggregate principal of the Notes, which includes the exercise of the initial purchasers’ option in full. The offering resulted in net proceeds of $305.3 million after deducting the initial purchasers’ discounts and commissions and offering expenses. The terms of the Notes are further described in Note 10 to our consolidated financial statements. We used a portion of the net proceeds to repurchase the revenue interests from the Purchasers at a call price of $192.7 million. Upon repurchase of the revenue interests from the Purchasers, the RIPA, in accordance with its terms, was terminated with no further payments due to the Purchasers and the $100.0 million of our previously restricted cash equivalents was no longer restricted from use.

In September 2022, we filed an automatic shelf registration statement on Form S-3 with the SEC (the “2022 Shelf Registration”), which became effective upon filing, pursuant to which we registered for sale from time to time in one or more offerings an unlimited amount of any combination of our common stock, preferred stock, debt securities and warrants, so long as we continue to satisfy the requirements of a “well-known seasoned issuer” under SEC rules. This automatic shelf registration statement will remain in effect for up to three years from the date it became effective. As of December 31, 2024, we have not issued any securities pursuant to the 2022 Shelf Registration.

On November 2, 2023, we entered into a Sales Agreement (the “2023 Sales Agreement”) with Leerink and Cantor Fitzgerald & Co. (the “Sales Agents”), pursuant to which we may, from time to time, sell up to an aggregate amount of $200.0 million of our common stock through the Sales Agents in an “at-the-market” offering (the “ATM Offering”) pursuant to the 2022 Shelf Registration. We are not required to sell shares under the 2023 Sales Agreement. Sales of our common stock, if any, under the 2023 Sales Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act. We will pay a given designated Sales Agent a commission of up to 3.0% of the aggregate gross proceeds of any shares of common stock sold through it pursuant to the 2023 Sales Agreement. As of December 31, 2024, we have not issued any securities pursuant to the 2023 Sales Agreement.

96

Table of Contents

In August 2020, the SEC declared effective a registration statement on Form S-3 (the “2020 Shelf Registration”) covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into a sales agreement (the “2020 Sales Agreement”) with SVB Securities LLC, subsequently acquired by Leerink Partners LLC (“Leerink”), pursuant to which we could issue and sell, in an at the market offering, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the 2020 Shelf Registration through Leerink acting as the sales agent and/or principal. The 2020 Shelf Registration expired in August 2023, and no further sales may be made under the 2020 Sales Agreement. Prior to the expiration of the 2020 Shelf Registration, we issued and sold an aggregate of 2,125,090 shares of common stock pursuant to the 2020 Sales Agreement, resulting in aggregate gross proceeds to us of $43.7 million.

Based on our current and anticipated level of operations and cash generated from sales of our approved medicines, we believe our existing unrestricted cash, cash equivalents and investments will be sufficient to fund current operations through at least the next 12 months from the filing of this Annual Report and beyond.

We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, continue commercialization activities for our approved medicines and potentially expand into additional markets, hire additional staff, including clinical, scientific, operational, financial and management personnel and pay potential development milestones. Net loss is also impacted by significant non-cash charges related to stock-based compensation and amortization of intangible assets.

Our primary use of cash is to fund operating expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Although we expect product revenues to increase as we continue commercial activities for our approved medicines, we may not achieve commercial success. Certain of our approved medicines, including the Bile Acid Medicines, are subject to immediate competition from compounded and generic entrants, as the abbreviated new drug application (“ANDA”) and NDA for these drug products have no remaining or current patent or non-patent exclusivity. In addition, Chenodal is standard of care for the treatment of CTX in the U.S. with a medical necessity recognition by the FDA. We submitted an NDA for chenodiol for the treatment of CTX in 2024 and received FDA approval for the treatment of adults with CTX in February 2025, which will be commercialized under the brand name Ctexli. The FDA has also granted orphan exclusivity for chenodiol for that indication.

Our principal source of liquidity is product revenue from sales of approved medicines, and, to a lesser extent, from our license and collaboration agreements. Until such time, if ever, as we can generate sufficient product revenue from sales of our approved medicines, our current product candidates or any future product candidates, if approved, to fund operations, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license or development agreements. Our primary cash needs are for day-to-day operations and to fund our working capital requirements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. Additionally, if the equity and credit markets deteriorate from adverse geopolitical and macroeconomic developments or otherwise, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Material Cash Requirements

In addition to ongoing capital needs to fund our ongoing operations, our material cash requirements include the following contractual and other obligations.

In April 2023, we completed an offering of $316.3 million aggregate principal of the Notes, which includes the exercise of the initial purchasers’ option in full. The offering resulted in net proceeds of $305.3 million after deducting the initial purchasers’ discounts and commissions and offering expenses. The Notes are our senior, unsecured obligations and accrue interest at a rate of 4.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year. The

97

Table of Contents

Notes will mature on May 1, 2029, unless earlier converted, redeemed or repurchased by us. The terms of these Notes are further described in Note 10 to our consolidated financial statements.

During the fourth quarter of 2024, the last reported sale price of our common stock exceeded 130% of the conversion price of the Notes for more than 20 trading days during the 30 consecutive trading days ended December 31, 2024. As a result, the Notes are convertible at the option of the holders of the Notes during the first quarter of 2025, the quarter immediately following the quarter when the conditions were met, as stated in the terms of the Notes. If holders of the Notes elect to convert their Notes, we may elect to settle such conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock.

Under the Shire License Agreement and the Asset Purchase Agreement with Travere, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. The amount and timing of milestone obligations are unknown or uncertain as we are unable to estimate the timing or likelihood of achieving the milestone events. Additionally, the amount of royalty payments are based upon future product sales, which we are unable to predict with certainty. These potential obligations are further described in Note 7 to our consolidated financial statements.

In October 2024, we entered into a license agreement with Enthorin Therapeutics, LLC and Dart Neuroscience LLC, under which we acquired the worldwide rights to develop, manufacture and commercialize a compound designated as ENT-3379, renamed MRM-3379, in exchange for an upfront payment of $7.5 million and up to an additional $217.5 million upon the achievement of regulatory and sales-based milestones as well as mid-single digit percent royalties on any future sales of MRM-3379. We expect to initiate our Phase 2 clinical trial in Fragile X Syndrome in 2025.

We additionally have contractual obligations for our operating leases for our corporate headquarters. These obligations are further described in Note 9 to our consolidated financial statements.

We enter into contracts in the normal course of business with clinical research organizations and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancellable contracts.

We enter into commercial inventory supply agreements that obligate us to firm commitments for the purchase of minimum order quantities, which may be material to our financial statements.

Cash Flows

The following table provides a summary of the net cash flow activity for the periods indicated (in thousands):

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $10.3 million for the year ended December 31, 2024, reflecting our net loss of $87.9 million partially offset by adjustments to net loss of $75.7 million. The adjustments consisted primarily of stock-based compensation expense, depreciation and amortization of our intangible assets and fixed assets and charges associated with excess and obsolete inventory and firm commitment losses. Additionally, cash provided by operating activities reflected changes in net operating assets of $22.6 million, primarily related to the increase in accounts payable, accrued expenses and other liabilities resulting primarily from an increase in accrued sales deductions and royalties due to the growth from our product sales in the year ended December 31, 2024, and an increase in accrued expenses driven by our growth, including accrued expenses related to clinical studies and contract manufacturing activities, offset by an increase in accounts receivable due to the growth from our product sales and payments made for the purchase of inventory.

Net cash used in operating activities was $70.9 million for the year ended December 31, 2023, reflecting our net loss of $163.4 million partially offset by adjustments to net loss of $111.7 million. The adjustments consisted primarily of

98

Table of Contents

loss from termination of RIPA and effective interest expense prior to the termination in April 2023, stock-based compensation expense, and depreciation and amortization of our intangible assets and fixed assets. Additionally, cash used in operating activities reflected changes in net operating assets of $19.2 million, consisting primarily of an increase in accounts receivables related to sales of our approved medicines, an increase in accounts payable, accrued expenses and other liabilities primarily related to the increase in accrued sales deductions and accrued royalties payable due to our increased net product sales, and an increase in accrued interest expense related to the Notes issued in April 2023.

Net Cash Used in Investing Activities

Net cash used in investing activities was $90.1 million for the year ended December 31, 2024, primarily due to purchases of investments resulting from the changing interest rate environment and milestone payments associated with the approval of Livmarli for cholestatic pruritus in patients with PFIC in the U.S. and for the treatment of PFIC in the EU, offset by proceeds from maturities of investments.

Net cash used in investing activities was $107.2 million for the year ended December 31, 2023, primarily due to the payment in connection with our acquisition of the Bile Acid Medicines from Travere, purchases of investments and our milestone payment related to the approval of Livmarli by the European Commission for the treatment of cholestatic pruritus in patients with ALGS two months of age and older, partially offset by proceeds from maturities of investments.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $17.7 million for the year ended December 31, 2024, due to proceeds from employee equity award exercises.

Net cash provided by financing activities was $336.6 million for the year ended December 31, 2023, due to net proceeds from the issuance of the Notes in April 2023, from the issuance and sale of common stock in a private placement offering in August 2023, from the issuance and sale of common stock under the 2020 Sales Agreement with Leerink during the year ended December 31, 2023, and proceeds from employee equity award exercises, partially offset by revenue interest payments and payments to repurchase the revenue interests under the RIPA.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 “Financial Statements and Supplementary Data” and included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements based upon our current beliefs, estimates, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report.

Overview

We are a biopharmaceutical company focused on the identification, acquisition, development and commercialization of novel therapies for debilitating rare and orphan diseases. We have three approved medicines: Livmarli, Cholbam, and Chenodal.

Livmarli is a novel, orally administered, minimally-absorbed IBATi that is approved for the treatment of cholestatic pruritus in patients with ALGS in the United States and various other countries around the world and for cholestatic pruritus in patients with PFIC in the United States. We market and commercialize Livmarli in the United States and certain countries in Europe through our specialized and focused commercial team. We have also entered into license and distribution agreements with several rare disease companies for the commercialization of Livmarli in additional countries. We are also developing Livmarli for PFIC outside of the United States. We submitted a marketing authorization variation to the EMA in April 2023, for which we expect an approval decision in the first half of 2024, based on positive data from our MARCH Phase 3 clinical trial of Livmarli in patients with PFIC.

On August 31, 2023, we completed the acquisition of assets of Travere that are primarily related to the development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of the Bile Acid Medicines pursuant to an asset purchase agreement dated July 16, 2023. The FDA approved Cholbam in March 2015 as the first FDA-approved treatment for pediatric and adult patients with bile acid synthesis disorders due to single enzyme defects and for adjunctive treatment of patients with peroxisomal disorders, including PBD-ZSD and SLOS. Chenodal is approved for the treatment of radiolucent stones in the gallbladder and has received medical necessity recognition by the FDA for the treatment of CTX. We commercialize Chenodal and Cholbam in the United States through our specialized and focused commercial team. We have also assumed several license and distribution agreements with several rare disease companies for the commercialization of Chenodal and Cholbam in additional countries. In October 2023, we reported positive topline data from our RESTORE clinical trial evaluating Chenodal in patients with CTX. We plan to submit a new drug application for Chenodal for the treatment of CTX to the FDA in the first half of 2024.

We are also advancing our product candidate, volixibat, a novel, oral, minimally-absorbed agent designed to inhibit IBAT, for the treatment of adult patients with cholestatic liver diseases. We are developing volixibat in the setting of PSC and PBC. Volixibat has been studied in over 400 adults for up to 48 weeks. Clinical trials of volixibat have shown significant activity on IBAT and bile acid markers such as 7αC4, fecal bile acids and cholesterol, demonstrating potent biological activity. We expect to conduct an interim analysis of our VISTAS Phase 2b clinical trial in PSC and report interim data from our VANTAGE Phase 2b clinical trial in PBC, both in the first half of 2024.

We were incorporated in May 2018 and commenced operations in November 2018. To date, we have focused primarily on acquiring and in-licensing our product candidates, organizing and staffing our company, business planning, raising capital, advancing our product candidates through clinical development, preparing for commercialization of our product candidates, commercializing Livmarli, and conducting business development activities relating to, among other things, portfolio expansion through collaborations and acquisitions.

We have not generated operating income to date. We expect to incur significant operating losses for the foreseeable future. Since inception, we have funded our operations primarily through debt, equity, revenue interest financings and cash from our product sales, net and collaboration revenue.

94

Financial Overview

Our net loss was $163.4 million and $135.7 million for the years ended December 31, 2023 and 2022, respectively. Our net loss for the year ended December 30, 2023 includes a $49.1 million loss related to the extinguishment of the liabilities related to the RIPA. As of 2023, we had an accumulated deficit of $556.2 million compared to $392.8 million as of December 31, 2022. As of December 31, 2023, we had cash and cash equivalents of $286.3 million, compared to cash, cash equivalents, restricted cash and investments of $251.7 million as of December 31, 2022.

We anticipate we will continue to generate losses for the foreseeable future as we continue commercial activities for our approved medicines, conduct our ongoing and planned clinical trials, seek regulatory approvals for our product candidates and make potential milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. We expect total product sales of our approved medicines will continue to increase on an annual basis, though we expect quarterly fluctuations. We have entered into collaboration arrangements with other companies whereby we are entitled to receive upfront and license fees, research and development funding, development and sales-based milestones, and tiered royalties based on sales of commercialized products. In select countries, we have entered into distribution agreements for the sale of Livmarli and such distributors may have fluctuating purchase levels of Livmarli. As a result, our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

We expect to satisfy future cash needs through existing capital balances, revenue from our approved medicines and through a combination of equity offerings, including the private placement described above, debt financings or other capital sources, collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate the development of one or more of our product candidates or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Geopolitical and Macroeconomic Developments

Due to the ongoing military conflicts between Ukraine and Russia and in Israel and the surrounding areas, the U.S. and global financial markets experienced volatility, which has led to disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally. In connection with the military conflict between Russia and Ukraine, the United States, United Kingdom and EU, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia and related sanctions, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity in both Europe and globally, and has introduced significant uncertainty into global markets. As a result, our business and results of operations may be adversely affected by the ongoing military conflicts and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict.

Although we did not see a significant financial impact to our business operations as a result of recent geopolitical and macroeconomic developments, such as recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures and the ongoing military conflicts for the year ended December 31, 2023, there may be potential impacts to our business in the future that are highly uncertain and difficult to predict such as disruptions or restrictions in our supply chain, disruption or restrictions on our employees’ ability to travel, disruptions to or delays in ongoing non-clinical trials, clinical trials, third-party manufacturing supply and other operations, inability for patients to see their healthcare providers and access our product and product candidates, or adverse geopolitical and macroeconomic concerns, interruptions or delays in the operations of the FDA or other regulatory authorities, continued increases in inflation and interest rates, bank

95

failures, changes in availability and cost of credit and our ability to raise capital and conduct business development activities. The ultimate impact of these geopolitical and macroeconomic developments, as well as any lasting effects on our revenue and the way we conduct our business, is highly uncertain and subject to continued change, and we recognize that they may continue to present unique challenges for us.

We believe that our existing cash and cash equivalents and existing sources of and access to financing are adequate to satisfy our needs for operating capital, working capital, capital expenditures, and debt service in the 12 months from the issuance of the consolidated financial statements included in this Annual Report. However, should adverse geopolitical and macroeconomic events and any associated recession or depression continue for a prolonged period, our results of operations, financial condition, liquidity and cash flows could be materially impacted as a result of a lower likelihood of effectively and efficiently developing new product candidates and successfully commercializing our approved medicines.

Asset Purchase Agreement with Travere Therapeutics, Inc.

On August 31, 2023, we completed the Bile Acid Portfolio Acquisition. We paid $210.4 million upon closing of the transaction, and up to an additional $235.0 million is payable upon the achievement of certain milestones based on specified amounts of annual net sales of the Bile Acid Medicines.

We concurrently entered into a transitional services agreement with Travere, pursuant to which Travere is obligated to perform certain services for a period of time, not anticipated to last beyond 12 months post-close, with respect to our use and operation of the assets purchased.

In connection with and immediately prior to the closing of the Bile Acid Portfolio Acquisition, we completed the private placement of 8,000,000 shares of our common stock at a price per share of $26.25, resulting in net proceeds of approximately $202.2 million.

Satiogen Acquisition

In May 2022, we completed the acquisition of Satiogen for total consideration of $24.2 million. At the closing of the acquisition, Satiogen’s assets consisted of cash and intangible assets related to developed technology. Through the transaction, we obtained all Satiogen-owned intellectual property relating to Livmarli and volixibat. The transaction resulted in a reduction of total licensing royalty obligations for Livmarli and volixibat.

The total potential consideration for the acquisition consisted of 841,792 shares of common stock and approximately $2.6 million in cash, excluding $0.2 million of stock option exercise prices deemed to have been paid immediately prior to the acquisition, in respect of an equivalent amount of cash on the books of Satiogen acquired by us at closing.

Assignment and License Agreement with Shire (Takeda)

In November 2018, we entered into the Shire License Agreement with Shire, which was subsequently acquired by Takeda, in which we were granted an exclusive, royalty bearing worldwide license to develop and commercialize our two product candidates, Livmarli and volixibat. As part of the Shire License Agreement, we were assigned license agreements held by Shire with Satiogen, Pfizer, and Sanofi (collectively, “Assigned License Agreements”).

Under the Shire License Agreement and Assigned License Agreements, to date, we have paid aggregate development regulatory and sales milestones of $71.0 million related to our Livmarli and volixibat programs.

Components of Results of Operations

Revenue

Product Sales, Net

We have three approved medicines: Livmarli, Cholbam and Chenodal. We expect total product sales of our approved medicines will continue to increase on an annual basis, though we expect quarterly fluctuations.

96

Our U.S. revenue from product sales, net further depends on our prescription mix of commercial payors, Medicaid and free medicines under our patient assistance program. We expect our prescription mix and resulting gross to net adjustment in the U.S. to remain consistent; however, we cannot reliably estimate it given our limited experience in the market. Our rest of world revenue from product sales, net primarily depends on our contractual obligations with our distributors and results of pricing negotiations with governmental authorities in certain European countries where we launch Livmarli and expect to launch our other product candidates, if approved. In addition, in certain countries, governments place large periodic orders. The timing of these orders can be inconsistent and can create quarter-to-quarter variation in revenue.

License Revenue

Under the exclusive licensing agreements with CANbridge and GC Biopharma, we have recognized as revenue the upfront nonrefundable payments related to the licenses granted upon satisfaction of certain performance obligations. Pursuant to the agreements, we are eligible to receive future milestone payments. These milestone payments are fully constrained and will be recognized in revenue in the period when it is probable that a significant reversal of cumulative revenue recognized for the contract would not occur. We are also eligible to receive royalty payments related to the agreements, which will be recognized as the underlying product sales occur.

Our license revenue is dependent upon our licensees’ achievement of future milestones, which are not within our control, and we are unable to reliably estimate the timing of such revenues.

Cost of Sales

Cost of sales consist of raw materials, third-party manufacturing costs, personnel, facility and other costs of manufacturing commercial products, transportation and freight, amortization of finite-lived intangible assets, amortization of capitalized intangibles and royalty payments payable on net sales of our approved medicines under licensing agreements. Cost of sales may also include period costs related to certain manufacturing services and charges for inventory valuation reserves.

As of the date of our acquisition of the Bile Acid Medicines from Travere, inventory acquired was valued at its fair value. As a result, our cost of sales exceeds the historical cost to manufacture the inventory and has a negative impact on our gross margin. We expect to sell the acquired inventory within the next two years from the balance sheet date. In addition, in connection with the acquisition, we have firm commitments for the purchase of minimum order quantities for active pharmaceutical ingredients. We periodically evaluate these firm commitments to determine if these commitments are in excess of our needs. If any net loss is determined, we record a charge to cost of sales in the period identified.

Prior to the regulatory approval of Livmarli, the manufacturing and related costs were expensed as research and development as any future economic benefit was not considered probable; accordingly, these costs were not capitalized and as a result gross margins resulting from product sales were initially higher until inventories that we had expensed prior to receiving approval were depleted. As of December 31, 2023, such inventories were substantially depleted.

Operating Expenses

Research and Development Expenses

Research and development expenses primarily relate to clinical development and manufacturing activities of our product candidates. Our research and development expenses include, among other things:

•
salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions;

•
external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials;

•
expenses related to drug formulation development and the production of clinical trial supplies, including fees paid to contract manufacturers;

97

•
licensing milestone payments related to development or regulatory events;

•
research and development funding for collaboration arrangements;

•
expenses related to non-clinical studies;

•
expenses related to compliance with drug development regulatory requirements; and

•
other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies.

We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Upfront payments, research and development funding and milestone payments made to third parties in connection with licenses and research and development collaborations are expensed as incurred.

Our research and development expense may increase in the future as we continue to develop our current product candidates and look to acquire and develop additional product candidates.

Selling, General and Administrative Expense

Sales and marketing expense, which is a component of selling, general and administrative expense, primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. General and administrative expense, which is a component of selling, general and administrative expense, primarily consists of corporate support and other administrative expenses, including employee-related expenses.

We anticipate that our selling, general and administrative expenses will increase in the future to support our continued commercialization efforts of our approved medicines in the United States and internationally as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include increased costs related to hiring of additional personnel and fees to outside consultants to support further marketing, legal, tax, planning and accounting activities.

Loss from termination of revenue interest purchase agreement

Loss from termination of RIPA is related to the repurchase and termination of the RIPA in the second quarter of 2023. The repurchase payment included a premium over the remaining revenue interest liability and resulted in the recognition of a loss from termination of RIPA in our consolidated statements of operations and comprehensive loss.

Interest Income

Interest income consists of interest earned on our cash equivalents and investments.

Interest Expense

We incur interest expense on our convertible notes and on the RIPA. Interest on our convertible notes consists of a 4% per annum fixed rate of interest and amortization of debt discount and amortization costs. Interest on the RIPA consisted primarily of costs associated with our liability and non-cash interest costs associated with the amortization of the related debt discount and deferred issuance costs. Prior to extinguishment of the RIPA in the second quarter of 2023, we imputed interest expense associated with this liability using the effective interest rate method which is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

Other Expense, Net

Other expense, net consists of gain or loss from remeasurement of the liabilities associated with the common stock issued in connection with the acquisition of Satiogen after the satisfaction of certain purchase price adjustments and indemnification obligations that may arise during the 12 month period following the asset

98

acquisition date (“Indemnification Holdback”) and the liability associated with the common stock to be issued in connection with the acquisition of Satiogen as contingent consideration upon achievement of a certain milestone (“Contingent Milestone”) both of which were recorded in connection with our acquisition of Satiogen, unrealized and realized currency gains and losses on net assets and liabilities denominated in foreign currency.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported, including the amount of assets, liabilities, expenses and the disclosure of contingent assets and liabilities. Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases its estimates on historical experience, known trends and events, and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Intangible Assets, Net

Intangible assets, net are measured at their fair values as of the acquisition date or, in the case of commercial milestone payments, the date they become due. Intangible assets are generally amortized on a straight-line basis over their estimated useful lives. We base the useful lives and related amortization expense on the period of time we estimate the assets will generate net product sales or otherwise be used. We also periodically review the lives assigned to our intangible assets to ensure that our initial estimates do not exceed any revised estimated periods from which we expect to realize cash flows from the technologies. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

We evaluate our intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the intangible asset may be impaired, we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the technology over the remaining amortization period, we reduce the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period.

We make significant judgments in relation to the valuation of intangible assets resulting from asset acquisitions, particularly in the forecasts of future operating results that are used in the discounted cash flow valuation models. It is possible that plans may change and estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

Product Sales, Net

Revenues from direct product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, including amounts from payors and other third parties on behalf of our customers. For revenues from partner markets, we record net product sales based on the estimated variable consideration to be received when the product is sold. The transaction price, which may include fixed or variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the product sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. We recognize our best estimate of the

99

consideration that we expect to receive when control of the inventory is transferred to our customer and revenue is recognized. Estimates are reviewed and updated quarterly as additional information becomes known. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

Government Rebates

We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate Program. Our rebate calculations may require estimates, including estimates of customer mix, to determine which sales will be subject to rebates and the amount of such rebates. We update estimates and assumptions on a quarterly basis and record any necessary adjustments to revenue in the period identified. Estimated rebates are recorded as a reduction of revenue in the period the related sale is recognized. To date, actual government rebates have not differed materially from our estimates.

Revenue Interest Liability, Net

We imputed interest expense associated with this liability using the effective interest rate method. The effective interest rate was calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The effective interest rate on the liability varied during the term of the agreement depending on a number of factors, including the level of actual and forecasted product sales, net. We evaluated the interest rate quarterly based on actual product sales, net and on product sales, net forecasts utilizing the prospective method. In April 2023, we repurchased all future Revenue Interests and as a result, the RIPA was terminated in accordance with its terms.

At December 31, 2022, the revenue interest liability was calculated using our estimated global forecasted net sales of Livmarli at the time and was impacted by a debt discount comprising the estimated value of a bifurcated derivative liability and issuance costs incurred.

Cost of Product Sales

Prior to receiving approval from the FDA or other foreign regulatory authorities for a new medicine or new formulation, we expense all costs incurred related to the manufacture of such medicines as research and development expense because of the inherent risks associated with the development of a drug candidate, the uncertainty about the regulatory approval process and our lack of history for regulatory approval of drug candidates. Subsequent to receiving FDA or other foreign regulatory authority approval, when commercialization is considered probable and the future economic benefit is expected to be realized, we begin capitalizing inventory costs as incurred.

Cost of product sales consist of raw materials, manufacturing costs, transportation and freight, amortization of capitalized intangible assets, royalties and indirect overhead costs associated with the manufacturing and distribution of the Company’s approved products. Cost of product sales may also include period costs related to certain manufacturing services and inventory adjustment charges.

We analyze our inventory levels quarterly for obsolescence and, if required, adjust inventory to its net realizable value for quantities in excess of expected demand. The analysis uses quantitative forecast and historical demand considerations in combination with shelf life and stop sell dates in our estimates to evaluate inventory that may not be sellable. The resulting adjustments are recognized as Cost of Sales.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We accrue and expense clinical trial activities performed by third parties based upon estimates of the proportion of work completed over the life of the individual study and patient enrollment rates in accordance with agreements established with clinical research organizations, clinical trial sites and other vendors

100

associated with the clinical trials. We determine the estimates by reviewing contracts, vendor agreements and purchase orders and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

We make estimates of accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Uncertain Tax Positions

We are subject to income taxes in the United States and certain foreign jurisdictions. The evaluation of uncertain tax positions involves significant judgment in the interpretation and application of GAAP and complex tax laws. Although management believes our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our reserves. Reserves are adjusted considering changing facts and circumstances, such as the closing of a tax examination or the refinement of an estimate. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

101

Results of Operations for the Years Ended December 31, 2023 and 2022

In this section, we discuss the results of our operations for the year ended December 31, 2023, compared to the year ended December 31, 2022. For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to our Annual Report on Form 10-K filed with the SEC on March 8, 2023.

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):

Product Sales, Net

Product sales, net was $178.9 million for the year ended December 31, 2023, compared to $75.1 million for the year ended December 31, 2022. The increase in product sales, net was a result of our continued commercialization of Livmarli in the United States, in certain countries in Europe and other international sales through partner market supply orders and sales of Bile Acid Medicines for a partial year following the completion of the Bile Acid Portfolio Acquisition.

The following table disaggregates total Product sales, net:

License Revenue

License revenue was $7.5 million for the year ended December 31, 2023 due to the achievement of regulatory milestones by CANbridge and GC Biopharma associated with our license agreements, compared to $2.0 million for the year ended December 31, 2022, due to the achievement of a regulatory milestone by CANbridge associated with our license agreement.

102

Cost of Sales

Cost of sales was $47.0 million for the year ended December 31, 2023, compared to $12.4 million for the year ended December 31, 2022. The increase in cost of sales was primarily a result of increased royalties payable of $9.8 million on net sales of Livmarli and the Bile Acid Medicines under licensing agreements, $7.5 million of amortization of acquired intangibles primarily associated with our acquisition of the Bile Acid Medicines in August 2023 and Satiogen in May 2022, a $5.2 million charge related to net losses associated with excess inventory from certain firm minimum purchase commitments in connection with our acquired Bile Acid Medicines, $3.9 million of increased costs associated with reserves for excess and obsolete inventory, increased product cost of sales of approximately $4.0 million primarily related to the Bile Acid Medicines and $4.0 million of increased commercial product development and supply chain costs.

Research and Development Expenses

The following table summarizes the period-over-period changes in research and development expenses relating to our product candidates in development for the periods indicated (in thousands):

Research and development expenses were $102.6 million for the year ended December 31, 2023, a decrease of $4.2 million compared to the year ended December 31, 2022. The decrease was primarily due to:

•
for Livmarli programs, a decrease of $10.8 million, primarily due to decreases of $5.4 million in manufacturing development expenses, $3.1 million in clinical trial expenses primarily related to the MARCH Phase 3 clinical trial which was completed during 2022 and $2.4 million in non-clinical and general research and development expenses; and

•
for volixibat programs, a decrease of $0.9 million, primarily due to a $3.3 million decrease in clinical expenses associated with the discontinuation of the intrahepatic cholestasis of pregnancy clinical trial and lower clinical manufacturing expenses of $1.8 million, partially offset by an increase of $4.1 million of clinical trial expenses for PSC and PBC.

The decreases were partially offset by increases due to:

•
for personnel related expenses, an increase of $3.3 million, related to an increase in employee headcount to support our development pipeline; and

•
for other expense, an increase of $3.3 million, primarily due to other general research and development activities.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $145.9 million for the year ended December 31, 2023, an increase of $56.8 million compared to the year ended December 31, 2022. The increase was primarily due to an increase of $26.6 million in personnel and other compensation related expenses, including an increase of $7.2 million in stock-based compensation, reflecting an increase in the number of our selling, marketing and administrative employees to support commercial activities for our approved medicines, and costs associated with the acquisition of the Bile Acid Portfolio and international expansion. The increase was also due to $17.0 million in expenses primarily related to legal, public relations, accounting and international expansion activities, $9.6 million

103

in advertising, promotion and medical affairs associated with commercial activities of our approved medicines and $3.5 million in other general administrative expenses.

Loss from termination of revenue interest purchase agreement

Loss from termination of RIPA was $49.1 million for the year ended December 31, 2023, compared to zero for the year ended December 31, 2022. The loss was related to the premium paid to repurchase the revenue interests pursuant to the RIPA.

Interest Income

Interest income was $13.7 million for the year ended December 31, 2023, an increase of $9.9 million compared to the year ended December 31, 2022. The increase was primarily due to higher interest earned on our cash equivalents and investment balances largely due to higher money market and treasury yields and higher cash equivalent balance throughout the year ended December 31, 2023.

Interest Expense

Interest expense was $15.1 million for the year ended December 31, 2023, a decrease of $0.9 million compared to the year ended December 31, 2022. For the year ended December 31, 2023, interest expense consisted of $10.0 million related to our convertible notes and $5.1 million related to the RIPA prior to extinguishment. For the year ended December 31, 2022, interest expense of $16.0 million was related to the RIPA.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability for the year ended December 31, 2022 was a gain of $0.9 million and was related to the remeasurement of the derivative liability at December 31, 2022. The gain reflects a decrease in value of the put option associated with the RIPA attributable to the decay in time value of the put option. There was no change in the estimated fair value of the derivative liability in 2023 prior to extinguishment of the RIPA.

Other (Expense) Income, Net

Other (expense) income, net was an expense of $2.8 million, net for the year ended December 31, 2023, compared to an income of $0.4 million, net for the year ended December 31, 2022. For the year ended December 31, 2023, the expense was primarily attributable to $1.8 million in unrealized currency losses on net assets and liabilities denominated in foreign currency, $0.7 million of expense associated with the remeasurement of the Contingent Milestone liability and the Indemnification Holdback liability prior to issuance of the underlying common stock as well as $0.4 million of realized currency loss. For the year ended December 31, 2022, the income was primarily related to the remeasurement of the Contingent Milestone liability and the Indemnification Holdback liability of $0.9 million and $0.3 million of unrealized currency gains on net assets and liabilities denominated in foreign currency, partially offset by $0.8 million of realized currency losses.

Provision For (Benefit From) Income Taxes

Provision for income taxes was $1.0 million for the year ended December 31, 2023 compared to a benefit from income taxes of $6.4 million for the year ended December 31, 2022. The change was related to the deferred tax liability recognized as a result of intangible assets acquired as part of the Satiogen acquisition and corresponding reduction in our valuation allowance against our net deferred tax assets during the year ended December 31, 2022.

Liquidity and Capital Resources

Overview

Since inception, we have funded our operations primarily through debt, equity, a revenue interest financing and, to a lesser extent, cash from our product sales and license and collaboration revenue. We had $286.3 million of cash and cash equivalents as of December 31, 2023, compared to cash, cash equivalents, restricted cash equivalents and investments of $251.7 million as of December 31, 2022. Since inception, we have incurred operating losses and

104

negative cash flows from operations. As of December 31, 2023, we had an accumulated deficit of $556.2 million, compared to $392.8 million as of December 31, 2022.

On August 31, 2023, we completed the Bile Acid Portfolio Acquisition for an aggregate purchase price of up to $445.0 million in cash, with $210.4 million paid at the Closing and up to $235.0 million upon achievement of certain milestones based on specified amounts of annual net sales (tiered from $125.0 million to $500.0 million) of the Bile Acid Medicines. In connection with and immediately prior to the closing of the Bile Acid Portfolio Acquisition, we completed the private placement of 8,000,000 shares of our common stock at a price per share of $26.25, resulting in net proceeds of approximately $202.2 million which we used to finance the upfront payment at the closing of the Bile Acid Portfolio Acquisition.

On April 17, 2023, we completed an offering of $316.3 million aggregate principal of the Notes, which includes the exercise of the initial purchasers’ option in full. The offering resulted in net proceeds of $305.3 million after deducting the initial purchasers’ discounts and commissions and offering expenses. The terms of the convertible Notes are further described in Note 10 to our consolidated financial statements. We used a portion of the net proceeds to repurchase the revenue interests from the Purchasers at a call price of $192.7 million. Upon repurchase of the revenue interests from the Purchasers, the RIPA, in accordance with its terms, was terminated with no further payments due to the Purchasers and the $100.0 million of our previously restricted cash equivalents was no longer restricted from use.

In September 2022, we filed an automatic statement on Form S-3 with the SEC (the “2022 Shelf Registration”), which became effective upon filing, pursuant to which we registered for sale from time to time in one or more offerings an unlimited amount of any combination of our common stock, preferred stock, debt securities and warrants, so long as we continue to satisfy the requirements of a “well-known seasoned issuer” under SEC rules. This automatic shelf registration statement will remain in effect for up to three years from the date it became effective. As of December 31, 2023, we have not issued any securities pursuant to the 2022 Shelf Registration. We may lose well-known seasoned issuer status in the future upon the occurrence of certain events prescribed by the Securities Act or the rules and regulations of the SEC occurring after we file this Quarterly Report if, at the time of those certain events, the worldwide market value of our voting and non-voting common equity held by our non-affiliates does not equal $700.0 million or more, calculated as of a date within 60 days prior to such events. If that were to occur and we were no longer considered a well-known seasoned issuer, we anticipate needing to amend our automatic shelf registration statement on Form S-3 prior to the occurrence of such events in order to sell securities under that Form S-3 on an ongoing basis.

On November 2, 2023, we entered into a Sales Agreement (the “2023 Sales Agreement”) with Leerink and Cantor Fitzgerald & Co. (the “Sales Agents”), pursuant to which we may, from time to time, sell up to an aggregate amount of $200.0 million of our common stock through the Sales Agents in an “at-the-market” offering (the “ATM Offering”) pursuant to the 2022 Shelf Registration. We are not required to sell shares under the 2023 Sales Agreement. Sales of our common stock, if any, under the 2023 Sales Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act. We will pay a given designated Sales Agent a commission of up to 3.0% of the aggregate gross proceeds of any shares of common stock sold through it pursuant to the 2023 Sales Agreement. No sales may be made under the 2023 Sales Agreement until a prospectus supplement relating to the ATM Offering is filed with the Securities and Exchange Commission.

In August 2020, the SEC declared effective the 2020 Shelf Registration covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into the 2020 Sales Agreement with Leerink pursuant to which we could issue and sell, in an at the market offering, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the 2020 Shelf Registration through Leerink acting as the sales agent and/or principal. During the year ended December 31, 2023 we issued and sold 658,206 shares of common stock pursuant to the 2020 Sales Agreement resulting in aggregate gross proceeds to us of $15.0 million. For the year ended December 31, 2023, the net proceeds to us after deducting sales commissions to Leerink and other issuance expenses were approximately $14.5 million. As of December 31, 2023, we have issued and sold an aggregate of 2,125,090 shares of common stock pursuant to the 2020 Sales Agreement, resulting in aggregate gross proceeds to us of $43.7 million. The 2020 Shelf Registration expired in August 2023, and no further sales may be made under the 2020 Sales Agreement.

105

In August 2022, we completed an underwritten public offering of our common stock pursuant to the 2020 Shelf Registration. We sold 3,478,261 shares of common stock at a price to the public of $23.00 per share. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 521,739 additional shares of our common stock at the public offering price, less the underwriting discounts, commissions and offering expenses, which the underwriters exercised in full. The underwritten public offering, including the underwriters’ exercise of their option, resulted in net proceeds to us of $86.1 million after deducting underwriting discounts, commissions and offering expenses.

Based on our current and anticipated level of operations and cash generated from sales of our approved medicines, we believe our existing cash and cash equivalents will be sufficient to fund our planned operations through at least the next 12 months from the filing of this Annual Report and beyond. Our cash and cash equivalents include readily available checking and money market funds. We maintain established guidelines relating to diversification and maturities of our investments to preserve principal and maintain liquidity.

We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, continue commercialization activities for our approved medicines and potentially expand into additional markets, hire additional staff, including clinical, scientific, operational, financial and management personnel and pay potential development and commercial and sales based milestones.

Our primary use of cash is to fund operating expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Although Livmarli has been approved for the treatment of cholestatic pruritus in patients with ALGS in patients three months of age and older and cholestatic pruritus in patients with PFIC five years of age and older in the U.S. and for the treatment of cholestatic pruritus in ALGS patients two months of age and older in Europe, and we expect product revenues to increase as we continue commercial activities, Livmarli may not achieve commercial success. Certain of our approved medicines, including the Bile Acid Medicines, are subject to immediate competition from compounded and generic entrants, as the ANDA and NDA for these drug products have no remaining or current patent or non-patent exclusivity. In addition, Chenodal is approved for radiolucent stones in the gallbladder yet is used primarily as standard of care for CTX. The FDA has provided a letter acknowledging Chenodal as a medical necessity for CTX, but prescriptions for this indication are not on label. As such, any change in this view from the FDA could adversely affect our ability to sell Chenodal in this indication. Unless and until Chenodal is approved for CTX, we cannot market or promote Chenodal for CTX which limits its growth potential.

Our principal source of liquidity is product revenue from sales of approved medicines, and, to a lesser extent, from our collaboration agreements. Until such time, if ever, as we can generate sufficient product revenue from sales of our approved medicines, our current product candidates or any future product candidates, if approved, to fund operations, we expect to finance our cash needs through a combination of equity offerings, debt financings and potential collaboration, license or development agreements. Our primary cash needs are for day-to-day operations and to fund our working capital requirements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. As a result of adverse geopolitical and macroeconomic developments, such as the ongoing military conflicts between Ukraine and Russia and in Israel and the surrounding areas, and related sanctions, actual and anticipated changes in interest rates, economic inflation and the responses by central banking authorities to control such inflation, bank failures, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets

106

deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

In addition to ongoing capital needs to fund our ongoing operations, our material cash requirements include the following contractual and other obligations.

On April 17, 2023, we completed an offering of $316.3 million aggregate principal of the Notes, which includes the exercise of the initial purchasers’ option in full. The offering resulted in net proceeds of $305.3 million after deducting the initial purchasers’ discounts and commissions and offering expenses. The Notes are our senior, unsecured obligations and accrue interest at a rate of 4.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year. Our first interest payment was due on November 1, 2023. The Notes will mature on May 1, 2029, unless earlier converted, redeemed or repurchased by us. The terms of these Notes are further described in Note 10 to our consolidated financial statements.

We used a portion of the net proceeds from the Notes to repurchase the revenue interests from the Purchasers at a call price of $192.7 million. Upon repurchase of the revenue interests from the Purchasers, the RIPA, in accordance with its terms, was terminated with no further payments due to the Purchasers.

Under the Shire License Agreement and Asset Purchase Agreement with Travere, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. The amount and timing of milestone obligations are unknown or uncertain as we are unable to estimate the timing or likelihood of achieving the milestone events. Additionally, the amount of royalty payments are based upon future product sales, which we are unable to predict with certainty. These potential obligations are further described in Note 7 to our consolidated financial statements.

We additionally have contractual obligations for our operating leases for our corporate headquarters. These obligations are further described in Note 9 to our consolidated financial statements.

We are party to certain license and collaboration agreements, which contain a number of contractual obligations. Those contractual obligations may entitle us to receive, or may obligate us to make, certain payments. The amount and timing of those payments are unknown or uncertain as we are unable to estimate the timing or likelihood of the events that will obligate those payments.

We enter into contracts in the normal course of business with clinical research organizations and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancelable contracts.

We enter into commercial inventory supply agreements that obligate us to firm commitments for the purchase of minimum order quantities, which may be material to our financial statements.

107

Cash Flows

The following table provides a summary of the net cash flow activity for the periods indicated (in thousands):

Net Cash Used in Operating Activities

Net cash used in operating activities was $70.9 million for the year ended December 31, 2023, reflecting our net loss of $163.4 million, partially offset by non-cash adjustments of $115.1 million. Non-cash adjustments consisted primarily of a loss from termination of RIPA of $49.1 million, $35.0 million of stock-based compensation, $11.4 million of depreciation and amortization of our intangible assets and fixed assets and non-cash lease expense, a $9.3 million charge associated with excess and obsolete inventory and losses on firm purchase commitments, $5.1 million of effective interest expense in connection with the RIPA, $3.4 million related to the cost of sale of inventory acquired in the Bile Acid Portolio Acquisition, $0.7 million expense related to the change in fair value of contingent liabilities associated with an acquisition, $1.8 million of unrealized foreign exchange losses and $1.1 million amortization of debt discount and offering costs, partially offset by $1.7 million net accretion of discounts on our investments. Additionally, cash used in operating activities reflected changes in net operating assets of $22.6 million, consisting primarily of a $44.0 million increase in accounts receivable due to the increase in the sales of Livmarli and the acquisition of the Bile Acid Medicines, a $30.8 million increase in accounts payable, accrued expenses and other liabilities resulting primarily from a $19.4 million increase in accrued sales deductions, a $4.3 million increase in accrued royalties payable both due to our increased net product sales, a $6.3 million increase in accrued compensation and related benefits and a $2.1 million increase in accrued interest expense related to the Notes issued in April 2023, a $4.4 million increase in inventory related to Livmarli and a $3.6 million increase in prepaid and other current assets due to timing of payment for deposits for professional services, software license and regulatory fees.

Net cash used in operating activities was $120.1 million for the year ended December 31, 2022, reflecting our net loss of $135.7 million partially offset by non-cash items of $36.6 million. Non-cash items consisted primarily of $27.0 million of stock-based compensation, $16.0 million of effective interest expense in connection with the RIPA, $3.7 million of depreciation and amortization of our intangible assets and fixed assets and non-cash lease expense, $6.6 million related to deferred tax liability recognized as a result of intangible assets acquired as part of the Satiogen acquisition, $1.7 million accretion of discounts on our investments, $0.9 million gain related to the change in fair value of Indemnification Holdback and Contingent Milestone liabilities and $0.9 million gain related to the change in fair value of the derivative liability. Additionally, cash used in operating activities reflected changes in net operating assets of $21.0 million, consisting primarily of a $20.7 million increase in accounts receivable related to sales of Livmarli, a $3.4 million increase in inventory, a $3.7 million increase in prepaid expenses and other current assets, a $0.1 million increase in other long term assets, and a $0.7 million decrease in operating lease liability, partially offset by a $7.6 million increase in accounts payable, accrued expenses and other liabilities.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities was $107.2 million for the year ended December 31, 2023, primarily due to $212.8 million paid in connection with our acquisition of the Bile Acid Medicines from Travere, $27.3 million used in purchases of investments and $20.0 million used in the acquisition of intangible assets associated with our license payments for Livmarli regulatory and commercial milestones, partially offset by proceeds of $153.0 million from maturities of investments.

Net cash provided by investing activities was $7.7 million for the year ended December 31, 2022, primarily due to proceeds of $140.3 million from maturities of investments, partially offset by $132.3 million used in purchases of investments and $0.3 million used in purchases of property and equipment.

108

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $336.6 million for the year ended December 31, 2023, due to net proceeds of $305.3 million from the issuance of convertible notes, net proceeds of $202.2 million from the issuance and sale of common stock in a private placement offering, $14.5 million net proceeds from the issuance and sale of common stock under the 2020 Sales Agreement with Leerink, pursuant to which we issued and sold an aggregate of 658,206 shares of common stock at a weighted-average price of $22.79 per share, and proceeds of $10.5 million from employee equity award exercises, partially offset by $195.6 million in revenue interest payments and payments to repurchase the revenue interests under the RIPA.

Net cash provided by financing activities was $109.1 million for the year ended December 31, 2022, due to net proceeds of $86.1 million from completion of an underwritten public offering of 4,000,000 shares of common stock at a price of $23.00 per share, net proceeds of $21.3 million from the issuance and sale of common stock under the Sales Agreement with SVB Securities, pursuant to which we issued and sold an aggregate of 1,160,915 shares of common stock at a weighted-average price of $19.01 per share, and proceeds of $7.3 million from employee equity award exercises, partially offset by $5.6 million of revenue interest payments made under the RIPA.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 “Financial Statements and Supplementary Data” and included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements based upon our current beliefs, estimates, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report.

Overview

We are a biopharmaceutical company focused on the identification, acquisition, development and commercialization of novel therapies for debilitating rare and orphan diseases. We focus on diseases for which the unmet medical need is high and the biology for treatment is clear.

Our product LIVMARLI (maralixibat) oral solution (“Livmarli”), a novel, orally administered, minimally-absorbed IBAT inhibitor, is approved for the treatment of cholestatic pruritus in patients with Alagille syndrome ("ALGS") one year of age and older in the United States and for the treatment of cholestatic pruritus in patients with ALGS two months and older in Europe. We believe the prevalent patient population in the United States is approximately 2,000 to 2,500 pediatric ALGS patients, which, based on our current expectations and beliefs, represents a greater than $500.0 million market opportunity. ALGS is estimated to impact one out of every 30,000 births globally. We market and commercialize Livmarli in the United States and certain countries in Europe through our specialized and focused commercial team. We have also entered into license and distribution agreements with several rare disease companies for the commercialization of Livmarli in additional countries. We are also developing Livmarli for PFIC and BA. We have submitted an sNDA to the FDA based on positive data from our Phase 3 study of Livmarli in patients with PFIC. We also expect to report topline data from our EMBARK Phase 2b clinical trial in BA in the second half of 2023.

We are advancing our second product candidate, volixibat, a novel, oral, minimally-absorbed agent designed to inhibit IBAT, for the treatment of adult patients with cholestatic liver diseases. We are developing volixibat for the treatment of PSC and PBC. Volixibat has been studied in over 400 adults for up to 48 weeks. Clinical trials of volixibat have shown significant activity on IBAT and bile acid markers such as 7αC4, fecal bile acids and cholesterol, demonstrating potent biological activity. We expect to conduct an interim analysis of our VISTAS Phase 2b clinical trial in PSC in mid-2023 and report interim data from our VANTAGE Phase 2b clinical trial in PBC in the second half of 2023.

We were incorporated in May 2018 and commenced operations in November 2018. To date, we have focused primarily on acquiring and in-licensing our product candidates, organizing and staffing our company, business planning, raising capital, advancing our product candidates through clinical development, preparing for commercialization of our product candidates, commercializing Livmarli, and conducting business development activities relating to, among other things, portfolio expansion through collaborations and acquisitions.

We have only one product approved for commercial sale and have not generated significant revenues from product sales, net as of December 31, 2022. We expect to incur significant operating losses for the foreseeable future. Since inception, we have funded our operations to date primarily through debt, equity, revenue interest financings and, to a lesser extent, cash from our product sales, net and collaboration revenue.

Financing Transactions

In August 2020, the Securities and Exchange Commission (“SEC”) declared effective a registration statement on Form S-3 (“Shelf Registration”) covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into a sales agreement (“Sales Agreement”) with SVB Securities LLC (“SVB Securities”) pursuant to which we may elect to issue and sell, in an at the market offering, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through SVB Securities acting as the sales agent and/or principal.

87

In August 2022, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,478,261 shares of common stock at a price to the public of $23.00 per share. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 521,739 additional shares of our common stock at the public offering price, less the underwriting discounts, commissions and offering expenses, which the underwriters exercised in full. The underwritten public offering, including the underwriters’ exercise of their option, resulted in net proceeds to us of $86.1 million after deducting underwriting discounts, commissions and offering expenses.

During the year ended December 31, 2022, we issued and sold 1,160,915 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $19.01 per share, resulting in aggregate gross proceeds to us of $22.1 million. The net proceeds after deducting sales commissions to SVB Securities and other issuance expenses were approximately $21.3 million. Through December 31, 2022, we have issued and sold an aggregate of 1,466,884 shares of common stock pursuant to the Sales Agreement, resulting in aggregate gross proceeds to us of $28.7 million. The remaining capacity under the Sales Agreement is approximately $46.3 million as of December 31, 2022. In January and February 2023, we sold 658,206 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $22.79 per share, resulting in net proceeds of $14.5 million.

In December 2020, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,750,000 shares of common stock at a public offering price of $20.00 per share, resulting in net proceeds of $70.0 million after deducting underwriting discounts, commissions and offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 562,500 additional shares of our common stock at the public offering price, less the underwriting discounts and commissions. In January 2021, the underwriters exercised their option for 375,654 shares of our common stock, resulting in net proceeds of $7.1 million after deducting underwriting discounts.

Financial Overview

Our net loss was $135.7 million and $84.0 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $392.8 million compared to $257.2 million as of December 31, 2021. As of December 31, 2022, we had cash, cash equivalents, restricted cash equivalents and investments of $251.7 million, compared to $261.5 million as of December 31, 2021, in each case, $100.0 million of which is restricted from use under the terms of the Revenue Interest Purchase Agreement ("RIPA"), as amended September 2021, by and among us and Mulholland SA LLC, an affiliate of Oberland Capital LLC, as agent for the purchasers party thereto (the "Purchasers"), and the Purchasers.

We anticipate we will continue to generate losses for the foreseeable future as we continue commercial activities for Livmarli, conduct our ongoing and planned clinical trials, seek regulatory approvals for our product candidates and make potential milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. We expect our product sales of Livmarli will continue to increase on an annual basis, though seasonality in demand and international product ordering may result in quarterly fluctuations. We have also entered into collaboration arrangements with other companies whereby we are entitled to receive upfront and license fees, research and development funding, development and sales-based milestones, and tiered royalties based on sales of commercialized products. As a result, our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

We expect to satisfy future cash needs through existing capital balances, product revenue from Livmarli and through a combination of equity offerings, debt financings or other capital sources, collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate the development of one or more of our product candidates or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Prior to the regulatory approval of Livmarli, the manufacturing and related costs were expensed as research and development as any future economic benefit was not considered probable; accordingly, these costs were not

88

capitalized and as a result gross margins resulting from product sales will initially be higher until we deplete inventories that we had expensed prior to receiving approval. We expect we will substantially deplete such inventories within the next 12 months from the filing of the Annual Report.

Geopolitical and Macroeconomic Developments

The coronavirus (including its variants, “COVID-19”) pandemic has had a significant economic impact across the global marketplace presenting challenges to maintaining business continuity and dramatically changing the ways in which we live and interact with others. While vaccines have become widely available in certain countries, and businesses and economies have reopened, the status of global economic recovery remains uncertain and unpredictable, and will continue to be impacted by developments in the pandemic including any subsequent waves of outbreak or new variant strains of COVID-19 which may require re-closures or other preventative measures. As public health directives surrounding the pandemic have relaxed, our offices have reopened and we are permitting travel and in-person events, taking into consideration government restrictions, employee safety, and health risks. Our approach may vary among geographies depending on appropriate health protocols, and may change at any time. Additionally, our efforts to reopen our offices safely may not be successful, could expose our employees to health risks, and could involve additional costs or liability.

Due to the ongoing military conflict between Ukraine and Russia, the U.S. and global financial markets experienced volatility, which has led to disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally. In connection with the military conflict, the United States, United Kingdom and European Union (“EU”), along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia and related sanctions, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity in both Europe and globally, and has introduced significant uncertainty into global markets. As a result, our business and results of operations may be adversely affected by the ongoing military conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict.

Although we did not see a significant financial impact to our business operations as a result of recent geopolitical and macroeconomic developments, such as the COVID-19 pandemic and the ongoing Ukraine-Russia conflict for the year ended December 31, 2022, there may be potential impacts to our business in the future that are highly uncertain and difficult to predict such as disruptions or restrictions in our supply chain, disruption or restrictions on our employees’ ability to travel, disruptions to or delays in ongoing non-clinical trials, clinical trials, third-party manufacturing supply and other operations, inability for patients to see their healthcare providers and access our product and product candidates, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic or adverse geopolitical and macroeconomic concerns, interruptions or delays in the operations of the FDA or other regulatory authorities, continued increases in inflation and interest rates, changes in availability and cost of credit and our ability to raise capital and conduct business development activities. The ultimate impact of these geopolitical and macroeconomic developments, as well as any lasting effects on our revenue and the way we conduct our business, is highly uncertain and subject to continued change, and we recognize that they may continue to present unique challenges for us.

We continue to believe that existing cash, cash equivalents and investments, excluding restricted cash equivalents, and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditures, debt service requirements and other business development initiatives that we plan to strategically pursue in the 12 months from the issuance of the consolidated financial statements included in this Annual Report. However, should adverse geopolitical and macroeconomic events, such as the COVID-19 pandemic, the ongoing Ukraine-Russia conflict and related sanctions, and any associated recession or depression continue for a prolonged period, our results of operations, financial condition, liquidity and cash flows could be materially impacted as a result of a lower likelihood of effectively and efficiently developing new medicines and successfully commercializing our products.

89

License Agreements

Assignment and License Agreement with Shire (Takeda)

In November 2018, we entered into the Shire License Agreement with Shire, which was subsequently acquired by Takeda, in which we were granted an exclusive, royalty bearing worldwide license to develop and commercialize our two product candidates, Livmarli and volixibat. As part of the Shire License Agreement, we were assigned license agreements held by Shire with Satiogen, Pfizer, and Sanofi (collectively, “Assigned License Agreements”).

Under the Shire License Agreement and Assigned License Agreements, to date, we have paid aggregate development regulatory and sales milestones of $66.0 million related to our Livmarli and volixibat programs.

Satiogen Acquisition

In May 2022, we completed the acquisition of Satiogen for total consideration of $24.2 million. At the closing of the acquisition, Satiogen’s assets consisted of cash and intangible assets related to developed technology. Through the transaction, we obtained all Satiogen-owned intellectual property relating to Livmarli and volixibat. The transaction resulted in a reduction of total licensing royalty obligations for Livmarli and volixibat.

The total potential consideration for the acquisition consisted of 841,792 shares of common stock and approximately $2.6 million in cash, excluding $0.2 million of stock option exercise prices deemed to have been paid immediately prior to the acquisition, in respect of an equivalent amount of cash on the books of Satiogen acquired by us at closing.

Components of Results of Operations

Revenue

Product Sales, Net

Our approved product, Livmarli, was approved for the treatment of cholestatic pruritus in patients with ALGS one year of age and older in the United States and for the treatment of cholestatic pruritus in patients with ALGS two months and older in Europe. We expect our product sales of Livmarli will continue to increase on an annual basis, though seasonality in demand and international product ordering may result in quarterly fluctuations.

Our U.S. revenue from product sales, net further depends on our prescription mix of commercial payors, Medicaid and free drugs under our patient assistance program. We expect our prescription mix and resulting gross to net adjustment in the U.S. to remain consistent; however, we cannot reliably estimate it given our limited experience in the market. Our rest of world revenue from product sales, net primarily depends on our contractual obligations with our distributors and results of pricing negotiations with governmental authorities in certain European countries where we launch Livmarli and expect to launch our product candidates, if approved. In addition, in certain countries, governments place large periodic orders. The timing of these orders can be inconsistent and can create quarter-to-quarter variation in revenue.

License Revenue

Under the exclusive licensing agreements with CANbridge and GC Biopharma, we have recognized as revenue the upfront nonrefundable payments related to the licenses granted upon satisfaction of certain performance obligations. Pursuant to the agreements, we are eligible to receive future milestone payments. These milestone payments are fully constrained and will be recognized in revenue in the period when it is probable that a significant reversal of cumulative revenue recognized for the contract would not occur. We are also eligible to receive royalty payments related to the agreements, which will be recognized as the underlying product sales occur.

Our license revenue is dependent upon our licensees’ achievement of future milestones, which are not within our control, and we are unable to reliably estimate the timing of such revenues.

Cost of Sales

90

Cost of sales consist of third party manufacturing costs, personnel, facility and other costs of manufacturing commercial products, transportation and freight, amortization of finite-lived intangible assets, amortization of capitalized intangibles associated with contractual milestone payments paid to licensors upon certain regulatory approval and sales-based events and royalty payments payable on net sales of Livmarli under licensing agreements. Cost of sales may also include period costs related to certain manufacturing services and inventory adjustment charges. Prior to receiving approval from the FDA in September 2021 to market and sell Livmarli in the United States, we expensed all costs incurred related to the manufacture of Livmarli as research and development expense because of the inherent risks associated with the development of a drug candidate, the uncertainty about the regulatory approval process and the lack of history as a company of regulatory approval of drug candidates. Our inventory of Livmarli produced prior to FDA approval is available for commercial or clinical use.

Operating Expenses

Research and Development Expenses

Research and development expenses primarily relate to clinical development and manufacturing activities of our product candidates. Our research and development expenses include, among other things:

•
salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions;

•
external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials;

•
expenses related to drug formulation development and the production of clinical trial supplies, including fees paid to contract manufacturers;

•
licensing milestone payments related to development or regulatory events;

•
research and development funding for collaboration arrangements;

•
expenses related to non-clinical studies;

•
expenses related to compliance with drug development regulatory requirements; and

•
other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies.

We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Upfront payments, research and development funding and milestone payments made to third parties in connection with licenses and research and development collaborations are expensed as incurred.

Our research and development expense may increase in the future as we continue to develop our current product candidates and look to acquire and develop additional product candidates.

Selling, General and Administrative Expense

Sales and marketing expense, which is a component of selling, general and administrative expense, primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. General and administrative expense, which is a component of selling, general and administrative expense, primarily consisted of corporate support and other administrative expenses, including employee-related expenses.

We anticipate that our selling, general and administrative expenses will increase in the future to support our continued commercialization efforts of Livmarli in the United States and internationally as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include increased costs related to hiring of additional personnel and fees to outside consultants to support further marketing, legal, tax and accounting activities.

91

Interest Income

Interest income consists of interest earned on our cash equivalents and investments.

Interest Expense

Interest expense is related to the RIPA. Costs during the year consist primarily of costs associated with our liability and non-cash interest costs associated with the amortization of the related debt discount and deferred issuance costs. We impute interest expense associated with this liability using the effective interest rate method which is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability consists of the gain or loss from remeasurement of the compound derivative liability related to the revenue interest liability during the period.

Gain from Sale of Priority Review Voucher, Net

Gain from the sale of priority review voucher ("PRV") represents the sale of the PRV that was granted to us by the FDA in September 2021 along with the approval of Livmarli for the treatment of cholestatic pruritus in patients with ALGS one year of age and older.

Other Income (Expense), Net

Other income (expense), net consists of gain or loss from remeasurement of the liabilities associated with the common stock to be issued in connection with the acquisition of Satiogen after the satisfaction of certain purchase price adjustments and indemnification obligations that may arise during the 12 month period following the asset acquisition date (“Indemnification Holdback”) and the liability associated with the common stock to be issued in connection with the acquisition of Satiogen as contingent consideration upon achievement of a certain milestone (“Contingent Milestone”) both of which were recorded in connection with our acquisition of Satiogen and transactional currency exchange gain or loss.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported, including the amount of assets, liabilities, expenses and the disclosure of contingent assets and liabilities. Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases its estimates on historical experience, known trends and events, and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Intangible Assets, Net

Intangible assets, net are measured at their fair values as of the acquisition date or, in the case of commercial milestone payments, the date they become due. Intangible assets are generally amortized on a straight-line basis over their estimated useful lives. We base the useful lives and related amortization expense on the period of time we estimate the assets will generate net product sales or otherwise be used. We also periodically review the lives assigned to our intangible assets to ensure that our initial estimates do not exceed any revised estimated periods from

92

which we expect to realize cash flows from the technologies. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

We evaluate our intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the intangible asset may be impaired, we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the technology over the remaining amortization period, we reduce the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period.

We make significant judgments in relation to the valuation of intangible assets resulting from asset acquisitions, particularly in the forecasts of future operating results that are used in the discounted cash flow valuation models. It is possible that plans may change and estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

Product Sales, Net

Revenues from direct product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, including amounts from payors and other third parties on behalf of our customers. For revenues from partner markets, we record net product sales based on the estimated variable consideration to be received when the product is sold. The transaction price, which may include fixed or variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the product sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. We recognize our best estimate of the consideration that we expect to receive when control of the inventory is transferred to our customer and revenue is recognized. Estimates are reviewed and updated quarterly as additional information becomes known. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

Government Rebates

We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate Program. Our rebate calculations may require estimates, including estimates of customer mix, to determine which sales will be subject to rebates and the amount of such rebates. We update estimates and assumptions on a quarterly basis and record any necessary adjustments to revenue in the period identified. Estimated rebates are recorded as a reduction of revenue in the period the related sale is recognized. To date, actual government rebates have not differed materially from our estimates.

Revenue Interest Liability, Net

We impute interest expense associated with this liability using the effective interest rate method. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The effective interest rate on the liability may vary during the term of the agreement depending on a number of factors, including the level of actual and forecasted product sales, net. We evaluate the interest rate quarterly based on actual product sales, net and on our current product sales, net forecasts utilizing the prospective method. A significant increase or decrease in product sales, net will materially impact the revenue interest liability, interest expense and the time period for repayment.

At December 31, 2022, the revenue interest liability is calculated using our current estimate of global forecasted net sales of Livmarli and impacted by a debt discount comprising the estimated value of a bifurcated derivative liability and issuance costs incurred.

Accrued Research and Development Expenses

93

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We accrue and expense clinical trial activities performed by third parties based upon estimates of the proportion of work completed over the life of the individual study and patient enrollment rates in accordance with agreements established with clinical research organizations, clinical trial sites and other vendors associated with the clinical trials. We determine the estimates by reviewing contracts, vendor agreements and purchase orders and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

We make estimates of accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Uncertain Tax Positions

We are subject to income taxes in the United States and certain foreign jurisdictions. The evaluation of uncertain tax positions involves significant judgment in the interpretation and application of GAAP and complex tax laws. Although management believes our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our reserves. Reserves are adjusted considering changing facts and circumstances, such as the closing of a tax examination or the refinement of an estimate. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

94

Results of Operations for the Years Ended December 31, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (in thousands):

Product Sales, Net

Product sales, net was $75.1 million for the year ended December 31, 2022, compared to $3.1 million for the year ended December 31, 2021. The increase in product sales, net was a result of our continued commercialization of Livmarli in the United States, and, to a lesser extent, from international sales through partner market supply orders.

License Revenue

License revenue was $2.0 million for the year ended December 31, 2022, compared to $16.0 million for the year ended December 31, 2021. The decrease in license revenue was primarily due to the satisfaction of certain performance obligations associated with the licenses granted under the license agreements with CANbridge and GC Biopharma in 2021. We did not have any comparable performance obligations in 2022.

Cost of Sales

For the year ended December 31, 2022, cost of sales was $12.4 million, compared to $1.9 million for the year ended December 31, 2021, and primarily consisted of royalties payable on net sales of Livmarli under licensing agreements, amortization of capitalized commercial milestone payments and acquired intangibles associated with our acquisition of Satiogen and indirect overhead costs associated with the manufacturing and distribution of Livmarli. There were minimal inventory costs reflected in cost of sales as inventory related to current product sold were expensed as research and development costs prior to Livmarli approval in the United States in September 2021.

95

Research and Development Expenses

The following table summarizes the period-over-period changes in research and development expenses relating to our product candidates in development for the periods indicated (in thousands):

Research and development expenses were $106.8 million for the year ended December 31, 2022, a decrease of $24.6 million compared to the year ended December 31, 2021. The decrease was primarily due to:

•
for Livmarli programs, an increase of $4.7 million, primarily due to an increase of $6.6 million in clinical trial expenses primarily for the EMBARK Phase 2b clinical trial for BA, a long term rollover study from the MARCH Phase 3 clinical trial for PFIC and an infant safety study offset by $1.4 million in clinical trial expenses for the MARCH Phase 3 clinical trial, which was completed during 2022 and $0.7 million in manufacturing activities as a result of prior year completion of an NDA registrational production;

•
for volixibat programs, an increase of $5.5 million, primarily due to an increase of $4.8 million in clinical trial expenses for PSC, PBC and ICP and non-clinical studies of $0.5 million;

•
for personnel related expenses, an increase of $3.3 million, related to an increase in employee headcount to support our development pipeline;

•
for other expense, an increase of $3.8 million, primarily due to outside consulting expenses, travel expenses and general overhead expenses;

•
for license fees, a decrease of $23.2 million, related to developmental milestone payments for the year ended December 31, 2021 consisting of $15.0 million associated with the acceptance of our NDA for filing of Livmarli for the treatment of cholestatic pruritus in patients with ALGS one year of age and older, $4.0 million associated with the initiation of the VISTAS Phase 2b clinical trial of volixibat in PSC and the EMBARK Phase 2 clinical trial of maralixibat for BA, and $4.2 million in an upfront fee in connection with the Vivet Collaboration Agreement; and

•
for collaboration funding, a decrease of $18.9 million due to a collaboration agreement with Vivet Therapeutics SAS ("Vivet"), which we terminated in 2021.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $89.1 million for the year ended December 31, 2022, an increase of $29.8 million compared to the year ended December 31, 2021. The increase was primarily due to an increase of $15.8 million in personnel and other compensation related expenses, including an increase of $3.9 million in stock-based compensation, reflecting an increase in the number of our selling, marketing and administrative employees to support commercial activities for Livmarli and increased requirements of operating as a public company, an increase of $10.9 million in advertising, promotion and patient support expenses associated with commercial activities for Livmarli, and an increase of $2.6 million in expenses primarily related to general legal and public relations, international expansion activities and other general administrative expenses.

96

Interest Income

Interest income was $3.9 million for the year ended December 31, 2022, an increase of $3.5 million compared to the year ended December 31, 2021. The increase was primarily due to higher interest earned on our cash equivalents and investment balances largely due to higher treasury yields.

Interest Expense

Interest expense was $16.0 million for the year ended December 31, 2022, a decrease of $1.6 million compared to the year ended December 31, 2021. Interest expense is related to the accreted interest recognized on the revenue interest liability in connection with the RIPA, with the decrease due to lower effective interest rate resulting from changes in estimates that enable the debt to be repaid in full over the anticipated life of the arrangement.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability was $0.9 million gain for the year ended December 31, 2022, compared to a $0.7 million loss for the year ended December 31, 2021. For the year ended December 31, 2022, the gain was related to the remeasurement of the derivative liability at December 31, 2022 and reflects a decrease in value of the put option associated with the RIPA resulting from the reduction in time for the put option to occur. For the year ended December 31, 2021, the loss was related to the remeasurement of the derivative liability at December 31, 2021 and reflects the net increase in the value of the underlying put option associated with the RIPA primarily resulting from changes in forecast product sales, net.

Other income (expense), net

Other income (expense), net was income of $0.4 million for the year ended December 31, 2022, compared to expense of $0.6 million for the year ended December 31, 2021. The change is primarily due to a gain resulting from the fair value remeasurement in the Satiogen Indemnification Holdback and Contingent Milestone liabilities since the acquisition date, which was primarily driven by a decrease in price of our common stock as of December 31, 2022.

Gain from Sale of Priority Review Voucher, Net

We did not have, and therefore did not sell, a PRV in the year ended December 31, 2022. Gain from the sale of the PRV, net of transaction costs, totaled $108.0 million for the year ended December 31, 2021.

Liquidity and Capital Resources

Overview

Since inception, we have funded our operations primarily through debt, equity, revenue interest financings and, to a lesser extent, cash from our product sales and license and collaboration revenue. We had $251.7 million of cash, cash equivalents, restricted cash equivalents and investments as of December 31, 2022, compared to $261.5 million as of December 31, 2021, in each case, inclusive of $100.0 million restricted cash equivalents. Since inception, we have incurred operating losses and negative cash flows from operations. As of December 31, 2022, we had an accumulated deficit of $392.8 million, compared to $257.2 million as of December 31, 2021.

In August 2020, the SEC declared effective the Shelf Registration covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into the Sales Agreement with SVB Securities pursuant to which we may elect to issue and sell, in an at the market offering, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through SVB Securities acting as the sales agent and/or principal. During the year ended December 31, 2022, we issued and sold 1,160,915 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $19.01 per share, resulting in aggregate gross proceeds to us of $22.1 million. The net proceeds after deducting sales commissions to SVB Securities and other issuance expenses were approximately $21.3 million. Through December 31, 2022, we have issued and sold an aggregate of 1,466,884 shares of common stock pursuant to the Sales Agreement, resulting in aggregate gross proceeds to us of $28.7 million. The remaining capacity under the Sales Agreement is

97

approximately $46.3 million as of December 31, 2022. In January and February 2023, we sold 658,206 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $22.79 per share, resulting in net proceeds of $14.5 million.

In December 2020, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,750,000 shares of common stock at a public offering price of $20.00 per share, resulting in net proceeds of $70.0 million after deducting underwriting discounts, commissions and offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 562,500 additional shares of our common stock at the public offering price, less the underwriting discounts and commissions. In January 2021, the underwriters partially exercised their option and purchased 375,654 shares of our common stock at a price of $20.0 per share, resulting in net proceeds of $7.1 million after deducting underwriting discounts.

In August 2022, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,478,261 shares of common stock at a price to the public of $23.00 per share. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 521,739 additional shares of our common stock at the public offering price, less the underwriting discounts, commissions and offering expenses, which the underwriters exercised in full. The underwritten public offering, including the underwriters’ exercise of their option, resulted in net proceeds to us of $86.1 million after deducting underwriting discounts, commissions and offering expenses.

On September 9, 2022, we filed an automatic shelf registration statement on Form S-3 with the SEC, which became effective upon filing, pursuant to which we registered for sale from time to time in one or more offerings an unlimited amount of any combination of our common stock, preferred stock, debt securities and warrants, so long as we continue to satisfy the requirements of a “well-known seasoned issuer” under SEC rules. This automatic shelf registration statement will remain in effect for up to three years from the date it became effective. As of December 31, 2022, we have not issued any securities pursuant to the automatic shelf registration statement. We may lose well-known seasoned issuer status in the future upon the occurrence of certain events prescribed by the Securities Act or the rules and regulations of the SEC occurring after we file this Annual Report if, at the time of those certain events, the worldwide market value of our voting and non-voting common equity held by our non-affiliates does not equal $700.0 million or more, calculated as of a date within 60 days prior to such events. If that were to occur and we were no longer considered a well-known seasoned issuer, we anticipate needing to amend our automatic shelf registration statement on Form S-3 prior to the occurrence of such events in order to sell securities under that Form S-3 on an ongoing basis.

Based on our current and anticipated level of operations, including cash generated from sales of Livmarli, we believe our cash, cash equivalents and investments, excluding restricted cash equivalents, will be sufficient to fund current operations through at least the next 12 months and beyond from the filing of this Annual Report. Our cash, cash equivalents and investments include money market funds, government agency securities and commercial paper. We maintain established guidelines relating to diversification and maturities of our investments to preserve principal and maintain liquidity.

We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, continue commercialization activities for Livmarli and potentially expand into additional markets, hire additional staff, including clinical, scientific, operational, financial and management personnel and pay potential development and commercial milestones in connection with our license agreements.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, selling, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Although Livmarli has been approved for the treatment of cholestatic pruritus in patients with ALGS in patients one year of age and older in the United States and for the treatment of cholestatic pruritus in patients two months of age and older in Europe, and we expect product revenues to increase as we continue commercial activities, Livmarli may not achieve commercial success. Our principal sources of liquidity are cash from the sale of

98

our equity securities, product revenue from sales of Livmarli, and, to a lesser extent, from our collaboration agreements. Until such time, if ever, as we can generate sufficient product revenue from sales of Livmarli, our current product candidates or any future product candidates, if approved, to fund operations, we expect to finance our cash needs through a combination of equity offerings, debt financings, revenue interest purchase agreements and potential collaboration, license or development agreements. Our primary cash needs are for day-to-day operations, to pay our debt obligations under the RIPA and to fund our working capital requirements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. As a result of adverse geopolitical and macroeconomic developments, such as the COVID-19 pandemic, actions taken to slow its spread, the ongoing military conflict between Ukraine and Russia and related sanctions, actual and anticipated changes in interest rates, economic inflation and the responses by central banking authorities to control such inflation, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

In addition to ongoing capital needs to fund our ongoing operations, our material cash requirements include the following contractual and other obligations.

Pursuant to the RIPA, the Purchasers have a right to receive the Revenue Interests based on product sales, net of Livmarli. The amounts of quarterly Revenue Interest Payments will change each reporting period based upon the underlying product sales, net of Livmarli and will initially be 9.75% of product sales, net. Under the RIPA, every $100.0 million of net sales generated, less than or equal to $350 million in an annual aggregate, would result in a repayment obligation of approximately $9.8 million. Additionally, every $100.0 million of net sales generated in excess of $350.0 million in an annual aggregate would result in a repayment obligation of approximately $2.0 million. In the future, as net sales thresholds set forth in the agreement are met and the repayment percentage rate changes, the amount of the obligation and timing of payment is likely to change. A significant increase or decrease in actual and forecast net sales will materially impact the revenue interest liability, interest expense and the time period for repayment.

Under the Shire License Agreement, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. The amount and timing of milestone obligations are unknown or uncertain as we are unable to estimate the timing or likelihood of achieving the milestone events. Additionally, the amount of royalty payments are based upon future product sales, which we are unable to predict with certainty. These potential obligations are further described in Note 7 to our consolidated financial statements.

We additionally have contractual obligations for our operating leases for our corporate headquarters. These obligations are further described in Note 9 to our consolidated financial statements.

We are party to certain license and collaboration agreements, which contain a number of contractual obligations. Those contractual obligations may entitle us to receive, or may obligate us to make, certain payments.

99

The amount and timing of those payments are unknown or uncertain as we are unable to estimate the timing or likelihood of the events that will obligate those payments.

We enter into contracts in the normal course of business with clinical research organizations and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancelable contracts.

Cash Flows

The following table provides a summary of the net cash flow activity for the periods indicated (in thousands):

Net Cash Used in Operating Activities

Net cash used in operating activities was $120.1 million for the year ended December 31, 2022, reflecting our net loss of $135.7 million partially offset by non-cash items of $36.6 million. Non-cash items consisted primarily of $27.0 million of stock-based compensation, $16.0 million of effective interest expense in connection with the RIPA, $3.7 million of depreciation and amortization of our intangible assets, fixed assets and operating lease right-of use assets, $6.6 million related to deferred tax liability recognized as a result of intangible assets acquired as part of the Satiogen acquisition, $1.7 million accretion of discounts on our investments, $0.9 million gain related to the change in fair value of Indemnification Holdback and Contingent Milestone liabilities and $0.9 million gain related to the change in fair value of the derivative liability. Additionally, cash used in operating activities reflected changes in net operating assets of $21.0 million, consisting primarily of a $20.7 million increase in accounts receivable related to sales of Livmarli, a $3.4 million increase in inventory, a $3.7 million increase in prepaid expenses and other current assets, a $0.1 million increase in other long term assets, and a $0.7 million decrease in operating lease liability, partially offset by a $7.6 million increase in accounts payable, accrued expenses and other liabilities.

Net cash used in operating activities was $132.8 million for the year ended December 31, 2021, reflecting our net loss of $84.0 million partially offset by non-cash items of $42.2 million and a non-cash gain of $108.0 million from the sale of the PRV. Non-cash items consisted primarily of $23.1 million of stock-based compensation, $17.6 million of effective interest expense in connection with the RIPA, $0.7 million related to the change in fair value of the derivative liability, and $1.0 million of depreciation and amortization of our fixed assets and operating lease right-of use assets. Additionally, cash used in operating activities reflected changes in net operating assets of $17.0 million, consisting primarily of a $22.7 million increase in accounts payable, accrued expenses and other liabilities primarily associated with clinical, manufacturing and commercial planning activities and collaboration funding pursuant to the collaboration agreement with Vivet and $5.0 million increase in prepaid expenses, inventory and other assets, partially offset by a $0.6 million decrease in our operating lease liability.

Net Cash Provided by Investing Activities

Net cash provided by investing activities was $7.7 million for the year ended December 31, 2022, primarily due to proceeds of $140.3 million from maturities of investments, partially offset by $132.3 million used in purchases of investments and $0.3 million used in purchases of property and equipment.

Net cash provided by investing activities was $48.5 million for the year ended December 31, 2021, primarily due to $108.0 million of net proceeds received from the sale of the PRV, proceeds of $155.6 million from maturities of investments, and proceeds of $2.0 million from paydowns of investments partially offset by $198.0 million used in purchases of investments and $19.0 million in milestone payments triggered under license agreements.

100

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $109.1 million for the year ended December 31, 2022, due to net proceeds of $86.1 million from completion of an underwritten public offering of 4,000,000 shares of common stock at a price of $23.00 per share, net proceeds of $21.3 million from the issuance and sale of common stock under the Sales Agreement with SVB Securities, pursuant to which we issued and sold an aggregate of 1,160,915 shares of common stock at a weighted-average price of $19.01 per share, and proceeds of $7.3 million from employee equity award exercises, partially offset by $5.6 million of revenue interest payments made under the RIPA.

Net cash provided by financing activities was $73.5 million for the year ended December 31, 2021, due to net proceeds of $64.6 million pursuant to the RIPA, net proceeds of $6.9 million received from the underwriters when they exercised their option to purchase 375,654 shares of our common stock in January 2021 following the follow-on underwritten public offering of our common stock in December 2020, and proceeds of $2.1 million from employee equity award exercises, partially offset by $0.1 million of revenue interest payments made under the RIPA.

JOBS Act

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”).

We will remain an emerging growth company until the earliest of (i) December 31, 2024, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

101

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 “Financial Statements and Supplementary Data” and included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements based upon our current beliefs, estimates, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report.

Overview

We are a biopharmaceutical company focused on the identification, acquisition, development and commercialization of novel therapies for debilitating rare and orphan diseases. We focus on diseases for which the unmet medical need is high and the biology for treatment is clear.

Our lead product LIVMARLI (maralixibat) oral solution (“Livmarli”), a novel, oral, minimally-absorbed agent designed to selectively inhibit ASBT, also known as the IBAT, is approved for the treatment of cholestatic pruritus in patients with ALGS 1 year of age and older in the United States. We market and commercialize Livmarli in the United States through our specialized and focused commercial team. We have also filed for approval in Europe of Livmarli for the treatment of cholestatic liver disease in patients with ALGS and plan to commercialize Livmarli in Western Europe with our international team based in Switzerland. We have entered license and distribution agreements with several rare disease companies for the commercialization of Livmarli in additional countries. We are also developing Livmarli for PFIC and BA. Livmarli has been granted breakthrough designation for ALGS and PFIC type 2.

We are advancing our second product candidate, volixibat, a novel, oral, minimally-absorbed agent designed to inhibit IBAT, for the treatment of adult patients with cholestatic liver diseases. We are developing volixibat for the treatment of ICP, PSC and PBC. Volixibat has been studied in over 400 adults for up to 48 weeks. Clinical trials of volixibat have shown significant activity on ASBT and bile acid markers such as 7αC4, fecal bile acids and cholesterol, demonstrating potent biological activity.

We were incorporated in May 2018 and commenced operations in November 2018. To date, we have focused primarily on acquiring and in-licensing our product candidates, organizing and staffing our company, business planning, raising capital, advancing our product candidates through clinical development, preparing for commercialization of our product candidates, commercializing Livmarli, and conducting business development activities relating to, among other things, portfolio expansion through collaborations.

We have a limited operating history and incurred significant operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future. We have only one product approved for commercial sale and have not generated significant revenues from product sales as of December 31, 2021. Since inception, we have funded our operations to date primarily through debt, equity and revenue interest financings.

Financing Transactions

In January 2020, we completed a follow-on public offering of our common stock pursuant to which we sold an aggregate of 2,400,000 shares of common stock at a public offering price of $20.00 per share, resulting in net proceeds of $44.7 million after deducting underwriting discounts, commissions and offering expenses payable by us.

In August 2020, the Securities and Exchange Commission (“SEC”) declared effective a registration statement on Form S-3 (“Shelf Registration”) covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into a sales agreement (“Sales Agreement”) with SVB Leerink LLC (“SVB Leerink”) pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through SVB Leerink acting as the sales agent and/or principal. During the year ended December 31, 2020, we sold 305,969 shares of common stock in at-the-market offerings pursuant to the Sales Agreement at a weighted-average price of $21.55 per share, resulting in gross proceeds of $6.6 million. The net proceeds after deducting sales commissions to SVB Leerink and other issuance expenses were

98

approximately $6.3 million. The remaining capacity under the Sales Agreement is approximately $68.4 million as of December 31, 2021. In January and February 2022, we sold 992,389 shares of common stock in at-the-market offerings pursuant to the Sales Agreement at a weighted-average price of $18.04 per share, resulting in net proceeds of $17.4 million.

In December 2020, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,750,000 shares of common stock at a price of $20.00 per share, resulting in net proceeds of $70.0 million after deducting underwriting discounts, commissions and offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 562,500 additional shares of our common stock at the public offering price, less the underwriting discounts and commissions. In January 2021, the underwriters exercised their option for 375,654 shares of our common stock, resulting in net proceeds of $7.1 million after deducting underwriting discounts.

In December 2020, we entered into a Revenue Interest Purchase Agreement, as amended in September 2021 (“RIPA”), with Mulholland SA LLC, an affiliate of Oberland Capital LLC (“Oberland”), as agent for purchasers party thereto (the “Purchasers”), and the Purchasers named therein, pursuant to which the Purchasers paid us $50.0 million on closing, less certain issuance costs. In April 2021, upon acceptance for filing by the FDA of our NDA for the treatment of cholestatic pruritus in patients with ALGS, we received an additional $65.0 million, less certain transaction costs, from the Purchasers. We may also be entitled to up to an additional $50.0 million at the option of the Purchasers to finance in-license or other acquisitions (“Purchaser Payments”). We were entitled to receive an additional $35.0 million upon FDA approval of Livmarli, which we elected to forgo. As consideration for the Purchaser Payments, the Purchasers have the right to receive the Revenue Interests from us based on the net sales of Livmarli, which will be tiered payments ranging from 2.00% to 9.75% of our net sales in the covered territory. The initial Revenue Interest rate of 9.75% will decrease upon certain revenue achievements. The Purchasers’ rights to receive such payments shall terminate on the date on which the Purchasers have received payments totaling 195.0% of the total payments made by the Purchasers to us, exclusive of transaction expenses, unless the RIPA is terminated earlier.

Concurrently with our entry into the RIPA, we entered into a Common Stock Purchase Agreement (the “Stock Purchase Agreement”) with TPC Investments II LP, TPC Investments Solutions LP and TPC Investments Solutions Co-Invest LP, each of which is an affiliate of Oberland. Pursuant to the Stock Purchase Agreement, we issued an aggregate of 509,164 shares of our common stock at a price per share of $19.64, resulting in net proceeds to us of $10.0 million.

In November 2021, we entered into a definitive agreement to sell the PRV that we received from the FDA in connection with the approval of Livmarli for the treatment of cholestatic pruritus in patients with ALGS one year of age and older, for cash proceeds of $110.0 million. In December 2021, we completed our sale of the PRV and received net proceeds of $108.0 million, after deducting commission costs.

Financial Overview

Our net loss was $84.0 million and $103.3 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $257.2 million and cash, cash equivalents, restricted cash equivalents and investments of $261.5 million, of which $100.0 million is restricted from use under terms of the RIPA.

We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned clinical trials, continue our research and development activities, continue commercial activities for Livmarli, and seek regulatory approvals for our product candidates, as well as hire additional personnel and protect our intellectual property. In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. We have also entered into collaboration arrangements with other companies whereby we are entitled to receive upfront and license fees, research and development funding, development and sales-based milestones, and tiered royalties based on sales of commercialized products. Arrangements that include upfront payments may require deferral of revenue recognition to a future period until we perform obligations under these arrangements. The event-based milestone and other contingent payments represent

99

variable consideration, and we use the most likely amount method or expected value method to estimate this variable consideration, depending on the nature of the contingency and the variable payments. Given the high degree of uncertainty around the occurrence of these events, we generally determine the milestone and other contingent amounts to be fully constrained until the uncertainty associated with these payments is resolved. We will recognize revenue from sales-based royalty payments when or as the sales occur. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur. The timing of these activities may fluctuate significantly. As a result, our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in particular on the timing of our clinical trials and non-clinical studies and our expenditures on other research and development activities.

We expect our revenue from product sales, net will increase in the future from the launch of Livmarli. However, the timing and amount of product sales, net are unknown. Accordingly, until such time as we can generate substantial product revenues to support our cost structure and sustain operating activities, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate the development of one or more of our product candidates or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Prior to the regulatory approval of Livmarli, the manufacturing and related costs were expensed as research and development as any future economic benefit was not considered probable; accordingly, these costs were not capitalized and as a result gross margins resulting from product sales, net will initially be higher until we deplete inventories that we had expensed prior to receiving approval.

COVID-19

The coronavirus (including its variants, “COVID-19”) pandemic has had a significant economic impact across the global marketplace presenting challenges to maintaining business continuity and dramatically changing the ways in which we live and interact with others. Although the initial impact of the pandemic has subsided, we are uncertain as to how more transmissible variants may impact our business. We are working diligently to ensure the advancement of all of our clinical development programs in the safest manner possible. While we are unable to reliably estimate the duration or extent of any potential business disruption or financial impact during this time, we remain committed to (i) prioritizing the safety, health and well-being of patients, their caregivers, healthcare providers and our employees; (ii) ensuring patients are well supported and have continued uninterrupted access to our product candidates, for which we currently do not expect any supply disruption; and (iii) advancing our clinical trials. Examples include a “Work from Home Policy” for our employees and access to home health care to assist families with safer participation in our trials.

Although we did not see a significant financial impact to our business operations as a result of COVID-19 for the year ended December 31, 2021, there may be potential impacts to our business in the future that are highly uncertain and difficult to predict such as temporary closures of our offices or those of our third-party manufacturers or suppliers, disruptions or restrictions on our employees’ ability to travel, disruptions to or delays in ongoing non-clinical trials, clinical trials, third-party manufacturing supply and other operations, inability for patients to see their healthcare providers and access our products, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, interruptions or delays in the operations of the FDA or other regulatory authorities, and our ability to raise capital and conduct business development activities. The ultimate impact of the COVID-19 pandemic, including any lasting effects on our revenue and the way we conduct our business, is highly uncertain and subject to continued change. We recognize that this pandemic may continue to present unique challenges for us throughout 2022.

We continue to believe that existing cash equivalents and investments, excluding restricted cash equivalents, and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditures, debt service requirements and other business development initiatives that we plan to strategically

100

pursue in the 12 months from the issuance of the consolidated financial statements included in this Annual Report. However, should the COVID-19 pandemic and any associated recession or depression continue for a prolonged period, our results of operations, financial condition, liquidity and cash flows could be materially impacted as a result of a lower likelihood of effectively and efficiently developing new medicines and successfully commercializing our products.

License Agreements

Assignment and License Agreement with Shire (Takeda)

In November 2018, we entered into the Shire License Agreement with Shire, which was subsequently acquired by Takeda Pharmaceutical Company Limited (“Takeda”), in which we were granted an exclusive, royalty bearing worldwide license to develop and commercialize our two product candidates, Livmarli and volixibat. As part of the Shire License Agreement, we were assigned license agreements held by Shire with Satiogen Pharmaceuticals, Inc. (“Satiogen” and altogether, the “Satiogen License”), Pfizer Inc., and Sanofi, collectively the Assigned License Agreements (“Assigned License Agreements”). In partial consideration for the rights granted to us under the Shire License Agreement, we made an upfront payment to Shire of $7.5 million and issued Shire 1,859,151 shares of our common stock with an estimated fair value of $7.0 million.

Under the Shire License Agreement and Assigned License Agreements, to date, we have paid aggregate development and regulatory milestones of $51.0 million related to our Livmarli and volixibat programs.

Licensing Agreement with Takeda

In September 2021, we entered into an exclusive licensing agreement with Takeda for the development and commercialization of Livmarli in Japan for ALGS, PFIC and BA. Under the terms of the agreement, Takeda will be responsible for regulatory approval and commercialization of Livmarli in Japan. Takeda will also be responsible for development, including conducting clinical studies in cholestatic indications. We are responsible for commercial supply to Takeda. In exchange, we are eligible to receive a percentage of Takeda’s annualized net sales, which range from high-double digits declining to mid-double digits over the first four years from commercial launch and thereafter remains at mid-double digits.

Components of Results of Operations

Revenue

Product Sales, Net

To date, we have not generated significant revenue from product sales. Our approved product, Livmarli, was approved by the FDA in September 2021 for the treatment of cholestatic pruritus in patients with ALGS one year of age and older. We recorded our first product sales of Livmarli in October 2021. We expect our product sales of Livmarli will increase as a result of our continued commercial activities. However, as it is early in our product launch, we do not yet have a trend and while we believe revenue will increase as we further engage with health care providers in the United States and globally, we cannot predict revenues with any certainty.

Our revenue from product sales, net further depends on our prescription mix of U.S. commercial payors, Medicaid and free drugs under our patient assistance program. Our experience to date in our recent product launch is not sufficient to allow us to reliably estimate the payor mix and resulting gross to net adjustments.

License Revenue

Under the exclusive licensing agreements with CANbridge and GC Pharma, we have recognized as revenue the upfront nonrefundable payments related to the licenses granted upon satisfaction of certain performance obligations. Pursuant to the agreements, we are eligible to receive future milestone payments. These milestone payments were fully constrained and not recognized currently in revenue due to the degree of uncertainty in achieving the milestones associated with these payments. We are also eligible to receive royalty payments related to the agreements, which will be recognized as the underlying product sales occur.

Cost of Product Sales

Cost of product sales consist of third party manufacturing costs, personnel, facility and other costs of manufacturing commercial products, transportation and freight, amortization of capitalized intangibles associated

101

with contractual milestone payments paid to licensors upon certain regulatory approval and sales-based events and royalty payments payable on net sales of Livmarli under licensing agreements. Cost of product sales may also include period costs related to certain manufacturing services and inventory adjustment charges. Prior to receiving approval from the FDA in September 2021 to market and sell Livmarli in the United States, we expensed all costs incurred related to the manufacture of Livmarli as research and development expense because of the inherent risks associated with the development of a drug candidate, the uncertainty about the regulatory approval process and the lack of history as a company of regulatory approval of drug candidates. Our inventory of Livmarli produced prior to FDA approval is available for commercial or clinical use.

Operating Expenses

Research and Development Expenses

Research and development expenses primarily relate to clinical development and manufacturing activities of our product candidates. Our research and development expenses include, among other things:

•
salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions;

•
external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials;

•
expenses related to drug formulation development and the production of clinical trial supplies, including fees paid to contract manufacturers;

•
licensing milestone payments related to development or regulatory events;

•
research and development funding for collaboration arrangements;

•
expenses related to non-clinical studies;

•
expenses related to compliance with drug development regulatory requirements; and

•
other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies.

We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Upfront payments, research and development funding and milestone payments made to third parties in connection with licenses and research and development collaborations are expensed as incurred.

We anticipate that our research and development expenses will increase in the future as we continue the clinical and development activity for further indications of Livmarli, as well as expand the clinical and development activity associated with our volixibat pipeline. These increases will likely include increased costs related to hiring of additional development personnel and fees to outside clinical development organizations that support clinical trial activity.

Selling, General and Administrative Expense

Selling expenses consist of professional fees related to preparation and commercialization of Livmarli, finished goods warehousing costs, as well as salaries and related employee benefits for commercial employees, including stock-based compensation.

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs.

We anticipate that our selling, general and administrative expenses will increase in the future to support our continued commercialization efforts of Livmarli in the United States and internationally as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include

102

increased costs related to hiring of additional personnel and fees to outside consultants to support further marketing, legal and accounting activities.

Interest Income

Interest income consists of interest earned on our cash equivalents and investments.

Interest Expense

Interest expense for the year ended December 31, 2021 was related to the RIPA. Costs during the year consist primarily of costs associated with our liability and non-cash interest costs associated with the amortization of the related debt discount and deferred issuance costs. We impute interest expense associated with this liability using the effective interest rate method which is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability consists of the gain or loss from remeasurement of the compound derivative liability related to the revenue interest liability during the period.

Gain from Sale of Priority Review Voucher, Net

Gain from the sale of priority review voucher represents the sale of the PRV that was granted by the FDA in September 2021 with the approval of Livmarli for the treatment of cholestatic pruritus in patients with ALGS one year of age and older.

Other Income (Expense), Net

Other income (expense), net consists of transactional currency exchange gain or loss.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported, including the amount of assets, liabilities, expenses and the disclosure of contingent assets and liabilities. Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases its estimates on historical experience, known trends and events, and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Product Sales, Net

Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, including amounts from payors and other third parties on behalf of our customers. The transaction price, which may include fixed or variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the product sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. Estimates are reviewed and updated quarterly as additional information becomes known. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

103

Government Rebates. We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate Program. Our rebate calculations may require estimates, including estimates of customer mix, to determine which sales will be subject to rebates and the amount of such rebates. We update estimates and assumptions on a quarterly basis and record any necessary adjustments to revenue in the period identified. Estimated rebates are recorded as a reduction of revenue in the period the related sale is recognized. To date, actual government rebates have not differed materially from our estimates.

Revenue Interest Liability, Net

We impute interest expense associated with this liability using the effective interest rate method. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The effective interest rate on the liability may vary during the term of the agreement depending on a number of factors, including the level of actual and forecasted product sales, net. We evaluate the interest rate quarterly based on actual product sales, net and on our current product sales, net forecasts utilizing the prospective method. A significant increase or decrease in product sales, net will materially impact the revenue interest liability, interest expense and the time period for repayment.

At December 31, 2021, the revenue interest liability is calculated using our current estimate of global forecasted net sales of Livmarli and impacted by a debt discount comprising the estimated value of a bifurcated derivative liability and issuance costs incurred.

The fair value of the derivative liability is valued using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative. The difference between the entire instrument with the embedded derivative compared to the instrument without the embedded derivative was the fair value of the derivative liability. The estimated probability and timing of underlying events triggering the exercisability of the derivative liability bifurcated from within the RIPA, forecasted cash flows and the discount rate are significant unobservable inputs used to determine the estimated fair value of the entire instrument with the embedded derivative.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We accrue and expense clinical trial activities performed by third parties based upon estimates of the proportion of work completed over the life of the individual study and patient enrollment rates in accordance with agreements established with clinical research organizations, clinical trial sites and other vendors associated with the clinical trials. We determine the estimates by reviewing contracts, vendor agreements and purchase orders and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

We make estimates of accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Uncertain Tax Positions

104

We are subject to income taxes in the United States and certain foreign jurisdictions. The evaluation of uncertain tax positions involves significant judgment in the interpretation and application of GAAP and complex tax laws. Although management believes our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our reserves. Reserves are adjusted considering changing facts and circumstances, such as the closing of a tax examination or the refinement of an estimate. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

Legal and Other Contingencies

We are subject to various legal proceedings and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain. We record a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated, the determination of which requires significant judgment. Resolution of legal matters in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

Results of Operations for the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020 (in thousands):

Product Sales, Net

Product sales, net was $3.1 million for the year ended December 31, 2021, compared to zero for the year ended December 31, 2020 as a result of our commercial launch of Livmarli in the United States in September 2021.

License Revenue

105

License revenue was $16.0 million for the year ended December 31, 2021, compared to zero for the year ended December 31, 2020. The increase in license revenue was due to the satisfaction of certain performance obligations associated with the licenses granted under the license agreements with CANbridge and GC Pharma.

Cost of Sales

For the year ended December 31, 2021, cost of sales was $1.9 million, compared to zero for the year ended December 31, 2020, and primarily consisted of amortization of capitalized intangible assets, royalties payable on net sales of Livmarli under licensing agreements and indirect overhead costs associated with the manufacturing and distribution of Livmarli. There were minimal inventory costs reflected in cost of sales as inventory related to current product sold were expensed as research and development costs prior to Livmarli approval in September 2021.

Research and Development Expenses

The following tables summarize the period-over-period changes in research and development expenses relating to our product candidates in development for the periods indicated (in thousands):

Research and development expenses were $131.4 million for the year ended December 31, 2021, an increase of $49.8 million compared to the year ended December 31, 2020. The increase was primarily due to:

•
for Livmarli programs, a decrease of $6.9 million, primarily due to a decrease of $8.2 million manufacturing activities as a result of prior year completion of NDA registrational production offset by a net increase of $1.1 million clinical trial expenses due to increases for the Phase 2b EMBARK clinical trial in BA, the Phase 3 MARCH clinical trial in PFIC, an infant safety study and an expanded access program, which were partially offset by $2.2 million in research and development funding pursuant to our license agreements with CANbridge and GC Pharma which was recorded as a reduction of clinical trial expenses, and $0.1 million of regulatory fees and other general development expenses;

•
for volixibat programs, an increase of $8.2 million, primarily due to an increase of $3.2 million in clinical trial expenses for PSC, PBC and ICP, $4.4 million related manufacturing activities supporting clinical supply, and $0.6 million in other general development expenses;

•
for collaboration funding, an increase of $18.9 million, due to Vivet Collaboration Agreement program development funding. We terminated this agreement in December 2021 and we do not expect to incur additional funding;

•
for stock-based compensation, an increase of $4.8 million, related to an increase in employee headcount as well as expense associated with performance-based restricted stock units that vested upon achievement of FDA approval of Livmarli;

•
for personnel related expenses, an increase of $8.7 million, related to an increase in employee headcount to support our development pipeline;

•
for license fees, an increase of $13.2 million, related to calendar year 2021 developmental milestone payments of $19.0 million consisting of $15.0 million associated with the acceptance of our NDA for

106

filing for Livmarli for the treatment of cholestatic pruritus in patients with ALGS one year of age and older, $4.0 million associated with the initiation of the Phase 2b VISTAS clinical trial in PSC and the Phase 2b EMBARK clinical trial in BA and a $4.2 million upfront fee in connection with our Vivet Collaboration Agreement compared to $10.0 million in calendar year 2020 upon acceptance of an MAA filing to the EMA for Livmarli for the treatment of PFIC2; and

•
for other general expense, an increase of $3.0 million, primarily due to outside consulting expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $59.2 million for the year ended December 31, 2021, an increase of $36.5 million compared to the year ended December 31, 2020. The increase was primarily due to an increase of $14.1 million in professional and consulting service expenses associated with commercial launch activities for Livmarli, $17.1 million of personnel and other compensation related expenses, including an increase of $5.7 million in stock-based compensation, reflecting an increase in the number of our administrative employees to support commercial launch activities for Livmarli and increased requirements of operating as a public company, such as regulatory compliance, an increase of $2.5 million in expenses primarily related to general legal and public relations activities, an increase of $1.5 million in consulting and professional services general corporate compliance and support, and an increase of $1.4 million in other general administrative expenses.

Interest Income

Interest income was $0.4 million for the year ended December 31, 2021, a decrease of $1.2 million compared to the year ended December 31, 2020. The decrease was primarily due to lower interest earned on our cash equivalents and investment balances compared to the prior year largely a result of current economic conditions.

Interest Expense

Interest expense was $17.6 million for the year ended December 31, 2021, an increase of $17.3 million compared to the year ended December 31, 2020. The increase reflected a full year of accreted interest recognized on the revenue interest liability in connection with the RIPA.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability was $0.7 million for the year ended December 31, 2021 compared to zero for the year ended December 31, 2020. The change was related to the remeasurement of the derivative liability at December 31, 2021 and reflects an increase in value of the put option associated with the RIPA primarily resulting from changes in forecast product sales, net.

Gain from Sale of Priority Review Voucher, Net

Gain from sale of the PRV, net of transaction costs, totaled $108.0 million for the year ended December 31, 2021. We did not sell a PRV in the year ended December 31, 2020.

Liquidity and Capital Resources

Overview

To date, we have funded our operations primarily from the sale of our equity securities, revenue interest financings and collaboration arrangements and to a lesser extent from product revenue from the sales of Livmarli.

We had $261.5 million of cash, cash equivalents, restricted cash equivalents and investments as of December 31, 2021, inclusive of $100.0 million restricted cash equivalents, compared to $231.8 million as of December 31, 2020. Since inception, we have incurred operating losses and negative cash flows from operations. As of December 31, 2021, we had an accumulated deficit of $257.2 million.

107

In January 2020, we completed a follow-on public offering of our common stock pursuant to which we sold an aggregate of 2,400,000 shares of common stock at a price of $20.00 per share, resulting in net proceeds of $44.7 million after deducting underwriting discounts, commissions and offering expenses payable by us.

In August 2020, the SEC declared effective the Shelf Registration covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into the Sales Agreement with SVB Leerink, pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through SVB Leerink acting as the sales agent and/or principal. During the year ended December 31, 2021, we did not sell any common stock pursuant to the Sales Agreement. As of December 31, 2020, we had sold 305,969 shares of common stock in an at-the-market offering pursuant to the Sales Agreement at a weighted-average price of $21.55 per share, resulting in gross proceeds of $6.6 million. The net proceeds after deducting sales commissions to SVB Leerink and other issuance expenses were approximately $6.3 million. The remaining capacity under the Sales Agreement is approximately $68.4 million as of December 31, 2021. In January and February 2022, we sold 992,389 shares of common stock in at-the-market offerings pursuant to the Sales Agreement at a weighted-average price of $18.04 per share, resulting in net proceeds of $17.4 million.

In December 2020, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,750,000 shares of common stock at a public offering price of $20.00 per share, resulting in net proceeds of $70.0 million after deducting underwriting discounts, commissions and offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 562,500 additional shares of our common stock at the public offering price, less the underwriting discounts and commissions. In January 2021, the underwriters exercised their option for 375,654 shares of our common stock resulting in net proceeds of $7.1 million after deducting underwriting discounts.

Pursuant to the RIPA, we received $115.0 million from the Purchasers consisting of an upfront cash payment of $50.0 million and an additional $65.0 million as a result of acceptance for filing of our NDA for Livmarli. We may also be entitled to receive up to an additional $50.0 million at the option of the Purchasers to finance in-license or other acquisitions. In return, the Purchasers have a right to receive Revenue Interests based on net product sales of Livmarli. We were entitled to receive an additional $35.0 million upon FDA approval of Livmarli, which we elected to forgo.

Pursuant to the Stock Purchase Agreement, entered into concurrently with our entry into the RIPA, we issued an aggregate of 509,164 shares of our common stock at a price per share of $19.64, resulting in net proceeds to us of $10.0 million.

In December 2021, we received net cash proceeds of $108.0 million, after deducting commission costs, related to the sale of the PRV which we received from the FDA in connection with the approval of Livmarli for the treatment of cholestatic pruritus in patients with ALGS one year of age and older. Of these proceeds, $100.0 million was placed in a segregated bank account as restricted cash, per the terms of the RIPA.

Based on our current and anticipated level of operations, we believe our unrestricted cash, cash equivalents and investments will be sufficient to fund current operations through at least the next 12 months from the filing of this Annual Report. Our unrestricted cash, cash equivalents and investments include money market funds, government agency securities, corporate debt and commercial paper. We maintain established guidelines relating to diversification and maturities of our investments to preserve principal and maintain liquidity.

We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, continue commercial activities for Livmarli and potentially expand into additional markets, hire additional staff, including clinical, scientific, operational, financial and management personnel and pay potential development and commercial milestones in connection with our license agreements.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, selling, general and administrative expenditures, including commercial expenses. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

108

Although Livmarli has been approved by the FDA for the treatment of cholestatic pruritus in patients with ALGS one year of age and older, and we expect product revenues to increase as we continue commercial activities, Livmarli may not achieve commercial success. Our principal sources of liquidity are cash from the sale of our equity securities, revenue interest financings and collaboration arrangements and, to a lesser extent, from product revenue from the sale of Livmarli. Until such time, if ever, as we can generate substantial product revenue from sales of Livmarli, our current product candidates or any future product candidates, if approved, we expect to finance our cash needs through a combination of equity offerings, debt financings, revenue interest purchase agreements and potential collaboration, license or development agreements. Our primary cash needs are for day-to-day operations, to pay our debt obligations under the RIPA and to fund our working capital requirements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through the RIPA, collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

In addition to ongoing capital needs to fund our ongoing operations, the Company’s material cash requirements include the following contractual and other obligations.

Pursuant to the RIPA, the Purchasers have a right to receive Revenue Interests based on net product sales of Livmarli. The amounts of quarterly Revenue Interest Payments will change each reporting period based upon the underlying net product sales of Livmarli and will initially be 9.75% of net product sales. Per the terms of the agreement, every $100.0 million of net sales generated, less than or equal to $350 million in an annual aggregate, would result in a repayment obligation of approximately $9.8 million. Additionally, every $100.0 million of net sales generated in excess of $350.0 million in an annual aggregate would result in a repayment obligation of approximately $2.0 million. In the future, as net sales thresholds set forth in the agreement are met and the repayment percentage rate changes, the amount of the obligation and timing of payment is likely to change. A significant increase or decrease in actual and forecast net sales will materially impact the revenue interest liability, interest expense and the time period for repayment.

Under the Shire License Agreement, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. The amount and timing of milestone obligations are unknown or uncertain as we are unable to estimate the timing or likelihood of achieving the milestone events. Additionally, the amount of royalty payments are based upon future product sales, which we are unable to predict with certainty. These potential obligations are further described in Note 7 to the consolidated financial statements.

We additionally have contractual obligations for our operating leases for our corporate headquarters. These obligations are further described in Note 9 to our consolidated financial statements.

We are party to certain license and collaboration agreements, which contain a number of contractual obligations. Those contractual obligations may entitle us to receive, or may obligate us to make, certain payments. The amount and timing of those payments are unknown or uncertain as we are unable to estimate the timing or likelihood of the events that will obligate those payments.

109

We enter into contracts in the normal course of business with clinical research organizations and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancelable contracts.

Cash Flows

The following table provides a summary of the net cash flow activity for the periods indicated (in thousands):

Net Cash Used in Operating Activities

Net cash used in operating activities was $132.8 million for the year ended December 31, 2021, reflecting our net loss of $84.0 million partially offset by non-cash items of $42.2 million and a non-cash gain of $108.0 million from the sale of the PRV. Non-cash items consisted primarily of $23.1 million of stock-based compensation, $17.6 million of effective interest expense in connection with the RIPA, $0.7 million related to the change in fair value of the derivative liability, and $1.0 million of depreciation and amortization of our fixed assets and operating lease right-of use assets. Additionally, cash used in operating activities reflected changes in net operating assets of $17.0 million, consisting primarily of a $22.7 million increase in accounts payable, accrued expenses and other liabilities primarily associated with clinical, manufacturing and commercial planning activities and collaboration funding pursuant to the Vivet Collaboration Agreement and $5.0 million increase in prepaid expenses, inventory and other assets, partially offset by a $0.6 million decrease in our operating lease liability.

Net cash used in operating activities was $89.1 million for the year ended December 31, 2020, reflecting our net loss of $103.3 million partially offset by non-cash items of $13.6 million. Non-cash items consisted primarily of $12.6 million of stock-based compensation, $0.6 million of depreciation and amortization of our fixed assets and our operating lease right-of use assets and $0.3 million of interest expense in connection with the RIPA. Additionally, cash used in operating activities reflected changes in net operating assets of $0.6 million, consisting primarily of a $3.7 million increase in accounts payable, accrued expenses and other liabilities due to clinical and manufacturing activities, offset by a $1.8 million increase to prepaid expenses primarily associated with clinical and manufacturing activities, $1.0 million increase in long term assets primarily associated with advances to vendors associated with our clinical trials, and a $0.4 million decrease in our operating lease liability.

Net Cash Provided by Investing Activities

Net cash provided by investing activities was $48.5 million for the year ended December 31, 2021, primarily due to $108.0 million of net proceeds received from the sale of the PRV, proceeds of $155.6 million from maturities of investments, and proceeds of $2.0 million from paydowns of investments partially offset by $198.0 million used in purchases of investments and $19.0 million in milestone payments triggered under license agreements.

Net cash provided by investing activities was $37.9 million for the year ended December 31, 2020 primarily due to proceeds of $85.9 million from maturities of investments and proceeds of $26.8 million from paydowns of investments, partially offset by $74.6 million used in purchases of investments and $0.2 million used for purchases of property and equipment.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $73.5 million for the year ended December 31, 2021, due to net proceeds of $64.6 million pursuant to the RIPA, net proceeds of $6.9 million received from the underwriters when they exercised their option to purchase 375,654 shares of our common stock in January 2021 following the follow-on underwritten public offering of our common stock in December 2020, and proceeds of $2.1 million from

110

employee equity award exercises, partially offset by $0.1 million of revenue interest payments made under the RIPA.

Net cash provided by financing activities was $181.3 million for the year ended December 31, 2020, due to net proceeds of $44.7 million received from the completion of a follow-on public offering of our common stock pursuant to which we sold an aggregate of 2,400,000 shares of common stock at a price of $20.00 per share, net proceeds of $70.0 million received from completion of a public offering of our common stock pursuant to which we sold an aggregate of 3,750,000 shares of common stock at $20.00 per share, net proceeds of $49.6 million pursuant to the RIPA, net proceeds of $10.0 million pursuant to the Stock Purchase Agreement entered into in connection with the RIPA for the sale of an aggregate of 509,164 shares of our common stock at a price per share of $19.64, net proceeds of $6.3 million from the sale of common stock under the Sales Agreement with SVB Leerink, pursuant to which we sold an aggregate of 305,969 shares of common stock at a weighted-average price of $21.55 per share, and proceeds of $0.8 million from the issuance of common stock pursuant to the exercise of outstanding options pursuant to our equity incentive plans. These proceeds were offset by the payment of $0.2 million for deferred offering costs associated with the Shelf Registration. The deferred offering costs are reflected as other assets on our consolidated balance sheet until such time as we complete sales of shares under the Shelf Registration.

JOBS Act

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”).

We will remain an emerging growth company until the earliest of (i) December 31, 2024, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.