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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 10-Q
_________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 001-36257
 TRAVERE THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware27-4842691
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3611 Valley Centre Drive, Suite 300
San Diego, CA 92130
(Address of Principal Executive Offices)
(888) 969-7879
(Registrant's Telephone number including area code)
N/A
Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareTVTXThe Nasdaq Global Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐ No
 The number of shares of outstanding common stock, par value $0.0001 per share, of the Registrant as of May 2, 2024 was 76,129,018.


TRAVERE THERAPEUTICS, INC.
Form 10-Q
For the Fiscal Quarter Ended March 31, 2024

TABLE OF CONTENTS
  Page No.
 
 
 
 
 
1

FORWARD-LOOKING STATEMENTS 
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and in this Quarterly Report on Form 10-Q. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. 
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned to not unduly rely upon these statements.
We file reports with the Securities and Exchange Commission ("SEC"). The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Risk Factor Summary
Below is a summary of material factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found under the heading “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making investment decisions regarding our common stock.
Our future prospects are highly dependent upon our ability to successfully develop and execute commercialization strategies for our products, including FILSPARI (sparsentan) to reduce proteinuria in adults with primary IgAN, and to attain market acceptance among physicians, patients and healthcare payers.
Our clinical trials are expensive and time-consuming and may fail to demonstrate the safety and efficacy of our product candidates.
Success in nonclinical testing and early clinical trials does not ensure that later clinical trials will be successful.
Communications and/or feedback from regulatory authorities related to our clinical trials does not guarantee any particular outcome from or timeline for regulatory review, and expedited regulatory review pathways may not actually lead to faster development or approval.
In order to operate our business and increase adoption and sales of our products, we need to continue to develop our commercial organization, including maintaining a highly experienced and skilled workforce with qualified sales representatives.
Interim, topline and preliminary data from our clinical trials that we announce or publish may change materially as more patient data become available and audit and verification procedures are completed.
We face substantial generic and other competition, and our operating results will suffer if we fail to compete effectively.
Healthcare reform initiatives, unfavorable pricing regulations, and changes in reimbursement practices of third-party payers or patients' access to insurance coverage could affect the pricing of and demand for our products.
We are dependent on third parties to manufacture and distribute our products.
The market opportunities for our products and product candidates may be smaller than we believe they are.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval or commercialization.
We do not currently have patent protection for certain of our commercial products. If we are unable to obtain and maintain intellectual property relating to our technology and products, their value may be adversely affected.
We expect to rely on orphan drug status to develop and commercialize certain of our product candidates, but our orphan drug designations may not confer marketing exclusivity or other expected commercial benefits.
We will likely experience fluctuations in operating results and could incur substantial losses, and the market price for shares of our common stock may be volatile.
2

Negative publicity regarding any of our products could impair our ability to market any such product and may require us to spend time and money to address these issues.
We may need substantial funding and may be unable to raise capital when needed. Our indebtedness could adversely affect our financial condition.
We might not receive some or all of the potential milestone payments from the sale of our bile acid product portfolio for the treatment of rare liver diseases.
We may be unable to successfully integrate new products or businesses we may acquire.
We may become involved in litigation matters, which could result in substantial costs, divert management's attention and otherwise have a material adverse effect on our business, operating results or financial condition.
We are subject to significant ongoing regulatory obligations and oversight, which may result in significant additional expense and may limit our commercial success.
3

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
 March 31, 2024December 31, 2023
Assets(unaudited) 
Current assets:  
Cash and cash equivalents$43,251 $58,176 
Marketable debt securities, at fair value397,793 508,675 
Accounts receivable, net22,731 21,179 
Inventory4,532 9,410 
Prepaid expenses and other current assets12,769 19,335 
Total current assets481,076 616,775 
Long-term inventory37,774 31,494 
Property and equipment, net6,943 7,479 
Operating lease right of use assets17,271 18,061 
Intangible assets, net101,182 104,443 
Other assets19,301 10,661 
Total assets$663,547 $788,913 
Liabilities and Stockholders' Equity   
Current liabilities:  
Accounts payable$16,725 $41,675 
Accrued expenses139,580 118,991 
Deferred revenue, current portion6,460 7,096 
Operating lease liabilities, current portion5,036 4,909 
Other current liabilities5,428 5,237 
Total current liabilities173,229 177,908 
Convertible debt377,693 377,263 
Deferred revenue, less current portion888 1,835 
Operating lease liabilities, less current portion21,287 22,612 
Other non-current liabilities16,379 8,485 
Total liabilities589,476 588,103 
Commitments and Contingencies (See Note 13)
Stockholders' Equity:  
Preferred stock $0.0001 par value; 20,000,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023
  
Common stock $0.0001 par value; 200,000,000 shares authorized; 76,108,829, and 75,367,117 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
8 7 
Additional paid-in capital1,337,638 1,327,881 
Accumulated deficit(1,261,683)(1,125,622)
Accumulated other comprehensive loss(1,892)(1,456)
Total stockholders' equity 74,071 200,810 
Total liabilities and stockholders' equity $663,547 $788,913 
The accompanying notes are an integral part of these consolidated financial statements.
4

TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
(unaudited)
 Three Months Ended March 31,
 20242023
Net product sales$39,984 $24,178 
License and collaboration revenue1,390 6,710 
Total revenue41,374 30,888 
Operating expenses:  
Cost of goods sold1,504 4,145 
Research and development49,420 58,162 
Selling, general and administrative64,223 65,950 
In-process research and development65,205  
Restructuring259  
Total operating expenses180,611 128,257 
Operating loss(139,237)(97,369)
Other income (expenses), net:  
Interest income6,032 3,646 
Interest expense(2,800)(2,850)
Other income, net238 87 
Total other income, net3,470 883 
Loss from continuing operations before income tax provision(135,767)(96,486)
Income tax provision on continuing operations(191)(78)
Loss from continuing operations, net of tax(135,958)(96,564)
(Loss) income from discontinued operations, net of tax(103)10,233 
Net loss$(136,061)$(86,331)
Per share data
Basic and diluted:
Net loss from continuing operations$(1.76)$(1.42)
Net income from discontinued operations 0.15 
Net loss per common share$(1.76)$(1.27)
Weighted average common shares outstanding77,136,493 68,174,099 
Comprehensive loss:  
Net loss$(136,061)$(86,331)
Foreign currency translation gain (loss)629 (566)
Unrealized (loss) gain on marketable debt securities(1,065)1,297 
Comprehensive loss$(136,497)$(85,600)
The accompanying notes are an integral part of these consolidated financial statements.
5

TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited, in thousands, except share amounts)
Three Months Ended March 31, 2024Three Months Ended March 31, 2023
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders'
Equity
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance - December 3175,367,117 $7 $1,327,881 $(1,456)$(1,125,622)$200,810 64,290,570 $6 $1,059,975 $(2,907)$(1,014,223)$42,851 
Share based compensation— — 9,420 — — 9,420 — — 13,325 — — 13,325 
Issuance of common stock under the equity incentive plan and proceeds from exercise741,712 1 (1)— —  592,486 — 2,296 — — 2,296 
Employee stock purchase program purchase and expense— — 338 — — 338 — — 439 — — 439 
Issuance of common stock, net of issuance costs of $12.6 million
— — — — — — 9,703,750 1 191,198 — — 191,199 
Issuance of pre-funded common stock warrants, net of issuance costs of $1.6 million
— — — — — — — — 24,630 — — 24,630 
Foreign currency translation adjustments— — — 629 — 629 — — — (566)— (566)
Unrealized (loss) gain on marketable debt securities— — — (1,065)— (1,065)— — — 1,297 — 1,297 
Net loss— — — — (136,061)(136,061)— — — — (86,331)(86,331)
Balance - March 3176,108,829 $8 $1,337,638 $(1,892)$(1,261,683)$74,071 74,586,806 $7 $1,291,863 $(2,176)$(1,100,554)$189,140 
The accompanying notes are an integral part of these consolidated financial statements.












6

TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 For the Three Months Ended March 31,
 20242023
Cash Flows From Operating Activities:
Net loss$(136,061)$(86,331)
Net (loss) income from discontinued operations(103)10,233 
Net loss from continuing operations(135,958)(96,564)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization9,880 6,620 
Share based compensation9,758 13,471 
Other364 (1,097)
Changes in operating assets and liabilities:
Accounts receivable(1,547)(4,658)
Inventory(1,824)(510)
Prepaid expenses and other current and non-current assets(2,724)(2,599)
Accounts payable(24,841)(351)
Accrued expenses21,474 (8,879)
Deferred revenue, current and non-current(1,522)(3,844)
Other current and non-current liabilities8,038 (238)
Net cash used in operating activities - continuing operations(118,902)(98,649)
Net cash (used in) provided by operating activities - discontinued operations(103)17,532 
Net cash used in operating activities(119,005)(81,117)
Cash Flows From Investing Activities:  
Proceeds from the sale and maturity of marketable debt securities111,364 94,118 
Purchase of marketable debt securities (103,190)
Purchase of fixed assets (630)
Purchase of intangible assets(6,466)(27,337)
Net cash provided by (used in) investing activities - continuing operations104,898 (37,039)
Cash Flows From Financing Activities:  
Payment of guaranteed minimum royalty(525)(525)
Proceeds from the issuance of common stock, net of issuance costs 191,199 
Proceeds from the issuance of pre-funded warrants, net of issuance costs 24,630 
Proceeds from exercise of stock options 2,296 
Net cash (used in) provided by financing activities - continuing operations(525)217,600 
Net cash used in financing activities - discontinued operations (604)
Net cash (used in) provided by financing activities(525)216,996 
Effect of exchange rate changes on cash(293)848 
Net (decrease) increase in cash and cash equivalents(14,925)99,688 
Cash and cash equivalents, beginning of year58,176 61,688 
Cash and cash equivalents, end of period$43,251 $161,376 
The accompanying notes are an integral part of these consolidated financial statements.








7

TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.  DESCRIPTION OF BUSINESS
Organization and Description of Business
Travere Therapeutics, Inc. (“we”, “our”, “us”, “Travere” and the “Company”) refers to Travere Therapeutics, Inc., a Delaware corporation, as well as its subsidiaries. Travere is a fully integrated biopharmaceutical company headquartered in San Diego, California focused on identifying, developing and delivering life-changing therapies to people living with rare kidney and metabolic diseases. The Company regularly evaluates and, where appropriate, acts on opportunities to expand its product pipeline through licenses and acquisitions of products in areas that will serve patients with serious unmet medical need and that the Company believes offer attractive growth characteristics.
Discontinued Operations - Sale of Bile Acid Product Portfolio
In July 2023, Travere entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Mirum Pharmaceuticals, Inc. ("Mirum Pharmaceuticals" or “Mirum”), pursuant to which Mirum agreed to purchase from Travere substantially all of the assets primarily related to Travere’s business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of Chenodal and Cholbam (also known as Kolbam, and together with Chenodal, the “Products”), collectively, the "bile acid business". On August 31, 2023, the Company and Mirum consummated the transactions contemplated by the Purchase Agreement (the “Closing”). In connection with the Closing, Mirum paid Travere an upfront cash payment of $210.0 million. Pursuant to the Purchase Agreement, after the Closing, Travere is eligible to receive up to $235.0 million upon the achievement of certain milestones based on specified amounts of annual net sales (tiered from $125.0 million to $500.0 million) of the Products. The Company has reflected the bile acid business as a discontinued operation in the unaudited consolidated financial statements for all periods presented. See Note 18 for further discussion.
Unless otherwise noted, amounts and disclosures throughout the Notes to the unaudited consolidated financial statements relate to the Company's continuing operations.
Approved Products:
FILSPARI® (sparsentan)
On February 17, 2023, the U.S. Food and Drug Administration (the "FDA") granted accelerated approval of FILSPARI® (sparsentan) to reduce proteinuria in adults with primary IgAN at risk of rapid disease progression, generally a UPCR ≥1.5 gram/gram. FILSPARI, a once-daily, oral medication is designed to selectively target two critical pathways (endothelin 1 and angiotensin-II) in the disease progression of IgAN.
This indication was granted under accelerated approval based on reduction in proteinuria. The continued approval of FILSPARI may be contingent upon confirmation of a clinical benefit in the Company's Phase 3 clinical trial of sparsentan for the treatment of IgAN (the "PROTECT Study"). In September 2023, the Company announced topline two-year confirmatory secondary endpoint results from the PROTECT Study and in December 2023, the Company announced the completion of a successful pre-NDA meeting with the FDA for FILSPARI in IgAN. In March 2024, the Company submitted a supplemental New Drug Application (sNDA) for conversion of the existing U.S. accelerated approval of FILSPARI to full approval. In May 2024, the Company announced that the FDA has accepted and granted Priority Review of its sNDA to convert FILSPARI from accelerated approval to full approval for the treatment of IgAN in the U.S. The FDA assigned a Prescription Drug User Fee Act (“PDUFA”) target action date of September 5, 2024.
In April 2024, the Company and Vifor (International) Ltd. ("CSL Vifor"), with whom the Company entered into a license and collaboration agreement ("License Agreement") in September 2021, announced that the European Commission has granted conditional marketing authorization (“CMA”) for FILSPARI (sparsentan) for the treatment of adults with primary IgAN with a urine protein excretion ≥1.0 g/day (or urine protein-to-creatinine ratio ≥0.75 g/g). The CMA is granted for all member states of the European Union, as well as in Iceland, Liechtenstein and Norway. The European Commission's decision follows the positive opinion from the Committee for Medicinal Products for Human Use (“CHMP”) in February 2024, based on results from the pivotal Phase 3 PROTECT Study of FILSPARI in IgAN. Under the terms of the License Agreement, the Company will be entitled to receive a regulatory milestone payment of $17.5 million upon receipt of full regulatory approval by the European Commission for IgAN, and an additional milestone payment upon achievement of market access initiatives in certain countries. The Company also expects to make a milestone payment of $5.8 million to Ligand Pharmaceuticals in the second quarter of 2024.
Thiola® and Thiola EC® (tiopronin tablets)
Thiola® and Thiola EC® (tiopronin tablets) are approved in the United States for the prevention of cystine (kidney) stone formation in patients with severe homozygous cystinuria.
Clinical-Stage Programs:
Sparsentan for the treatment of FSGS
Sparsentan remains a novel investigational product candidate which has been granted Orphan Drug Designation for the treatment of focal segmental glomerulosclerosis (FSGS) in the U.S. and the EEA. In December 2023, the Company announced that it had completed its planned Type C meeting with the FDA to discuss previously reported results from the Phase 3 DUPLEX Study of sparsentan in FSGS. The FDA acknowledged the high unmet need for approved therapies as well as the challenges in studying FSGS but indicated that the two-year results from the Phase 3 DUPLEX Study alone were not sufficient to support an sNDA submission. Together with CSL Vifor, the Company also plans to engage with the EMA to determine the potential for a subsequent variation to the CMA of sparsentan for the treatment of FSGS, subject to a review decision on the pending application for CMA of sparsentan in
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IgAN. The Company is conducting additional analyses of FSGS data and intends to engage with regulators to evaluate potential regulatory pathways for a sparsentan FSGS indication.
Pegtibatinase
Pegtibatinase is a novel investigational human enzyme replacement candidate being evaluated for the treatment of classical homocystinuria (HCU). Pegtibatinase has been granted Rare Pediatric Disease, Fast Track and Breakthrough Therapy designations by the FDA, as well as orphan drug designation in the United States and European Union. In May 2023, the Company announced positive topline results from cohort 6 in the Phase 1/2 COMPOSE Study. In December 2023, the Company initiated the pivotal Phase 3 HARMONY Study to support the potential approval of pegtibatinase for the treatment of classical HCU. The HARMONY Study is a global, randomized, multi-center, double-blind, placebo-controlled Phase 3 clinical trial designed to evaluate the efficacy and safety of pegtibatinase as a novel treatment to reduce total homocysteine (tHcy) levels. In the beginning of 2024, the first patients were dosed in the HARMONY Study. Topline results from the HARMONY Study are expected in 2026. The Company acquired pegtibatinase as part of the November 2020 acquisition of Orphan Technologies Limited.
Preclinical Programs:
The Company is a participant in a Cooperative Research and Development Agreement ("CRADA"), which forms a multi-stakeholder approach to pool resources with leading experts and incorporate the patient perspective early in the therapeutic identification and development process. The Company is partnering with the National Institutes of Health’s National Center for Advancing Translational Sciences ("NCATS") and a leading patient advocacy organization, Alagille Syndrome Alliance, aimed at the identification of potential small molecule therapeutics for Alagille syndrome ("ALGS"). There are no treatment options currently approved for ALGS.
The Company is party to a collaboration agreement with PharmaKrysto Limited and their early-stage cystinuria discovery program, whereby the Company is responsible for funding all research and development expenses for the pre-clinical activities associated with the cystinuria program.

NOTE 2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods. The December 31, 2023 balance sheet information was derived from the audited financial statements as of that date. Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation, including reclassifying the prior period revenues and expenses attributable to the bile acid business as net income from discontinued operations. These reclassifications did not have an impact on total assets or total liabilities in the Consolidated Balance Sheets or net loss in the Consolidated Statements of Operations.
A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows:
Principles of Consolidation
The unaudited consolidated financial statements represent the consolidation of the accounts of the Company, its subsidiaries and variable interest entities for which the Company has been determined to be the primary beneficiary, in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). All intercompany accounts and transactions have been eliminated in consolidation. See Note 6 for further discussion of variable interest entities (“VIE”) that the Company consolidates.
Revenue Recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue from contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer. See Note 3 and Note 4 for further discussion.
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Payments received under collaboration and licensing agreements may include non-refundable fees at the inception of the arrangements, milestone payments for specific achievements and royalties on the sale of products. At the inception of arrangements that include milestone payments, the Company uses judgment to evaluate whether the milestones are probable of being achieved and estimates the amount to include in the transaction price utilizing the most likely amount method. If it is probable that a significant revenue reversal will not occur, the estimated amount is included in the transaction price. Milestone payments that are not within the Company or the licensee’s control, such as regulatory approvals, are considered to be constrained due to a high degree of uncertainty and are not included in the transaction price until such uncertainty is resolved. At the end of each reporting period, the Company re-evaluates the probability of achievement of development milestones and any related constraint and adjusts the estimate of the overall transaction price, if necessary. The Company recognizes aggregate sales-based milestones and royalty payments from product sales of which the license is deemed to be the predominant item to which the royalties relate, at the later of when the related sales occur or when the performance obligation to which the sales-based milestone or royalty has been allocated has been satisfied. Revenue from collaboration and licensing agreements may also include sales of inventory, at cost plus a margin, which is recorded in license and collaboration revenue.
The Company utilizes significant judgment to develop estimates of the stand-alone selling price for each distinct performance obligation based upon the relative stand-alone selling price. Variable consideration that relates specifically to the Company’s efforts to satisfy specific performance obligations is allocated entirely to those performance obligations. The stand-alone selling price for license-related performance obligations requires judgment in developing assumptions to project probability-weighted cash flows based upon estimates of forecasted revenues, clinical and regulatory timelines and discount rates. The stand-alone selling price for clinical development performance obligations is based on forecasted expected costs of satisfying a performance obligation plus an appropriate margin.
If the licenses to intellectual property are determined to be distinct from the other performance obligations identified in the arrangement and have stand-alone functionality, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to benefit from the license. For licenses that are not distinct from other promises, the Company applies judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the related revenue recognition accordingly.
The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. Revenue is recorded proportionally as costs are incurred. The Company generally utilizes the cost-to-cost method of progress because it best measures the transfer of control to the customer which occurs as the Company incurs costs. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. The Company uses judgment to estimate the total costs expected to complete the clinical development performance obligations, which include subcontractor costs, labor, materials, other direct costs and an allocation of indirect costs. The Company evaluates these cost estimates and the progress each reporting period and adjusts the measure of progress, if necessary.
Cost of goods sold
Cost of goods sold includes the cost of inventory sold, third party manufacturing and supply chain costs, product shipping and handling costs, and provisions for excess and obsolete inventory. Cost of goods sold also includes the cost of goods sold under the Company's license and collaboration agreements, which currently consists of the sale of active pharmaceutical ingredients to the Company's collaboration partner, at cost plus a margin.
The following table summarizes cost of goods sold for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Cost of goods sold - product sales$1,504 $1,108 
Cost of goods sold - license and collaboration 3,037 
Total cost of goods sold$1,504 $4,145 
Capitalization of Inventory Costs
Prior to the regulatory approval of the Company's drug candidates, the Company incurs expenses for the manufacture of drug product supplies to support clinical development that could potentially be available to support the commercial launch of those drugs. The Company capitalizes inventory costs associated with its products after regulatory approval, when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. Until the date at which regulatory approval has been received, costs related to the production of inventory are recorded as research and development expenses as incurred. Any eventual sale of previously expensed ("zero-cost") inventories may impact future margins, for any periods in which those inventories are sold.
Prior to the February 2023 FDA accelerated approval of FILSPARI (sparsentan), the Company expensed the production of active pharmaceutical ingredients purchased to support the commercial launch of FILSPARI, in research and development expenses. For the three months ended March 31, 2024 and 2023, sales of FILSPARI primarily consisted of zero-cost inventories. As of March 31, 2024, the Company had approximately $5.0 million of zero-cost inventory. The Company expects to continue to record zero cost of goods sold on the sale of previously expensed inventories through at least 2025. The Company began capitalizing inventory costs associated with FILSPARI following the February 2023 accelerated approval.
Research and Development Expenses
Research and development includes expenses related to sparsentan, pegtibatinase, and the Company's other pipeline programs. The Company expenses all research and development costs as they are incurred. The Company's research and development costs are composed of salaries and bonuses, benefits, share-based compensation, license fees, milestones under license agreements, costs paid to third-party contractors to perform research, conduct clinical
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trials, costs to develop drug materials and delivery devices, costs to manufacture drug product supplies to support clinical development, and associated overhead expenses and facilities costs. The Company charges direct internal and external program costs to the respective development programs. The Company also incurs indirect costs that are not allocated to specific programs because such costs benefit multiple development programs and allow us to increase our pharmaceutical development capabilities. These consist of internal shared resources related to the development and maintenance of systems and processes applicable to all of our programs.
Nonrefundable advance payments for goods and 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, or when it is no longer expected that the goods will be delivered or the services rendered.
Clinical Trial Expenses
The Company records expenses in connection with its clinical trials under contracts with contract research organizations ("CROs") that support conducting and managing clinical trials, as well as contract manufacturing organizations ("CMOs") for the manufacture of drug product supplies to support clinical development. The financial terms and activities of these agreements vary from contract to contract and may result in uneven expense levels. Generally, these agreements set forth activities that drive the recording of expenses such as start-up, initiation activities, enrollment, treatment of patients, or the completion of other clinical trial activities, and in the case of CMOs, costs associated with the production of drug product supplied and the procurement of raw materials to be consumed in the manufacturing process.
Expenses related to clinical trials are accrued based on our estimates of the progress of services performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials or the delivery of goods. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the amounts we are obligated to pay under our clinical trial agreements are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), the Company adjusts its estimates accordingly on a prospective basis. Revisions to the Company's contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become reasonably certain.
The Company currently has one Phase 1/2 clinical trial and three Phase 3 clinical trials in process that are in varying stages of activity, with ongoing non-clinical support trials. As such, clinical trial expenses will vary depending on all the factors set forth above and may fluctuate significantly from quarter to quarter.
Intangible Assets with Cost Accumulation Model
In 2014, the Company entered into a license agreement with Mission Pharmacal in which the Company obtained the exclusive right to license the trademark of Thiola. The acquisition of the Thiola license qualified as an asset acquisition under the principles of ASC 805, Business Combinations ("ASC 805") in effect at the time of acquisition. The license agreement requires the Company to make royalty payments based on net sales of Thiola. The liability for royalties in excess of the annual contractual minimum is recognized in the period in which the royalties become probable and estimable, which is typically in the period corresponding with the respective sales. The Company records an offsetting increase to the cost basis of the asset under the cost accumulation model ("Thiola Intangible"). The additional cost basis is subsequently amortized over the remaining useful life.
In the second quarter of 2023, the Company reduced the estimated useful life of the Thiola Intangible to better reflect the pattern of projected future cash flows. The change in estimated useful life was accounted for as a change in accounting estimate with the remaining carrying amounts of the Thiola Intangible being amortized prospectively over the new useful life.
Consistent with all prior periods since Thiola was acquired, the Company has not accrued any liability for future royalties in excess of the annual contractual minimum at March 31, 2024 as such royalties are not yet probable and estimable.
Variable Interest Entity
The Company reviews each investment and collaboration agreement to determine if it has a variable interest in the entity. In assessing whether the Company has a variable interest in the entity as a whole, the Company considers and makes judgments regarding the purpose and design of the entity, the value of the licensed assets to the entity, the value of the entity’s total assets and the significant activities of the entity. If the Company has a variable interest in the entity as a whole, the Company assesses whether or not the Company is a primary beneficiary of that VIE, based on a number of factors, including: (i) which party has the power to direct the activities that most significantly affect the VIE’s economic performance, (ii) the parties’ contractual rights and responsibilities pursuant to the collaboration agreement, and (iii) which party has the obligation to absorb losses of or the right to receive benefits from the VIE that could be significant to the VIE. If the Company determines that it is the primary beneficiary of a VIE at the onset of the collaboration, the collaboration is treated as a business combination and the Company consolidates the financial statements of the VIE into the Company’s consolidated financial statements. On a quarterly basis, the Company evaluates whether it continues to be the primary beneficiary of the consolidated VIE. If the Company determines that it is no longer the primary beneficiary of a consolidated VIE, it deconsolidates the VIE in the period in which the determination is made.
Assets and liabilities recorded as a result of consolidating the financial results of the VIE into the Company’s consolidated balance sheet do not represent additional assets that could be used to satisfy claims against the Company’s general assets or liabilities for which creditors have recourse to the Company’s general assets.
Equity Securities
The Company applies the equity method of accounting for investments when it has significant influence, but no controlling interest in the investee. Judgment regarding the level of influence over each equity method investment includes key factors such as ownership interest, representation on the board of directors, participation in joint steering committees and material intercompany transactions. The Company’s proportionate share of the earnings or losses resulting from these investments is reported in other income, net in the accompanying Consolidated Statements of Operations. Investments accounted for using the equity method may be reported on a lag of up to three months if financial statements of the investee are not available in sufficient time for the Company to apply the equity method as of the current reporting date. The January 2024 exercise of the option to purchase shares of common stock of Renalys represents a non-cash investing activity of $3.3 million. See Note 6 for further discussion.
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Discontinued Operations
Discontinued operations is presented when there is a disposal of a component or a group of components that in the Company's judgment represents a strategic shift that will have a major effect on the Company's operations and financial results. Results of operations directly related to discontinued operations are aggregated into a single line item in the Consolidated Statements of Operations for all periods presented. See Note 18 for further discussion.
Restructuring
Restructuring charges consist primarily of employee severance, one-time termination benefits related to the reduction of its workforce, and other costs. Liabilities for costs associated with a restructuring activity are recognized when the liability is incurred and are measured at fair value. One-time termination benefits are expensed at the date the entity notifies the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the service period. Termination benefits are calculated based on regional benefit practices and local statutory requirements.
In December 2023, the Company initiated a restructuring plan that resulted in a reduction of its workforce, primarily impacting non-field-based employees. One-time termination benefits include severance, continuation of health insurance coverage, and other benefits for a specified period of time. The Company estimated that it will incur a total of $12.0 million to $14.0 million in non-recurring charges in connection with the restructuring, of which the Company has recognized a total of $11.7 million as of March 31, 2024, including $0.3 million for the three months ended March 31, 2024. As of March 31, 2024 and December 31, 2023, the Company had accruals related to the restructuring of $1.2 million and $11.4 million, respectively, which is included in accrued expenses in the Consolidated Balance Sheets. Cash payments totaling $10.5 million were made related to the restructuring during 2024. The Company expects that it will incur the remaining estimated restructuring costs during 2024. The Company anticipates it will pay all restructuring plan amounts during 2024.
The following table sets forth a summary of changes in accrued restructuring costs for the three months ended March 31, 2024 and 2023 (in thousands):
Restructuring
20242023
Liability balance at January 1,$11,421 $ 
Restructuring expenses259  
Payments(10,502) 
Foreign currency impact26  
Liability balance at March 31,$1,204 $ 
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosure. The FASB amended the guidance in ASC 280, Segment Reporting ("ASC 280"), to require a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280. The guidance is applied retrospectively to all periods presented in financial statements, unless it is impracticable. This new guidance is effective for public business entities for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. The Company adopted this new standard as of January 1, 2024, however, the adoption did not have an impact on the accompanying quarterly financial statements since the standard is not effective for interim periods until fiscal 2025.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures. This new standard does not change accounting for income taxes but requires new disclosures focusing on two areas, the effective rate reconciliation and taxes paid. This new standard is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company expects to adopt this new standard beginning in fiscal 2025 when it becomes effective.

NOTE 3. REVENUE RECOGNITION
Product Sales, Net
Product sales consist of FILSPARI and tiopronin products (Thiola and Thiola EC). The Company sells its products to specialty pharmacies and through direct-to-patient distributors worldwide, with the United States representing over 98% of net product sales.
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The Company sells FILSPARI to three direct-to-patient specialty pharmacies. The Company sells its other products to patients and pharmacies, with distribution facilitated through a single direct-to-patient distributor. Revenues from product sales are recognized in satisfaction of a single performance obligation when the customer obtains control of the Company’s product. For FILSPARI, sales are recognized upon delivery of the product to the specialty pharmacies. The Company receives payments from its FILSPARI sales based on terms that are generally 30 days from shipment of the product to the specialty pharmacy. For the Company's other products, product sales are recognized upon delivery to the patient. The Company receives payments from sales of its other products, primarily through third party payers, based on terms that generally are within 30 days of delivery of product to the patient. Contracts do not contain significant financing components based on the typical period of time between performance of services and collection of consideration.
Deductions from Revenue
Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and co-pay assistance that are offered to customers, payers and other indirect customers relating to the Company’s sales of its products. These provisions are based on the estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, and are classified as a reduction of accounts receivable (if the amount is payable to a customer) or as a current liability (if the amount is payable to a party other than a customer). The Company includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transactions will not occur. Where appropriate, these reserves take into consideration the Company’s historical experience, current contractual and statutory requirements and specific known market events and trends. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. If actual results in the future vary from the Company’s provisions, the Company will adjust the estimate, which would affect net product revenue and earnings in the period such variances become known. For the three months ended March 31, 2024 and 2023, adjustments to net product revenue related to performance obligations satisfied in previous periods were immaterial.
Government Rebates: The Company calculates the rebates that it will be obligated to provide to government programs and deducts these estimated amounts from its gross product sales at the time the revenues are recognized. Allowances for government rebates and discounts are established based on an estimated allocation of payers and the government-mandated discounts applicable to government-funded programs. Rebate discounts are included in accrued expenses in the accompanying Consolidated Balance Sheets.
Commercial Rebates: The Company calculates the rebates it incurs according to any contracts with certain commercial payers and deducts these amounts from its gross product sales at the time the revenues are recognized. Allowances for commercial rebates are established based on actual payer information, which is reasonably estimated at the time of delivery for applicable products. Rebate discounts are included in accrued expenses in the accompanying Consolidated Balance Sheets.
Prompt Pay Discounts: The Company offers discounts to certain customers for prompt payments. The Company accrues for the calculated prompt pay discount based on the gross amount of each invoice for those customers at the time of sale.
Product Returns: Consistent with industry practice, the Company offers its customers a limited right to return product purchased directly from the Company, which is principally based upon the product’s expiration date. Historically, returns have been immaterial.
Co-pay AssistanceThe Company offers a co-pay assistance program, which is intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the estimated cost per claim associated with product that has been recognized as revenue.
The following table summarizes net product sales for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Tiopronin products$20,150 $21,174 
FILSPARI19,834 3,004 
Total net product sales$39,984 $24,178 
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NOTE 4. COLLABORATION AND LICENSE AGREEMENTS
License Agreement with CSL Vifor
On September 15, 2021, the Company entered into a license and collaboration agreement (“CSL Vifor License Agreement”) with Vifor (International) Ltd. (“CSL Vifor”), pursuant to which the Company granted an exclusive license to CSL Vifor for the commercialization of sparsentan in Europe, Australia and New Zealand ("CSL Vifor Licensed Territories"). CSL Vifor also has first right of negotiation to expand the licensed territories into Canada, China, Brazil and/ or Mexico. Under the terms of the CSL Vifor License Agreement, the Company received an upfront payment of $55.0 million and will be eligible for up to $135.0 million in aggregate regulatory and market access related milestone payments and up to $655.0 million in aggregate sales-based milestone payments for a total potential value of up to $845.0 million. The Company is also entitled to receive tiered double-digit royalties up to 40 percent of annual net sales of sparsentan in the CSL Vifor Licensed Territories.
Under the CSL Vifor License Agreement, CSL Vifor will be responsible for all commercialization activities in the CSL Vifor Licensed Territories. The Company remains responsible for the worldwide clinical development of sparsentan through regulatory approval as defined and will retain all rights to sparsentan in the United States and rest of world outside of the CSL Vifor Licensed Territories. Development costs for any post regulatory approval development activities, subject to approval by both parties, will be borne by the Company and CSL Vifor as defined, respectively. The CSL Vifor License Agreement will remain in effect, unless terminated earlier, until the expiration of all royalty terms for sparsentan in the licensed territories. Each party has the right to terminate the CSL Vifor License Agreement for the other party’s uncured material breach, insolvency or if the time required for performance under the CSL Vifor License Agreement by the other party is extended due to a force majeure event that continues for six months or more.
The Company assessed the CSL Vifor License Agreement and determined that it meets both criteria to be considered a collaborative agreement within the Scope of ASC 808, Collaborative Arrangements ("ASC 808") of active participation by both parties and exposures to significant risks and rewards dependent on the commercial success of the activities. Both parties participate on joint steering and other committees overseeing the collaboration activities. Also, both parties are exposed to significant risks and rewards based on the economic outcomes of regulatory approvals and commercialization of sparsentan.
The Company determined the transaction price under the CSL Vifor License Agreement totaled $55.0 million, consisting of the fixed non-refundable upfront payment. The variable regulatory and access related milestones were excluded from the transaction price given the substantial uncertainty related to their achievement. Sales-based milestone payments and royalties on net sales were excluded from the transaction price and will be recognized at the later of when the related sales occur or when the performance obligation to which the sales-based milestone or royalty has been allocated have been satisfied.
The Company concluded that CSL Vifor represented a customer and applied relevant guidance from ASC 606 to evaluate the accounting under the CSL Vifor License Agreement. In accordance with this guidance, the Company concluded that the promise to grant the license is distinct from the promise to provide clinical development services resulting in two performance obligations. As a result, the Company allocated $12.0 million of the transaction price, based on the performance obligations' relative standalone selling prices, to the license, which was recognized in full in 2021. The remaining $43.0 million of the transaction price was allocated to the clinical development activities and recorded as deferred revenue, which will be recognized over the development period based upon the ratio of costs incurred to date to the total estimated costs.
For the three months ended March 31, 2024, the Company recognized $1.4 million in license and collaboration revenue for clinical development activities, based upon the ratio of costs incurred to total estimated costs. For the three months ended March 31, 2023, the Company recognized $3.4 million in license and collaboration revenue for clinical development activities, based upon the ratio of costs incurred to total estimated costs.
Deferred revenue related to the clinical development activities as of March 31, 2024 was $7.3 million. Of this amount, $6.5 million was classified as current as of March 31, 2024, based upon amounts expected to be realized within the next year. As of December 31, 2023, deferred revenue related to the clinical development activities was $8.9 million, of which $7.1 million was classified as current. The Company estimates that the remainder of the deferred revenue balance will be fully realized by mid-2025.
Licensing Agreement with Renalys
In January 2024, the license agreement (“Renalys License Agreement”) between the Company and Renalys Pharma, Inc. (“Renalys”) came into effect. Pursuant to the terms of the Renalys License Agreement, the Company granted an exclusive license to Renalys for the development and commercialization of sparsentan in Japan, South Korea, Taiwan and other specified Asian countries ("Renalys Licensed Territories"). Under the terms of the Renalys License Agreement, the Company received a non-refundable upfront payment and will be eligible to receive up to $120.0 million in aggregate development and sales-based milestones. The Company is also entitled to receive tiered double-digit to mid-20 percent royalties of annual net sales of sparsentan in the Renalys Licensed Territories. In addition, the Company received an option to purchase shares of common stock of Renalys (“Option Agreement”), which it exercised in January 2024. The Company has the option to purchase all equity securities of Renalys at any time prior to the top-line results of the Phase 3 trial in Japan (“Buyout Right”).
Under the Renalys License Agreement, Renalys will be responsible for all development and commercialization activities in the Renalys Licensed Territories. The Renalys License Agreement will remain in effect, unless terminated earlier, until the expiration of all royalty terms for sparsentan in the Renalys Licensed Territories. Each party has the right to terminate the Renalys License Agreement for the other party’s uncured material breach or insolvency, or if the time required for performance under the Renalys License Agreement by the other party is extended due to a force majeure event that continues for nine months or more. Renalys may terminate the Renalys License Agreement for any reason upon prior written notice to the Company. The Company may terminate the Renalys License Agreement if Renalys abandons development in Japan or South Korea prior to first commercial sales of sparsentan in either Japan or South Korea.
The Company assessed the Renalys License Agreement and determined that it meets both criteria to be considered a collaborative agreement within the Scope of ASC 808, Collaborative Arrangements of active participation by both parties and exposures to significant risks and rewards dependent on the commercial success of the activities. Both parties participate on a joint steering committee overseeing the development and commercial activities. Also, both parties are exposed to significant risks and rewards based on the economic outcomes of regulatory approvals and commercialization of sparsentan.
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The Company determined the transaction price under the Renalys License Agreement totaled $8.3 million, consisting of the fixed non-refundable upfront payment, milestone payment and estimated fair value of the Option Agreement. The variable development-related milestones were excluded from the transaction price given the substantial uncertainty related to their achievement. Sales-based milestone payments and royalties on net sales were excluded from the transaction price and will be recognized at the later of when the related sales occur or when the performance obligation to which the sales-based milestone or royalty has been allocated has been satisfied.
The Company concluded that Renalys represents a customer and applied relevant guidance from ASC 606 to evaluate the accounting under the Renalys License Agreement. In accordance with this guidance, the Company concluded that the promise to grant the license is distinct, resulting in one performance obligation as the license has stand-alone functionally at contract inception. The Buyout Right precludes transferring control of the license to Renalys under ASC 606 and the Company’s option to repurchase the common stock at a price greater than the original license premium results in accounting for the Renalys License Agreement as a financing arrangement. The transaction price was recorded in other non-current liabilities, and will be recognized in revenue upon exercise or termination of the Buyout Right.
See Note 6 for further discussion of VIE’s.

NOTE 5. MARKETABLE DEBT SECURITIES
The Company's marketable debt securities as of March 31, 2024 and December 31, 2023 were composed of available-for-sale commercial paper and corporate and government debt securities. The primary objective of the Company’s investment portfolio is to preserve capital and liquidity while enhancing overall returns. The Company’s investment policy limits interest-bearing security investments to certain types of instruments issued by institutions with primarily investment grade credit ratings and places restrictions on maturities and concentration by asset class and issuer.
Marketable debt securities consisted of the following (in thousands):
March 31, 2024December 31, 2023
Marketable debt securities:
Commercial paper$9,899 $34,458 
Corporate debt securities304,771 368,323 
Securities of government sponsored entities83,123 105,894 
Total available-for-sale marketable debt securities$397,793 $508,675 
The following is a summary of short-term marketable debt securities classified as available-for-sale as of March 31, 2024 (in thousands):
Remaining Contractual Maturity
(in years)
Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Marketable debt securities:
Commercial paperLess than 1$9,902 $ $(3)$9,899 
Corporate debt securitiesLess than 1148,618 47 (328)148,337 
Securities of government-sponsored entitiesLess than 183,351 29 (257)83,123 
Total maturity less than 1 year241,871 76 (588)241,359 
Corporate debt securities1 to 2156,245 364 (175)156,434 
Total maturity 1 to 2 years156,245 364 (175)156,434 
Total available-for-sale marketable debt securities$398,116 $440 $(763)$397,793 










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The following is a summary of short-term marketable debt securities classified as available-for-sale as of December 31, 2023 (in thousands):
Remaining Contractual Maturity
(in years)
Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Marketable debt securities:
Commercial paperLess than 1$34,450 $25 $(17)$34,458 
Corporate debt securitiesLess than 1133,463 29 (408)133,084 
Securities of government-sponsored entitiesLess than 181,334 36 (274)81,096 
Total maturity less than 1 year249,247 90 (699)248,638 
Corporate debt securities1 to 2233,969 1,444 (174)235,239 
Securities of government-sponsored entities1 to 224,718 106 (26)24,798 
Total maturity 1 to 2 years258,687 1,550 (200)260,037 
Total available-for-sale securities$507,934 $1,640 $(899)$508,675 
For the three months ended March 31, 2024 and 2023, realized gains on marketable debt securities were immaterial. As of March 31, 2024 and December 31, 2023, the accrued interest receivable related to the Company's marketable debt securities was $3.8 million and $4.6 million, respectively, and was recorded in prepaid expenses and other current assets on the Consolidated Balance Sheets.
The Company reviews the available-for-sale marketable debt securities for declines in fair value below the cost basis each quarter. For any security whose fair value is below its amortized cost basis, the Company first evaluates whether it intends to sell the impaired security, or will otherwise be more likely than not required to sell the security before recovery. If either are true, the amortized cost basis of the security is written down to its fair value at the reporting date. If neither circumstance holds true, the Company assesses whether any portion of the unrealized loss is a result of a credit loss. Any amount deemed to be attributable to credit loss is recognized in the income statement, with the amount of the loss limited to the difference between fair value and amortized cost and recorded as an allowance for credit losses. The portion of the unrealized loss related to factors other than credit losses is recognized in other comprehensive income (loss).
The following is a summary of available-for-sale marketable debt securities in an unrealized loss position with no credit losses reported as of March 31, 2024 (in thousands):
Less Than 12 Months12 Months or GreaterTotal
Description of SecuritiesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Commercial paper$9,899 $3 $ $ $9,899 $3 
Corporate debt securities112,935 379 30,860 124 143,795 503 
Securities of government-sponsored entities27,224 67 36,037 190 63,261 257 
Total$150,058 $449 $66,897 $314 $216,955 $763 
The following is a summary of available-for-sale marketable debt securities in an unrealized loss position with no credit losses reported as of December 31, 2023 (in thousands):
Less Than 12 Months12 Months or GreaterTotal
Description of SecuritiesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Commercial paper$24,798 $17 $ $ $24,798 $17 
Corporate debt securities140,802 405 28,775 177 169,577 582 
Securities of government-sponsored entities61,933 217 12,540 83 74,473 300 
Total$227,533 $639 $41,315 $260 $268,848 $899 
As of March 31, 2024 and December 31, 2023, the amortized cost of the available-for-sale marketable debt securities in an unrealized loss position was $217.7 million and $269.7 million, respectively.
As of March 31, 2024 and December 31, 2023, the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. The increase in unrealized losses for the three months ended March 31, 2024 was primarily due to fluctuations in short-term interest rates. The Company does not believe the unrealized losses incurred during the period are due to credit-related factors. The credit ratings of the securities held remain of the highest quality. Moreover, the Company continues to receive payments of interest and principal as they become due, and our expectation is that those payments will continue to be received timely. Factors unknown to us at this time may cause actual results to differ and require adjustments to the Company’s estimates and assumptions in the future.

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NOTE 6. VARIABLE INTEREST ENTITIES
Stock Purchase and Collaboration Agreement with PharmaKrysto
In March 2022, the Company entered into a Collaboration Agreement with PharmaKrysto Limited (“PharmaKrysto”), a privately held pre-clinical stage company related to PharmaKrysto's early-stage cystinuria discovery program, and concurrently therewith entered into a Stock Purchase Agreement with PharmaKrysto (together, the "Agreements"). Pursuant to the terms of the Agreements, the Company paid PharmaKrysto's shareholders $0.6 million in cash to purchase 5% of the outstanding common shares of PharmaKrysto and $0.4 million to PharmaKrysto as a one-time signing fee. Under the Collaboration Agreement, the Company will fund all research and development expenses for the pre-clinical activities associated with the cystinuria program, which are estimated to be approximately $5.0 million. The Agreements require the Company to purchase an additional 5% of the outstanding common shares for $1.0 million upon the occurrence of a specified pre-clinical milestone, and grant an option to the Company to purchase all of the remaining outstanding shares of PharmaKrysto for $5.0 million upon the occurrence of a subsequent pre-clinical milestone prior to expiration of the option on March 8, 2025. If the Company elects to exercise the option, it would be required to perform commercially reasonable clinical diligence obligations. In addition, it would be required to make cash milestone payments totaling up to an aggregate $16.0 million upon the achievement of certain development and regulatory milestones, plus tiered royalty payments of less than 4% on future net sales of a product, if approved. The Company has the right to terminate the Agreements and return the shares for a nominal price at any time upon 60 days’ notice, subject to survival of contingent obligations, if any.
The Company determined that PharmaKrysto is a VIE because it lacks the resources to conduct the cystinuria clinical program and the limitation on the residual returns through the Company's option to purchase the remaining outstanding shares. The Company further concluded that it is the primary beneficiary of the VIE due to the Company's ultimate control over the research and development program, and its obligation, subject to continuation of the collaboration, to fund 100% of research and development costs of the program pursuant to the terms of the Collaboration Agreement.
The upfront payments were expensed to research and development and other income (expense), net upon initial consolidation. The consolidated assets and liabilities as of March 31, 2024 and December 31, 2023 were immaterial. The results of operations were not significant for the three months ended March 31, 2024 and 2023. The Company is not required to provide additional funding other than the contractually required amounts disclosed above. The creditors and beneficial holders of PharmaKrysto have no recourse to the general credit or assets of the Company.
Licensing Agreement with Renalys
In January 2024, the Renalys License Agreement between the Company and Renalys came into effect and the Company exercised its option to purchase shares of common stock of Renalys. The Company determined that Renalys is a VIE as they could require additional funding to support development and commercial activities. The Company has variable interests in Renalys, including an equity interest, Buyout Right and performance-related payments under the Renalys License Agreement that absorb variability from the performance of Renalys.
In order to determine the primary beneficiary of Renalys, the Company evaluated its variable interest to identify if the Company had the power to direct the activities that most significantly impact the economic performance. Based upon the capital structure, governing documents and overall business operations, the Company determined that it is not the primary beneficiary as it does do not have the power to direct the activities that most significantly impact the economic performance and does not have an obligation absorb losses.
The carrying amount of the assets and liabilities related to the Company’s variable interests are $3.3 million and $8.3 million, recorded in other assets and other non-current liabilities, respectively, in the Company’s Consolidated Balance Sheets. The $3.3 million in assets represent the Company’s maximum exposure to loss. The Company is not required to provide additional funding. The creditors have no recourse to the general credit or assets of the Company.

NOTE 7.  LEASES
As of March 31, 2024, the Company had two operating leases, including one operating lease with Kilroy Realty, L.P. (the "Landlord") for office space located in San Diego, California, which was entered into in April 2019 and subsequently amended in May 2020. Coinciding with the Company's ability to direct the use of the office space, which occurred in phases over 2020, and utilizing a discount rate equal to the Company's estimated incremental borrowing rate, the Company established ROU assets totaling $34.6 million and lease liabilities totaling $34.5 million. The total ROU asset and lease liability at measurement were each offset by lease incentives associated with tenant improvement allowances totaling $7.9 million.
The initial term of the office lease ends in August 2028, and the Landlord has granted the Company an option to extend the term of the lease by a period of 5 years. At lease inception, it was not reasonably certain that the Company will extend the term of the lease and therefore the renewal period has been excluded from the aforementioned ROU asset and lease liability measurements. The measurement of the lease term occurs from the February 2021 occupancy date of the office space.
The Company has one operating lease with Esprit Investments Limited for office space located in Dublin, Ireland, which was entered into in October 2022. The initial term of the office lease ends in September 2027. The lease provides the option to extend the term of the lease by a period of 5 years, although at lease inception, it was not reasonably certain that the Company would elect this option and therefore the renewal period was excluded from the initial lease measurement. Utilizing a discount rate equal to the Company's estimated incremental borrowing rate, the Company established an ROU asset and corresponding lease liability of $0.4 million.
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The following is a schedule of the future minimum rental commitments for the Company's operating leases reconciled to the lease liability and ROU asset as of March 31, 2024 (in thousands):
March 31, 2024
2024 (remaining nine months)$4,890 
20256,673 
20266,889 
20277,064 
20284,781 
Total undiscounted future minimum payments30,297 
Present value discount(3,974)
Total lease liability26,323 
Unamortized lease incentives(4,345)
Cash payments in excess of straight-line lease expense(4,707)
Total ROU asset$17,271 

The weighted-average remaining lease term and weighted-average discount rate of the Company's operating leases are as follows:
March 31, 2024December 31, 2023
Weighted-average remaining lease term in years4.44.7
Weighted-average discount rate6.48 %6.48 %
For the three months ended March 31, 2024 and 2023, the Company recorded $1.2 million and $1.2 million, respectively, in expense related to operating leases, including amortized tenant improvement allowances.

NOTE 8.  FAIR VALUE MEASUREMENTS
The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The valuation techniques used to measure the fair value of the Company’s debt securities and all other financial instruments, all of which have counter-parties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data. Based on the fair value hierarchy, the Company classified marketable debt securities within Level 2.
Financial instruments with carrying values approximating fair value include cash and cash equivalents, accounts receivable, and accounts payable, due to their short-term nature. As of March 31, 2024, the fair value of the Company's 2.5% Convertible Senior Notes due 2025 was $61.0 million and the fair value of the Company's 2.25% Convertible Senior Notes due 2029 was $202.4 million. As of December 31, 2023, the fair value of the Company's 2.5% Convertible Senior Notes due 2025 was $58.3 million and the fair value of the Company's 2.25% Convertible Senior Notes due 2029 was $212.1 million. The fair values were estimated utilizing market quotations and are considered Level 2.
The following table presents the Company’s assets, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of March 31, 2024 (in thousands):
As of March 31, 2024
Total carrying and estimated fair valueQuoted prices in active markets
(Level 1)
Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)
Assets:
Cash and cash equivalents$43,251 $43,251 $ $ 
Marketable debt securities, available-for-sale397,793  397,793  
Total$441,044 $43,251 $397,793 $ 
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The following table presents the Company’s assets, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of December 31, 2023 (in thousands):
As of December 31, 2023
Total carrying and estimated fair valueQuoted prices in active markets
(Level 1)
Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)
Assets:
Cash and cash equivalents$58,176 $58,176 $ $ 
Marketable debt securities, available-for-sale508,675  508,675  
Total$566,851 $58,176 $508,675 $ 

NOTE 9. INTANGIBLE ASSETS
Ligand License Agreement
In 2012, the Company entered into an agreement with Ligand Pharmaceuticals, Inc. ("Ligand") for a worldwide sublicense to develop, manufacture and commercialize sparsentan (the “Ligand License Agreement”). As consideration for the license, the Company is required to make substantial payments upon the achievement of certain milestones, totaling up to $114.1 million. In March 2023, the Company capitalized a $23.0 million milestone payment to Ligand (and Bristol-Myers Squibb Company ("BMS")) that was triggered upon the accelerated approval of FILSPARI in February 2023. Pursuant to the Ligand License Agreement, the Company is obligated to pay to Ligand (and BMS) an escalating royalty between 15% and 17% of net sales of sparsentan, with payments due quarterly. The Company began incurring costs associated with such royalties following the February 2023 approval of FILSPARI (sparsentan). For the three months ended March 31, 2024 and 2023, the Company capitalized $2.9 million and $0.5 million, respectively, to intangible assets for royalties owed on net sales of FILSPARI. The cost of the $23.0 million milestone payment and royalty payments are being amortized to selling, general and administration on a straight-line basis through April 30, 2033.
The following table sets forth amortizable intangible assets as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Finite-lived intangible assets$189,128 $183,037 
Less: accumulated amortization(88,699)(79,347)
Net carrying value$100,429 $103,690 
As of March 31, 2024 and December 31, 2023, the Company had goodwill of $0.8 million.
The following table summarizes amortization expense for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Research and development$ $2,394 
Selling, general and administrative9,352 3,668 
Total amortization expense$9,352 $6,062 

NOTE 10.  CONVERTIBLE NOTES PAYABLE
The composition of the Company’s convertible senior notes are as follows (in thousands):
 March 31, 2024 December 31, 2023
2.25% convertible senior notes due 2029
$316,250 $316,250 
2.50% convertible senior notes due 2025
68,904 68,904 
Unamortized debt issuance costs - 2.25% convertible senior notes due 2029
(6,997)(7,348)
Unamortized debt issuance costs - 2.50% convertible senior notes due 2025
(464)(543)
Total convertible senior notes, net of unamortized debt discount and debt issuance costs$377,693 $377,263 
Convertible Senior Notes Due 2029
On March 11, 2022, the Company completed a registered underwritten public offering of $316.3 million aggregate principal amount of 2.25% Convertible Senior Notes due 2029 (“2029 Notes”), which includes $41.3 million aggregate principal amount of 2029 Notes sold pursuant to the full exercise of the
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underwriters’ option to purchase additional 2029 Notes. The Company issued the 2029 Notes under an indenture, dated as of September 10, 2018, as supplemented by the second supplemental indenture, dated as of March 11, 2022 (collectively, the “2029 Indenture”). The 2029 Notes will mature on March 1, 2029, unless earlier repurchased, redeemed, or converted. The 2029 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 2.25%, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2022.
The Company received net proceeds from the issuance of the 2029 Notes of $306.4 million, after deducting commissions and offering expenses of $9.9 million. At March 31, 2024, accrued interest on the 2029 Notes of $0.6 million is included in accrued expenses in the accompanying Consolidated Balance Sheets. The 2029 Notes comprise the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the 2029 Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables.
Holders may convert their 2029 Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2022 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock for each of at least 20 trading days, whether or not consecutive, during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price on the applicable trading day; (2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) if the trading price per $1,000 principal amount of 2029 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions of the Company’s common stock; (4) if the Company calls the 2029 Notes for redemption; and (5) at any time from, and including, December 1, 2028 until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, based on the applicable conversion rate. The initial conversion rate for the 2029 Notes is 31.3740 shares of the Company’s common stock per $1,000 principal amount of 2029 Notes, which represents an initial conversion price of approximately $31.87 per share. If a “make-whole fundamental change” (as defined in the 2029 Indenture) occurs, then the Company will, in certain circumstances, increase the conversion rate for a specified period of time.
The 2029 Notes will be redeemable, in whole or in part at the Company’s option at any time, and from time to time, on or after March 2, 2026 and, in the case of any partial redemption, on or before the 40th scheduled trading day before the maturity date, at a cash redemption price equal to the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date the Company sends such notice. However, the Company may not redeem less than all of the outstanding 2029 Notes unless at least $100.0 million aggregate principal amount of 2029 Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. In addition, calling any 2029 Note for redemption will constitute a make-whole fundamental change with respect to that 2029 Note, in which case the conversion rate applicable to the conversion of that 2029 Note will be increased in certain circumstances if it is converted after it is called for redemption. If a fundamental change (as defined in the 2029 Indenture) occurs, then, except as described in the 2029 Indentures, holders may require the Company to repurchase their 2029 Notes at a cash repurchase price equal to the principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the 2029 Notes will be paid pursuant to the terms of the 2029 Indenture. In the event that all of the 2029 Notes are converted, the Company would be required to repay the principal amount and any conversion premium in any combination of cash and shares of its common stock at the Company’s option. In addition, calling the 2029 Notes for redemption will constitute a “make-whole fundamental change."
The Company incurred approximately $9.9 million of debt issuance costs relating to the issuance of the 2029 Notes, which were recorded as a reduction to the 2029 Notes on the Consolidated Balance Sheets. The debt issuance costs are being amortized and recognized as additional interest expense over the expected life of the 2029 Notes using the effective interest method. We determined the expected life of the debt is equal to the seven-year term of the 2029 Notes. The effective interest rate on the 2029 Notes is 2.74%.
Convertible Senior Notes Due 2025
On September 10, 2018, the Company completed a registered underwritten public offering of $276.0 million aggregate principal amount of 2.50% Convertible Senior Notes due 2025 ("2025 Notes"), and entered into a base indenture and supplemental indenture agreement (collectively, the "2025 Indenture") with respect to the 2025 Notes. The 2025 Notes will mature on September 15, 2025, unless earlier repurchased, redeemed, or converted. The 2025 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 2.50%, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2019.
The net proceeds from the issuance of the 2025 Notes were approximately $267.2 million, after deducting commissions and the offering expenses of $8.8 million payable by the Company. At March 31, 2024, accrued interest of $0.1 million is included in accrued expenses in the accompanying Consolidated Balance Sheets. The 2025 Notes comprise the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the 2025 Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables.
Holders may convert their 2025 Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2018 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock for each of at least 20 trading days, whether or not consecutive, during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price on the applicable trading day; (2) during the five consecutive business days immediately after any 10 consecutive trading day period (“measurement period”) if the trading price per $1,000 principal amount of 2025 Notes for each
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trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock; (4) if the Company calls the 2025 Notes for redemption; and (5) at any time from, and including, May 15, 2025 until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, based on the applicable conversion rate.
The initial conversion rate for the 2025 Notes is 25.7739 shares of the Company’s common stock per $1,000 principal amount of 2025 Notes, which represents an initial conversion price of approximately $38.80 per share. If a “make-whole fundamental change” (as defined in the 2025 Indenture) occurs, then the Company will, in certain circumstances, increase the conversion rate for a specified period of time.
The 2025 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after September 15, 2022 and, in the case of any partial redemption, on or before the 40th scheduled trading day before the maturity date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. If a fundamental change (as defined in the 2025 Indenture) occurs, then, subject to certain exceptions, holders may require the Company to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the 2025 Notes will be paid pursuant to the terms of the 2025 Indenture. In the event that all of the 2025 Notes are converted, the Company would be required to repay the principal amount and any conversion premium in any combination of cash and shares of its common stock at the Company’s option. In addition, calling the 2025 Notes for redemption will constitute a “make-whole fundamental change."
The Company incurred approximately $8.8 million of debt issuance costs relating to the issuance of the 2025 Notes, which were recorded as a reduction to the 2025 Notes on the Consolidated Balance Sheets. The debt issuance costs are being amortized and recognized as additional interest expense over the expected life of the 2025 Notes using the effective interest method. The Company determined the expected life of the debt is equal to the seven-year term of the 2025 Notes. The effective interest rate on the 2025 Notes is 2.98%.
On March 11, 2022, the Company completed its repurchase of $207.1 million aggregate principal amount of 2025 Notes for cash, including accrued and unpaid interest, for a total of $213.8 million. This transaction involved a contemporaneous exchange of cash between the Company and holders of the 2025 Notes participating in the issuance of the 2029 Notes. Accordingly, we evaluated the transaction for modification or extinguishment accounting in accordance with ASC 470-50, Debt – Modifications and Extinguishments on a creditor-by creditor basis depending on whether the exchange was determined to have substantially different terms. The repurchase of the 2025 Notes and issuance of the 2029 Notes were deemed to have substantially different terms based on the present value of the cash flows or significant difference between the value of the conversion option immediately prior to and after the exchange. Therefore, the repurchase of the 2025 Notes was accounted for as a debt extinguishment. The Company recorded a $7.6 million loss on extinguishment of debt on its Consolidated Statements of Operations for the three months ended March 31, 2023, which includes the write-off of related deferred financing costs of $3.4 million. After giving effect to the repurchase, the total remaining principal amount outstanding under the 2025 Notes as of March 31, 2024 was $68.9 million.
The 2025 and 2029 Notes are accounted for in accordance with ASC 470-20, Debt with conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of equity classification guidance. Based upon the Company’s analysis, it was determined that the 2025 Notes and the 2029 Notes do not contain embedded features requiring recognition as derivatives and bifurcation, and therefore are measured at amortized cost and recorded as liabilities on the Consolidated Balance Sheets.
The 2025 and 2029 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by the Company. There were no events of default for the 2025 Notes or 2029 Notes at March 31, 2024.
The 2025 and 2029 Notes are classified on the Company's Consolidated Balance Sheets at March 31, 2024 as long-tern convertible debt.
The following table sets forth total interest expense recognized related to the 2025 and 2029 Notes (in thousands):
Three Months Ended March 31,
20242023
Contractual interest expense$2,209 $2,209 
Amortization of debt issuance costs431 429 
Total interest expense for the 2025 and 2029 Notes$2,640 $2,638 
Total interest expense recognized for the three months ended March 31, 2024 and 2023 was $2.8 million and $2.9 million, respectively.

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NOTE 11. ACCRUED EXPENSES
Accrued expenses at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):
March 31, 2024December 31, 2023
Accrued milestone payments$65,000 $ 
Research and development20,861 26,006 
Compensation related costs18,715 29,908 
Sales discounts, rebates, and allowances11,633 13,730 
Accrued royalties6,686 6,991 
Selling, general and administrative5,893 7,190 
Accrued restructuring costs1,204 11,421 
Transition services accrual605 12,282 
Miscellaneous accrued expenses8,983 11,463 
Total accrued expenses$139,580 $118,991 

NOTE 12.  NET LOSS PER COMMON SHARE
Basic and diluted net income (loss) per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period. In accordance with ASC 260, Earnings per Share, if a company had a discontinued operation, the company uses income from continuing operations, adjusted for preferred dividend and similar adjustments, as its control number to determine whether potential common shares are dilutive.
As discussed in Note 17, as part of its February 2023 underwritten public offering, the Company issued and sold pre-funded warrants to purchase 1.25 million shares of its common stock at a price to the public of $20.9999 per pre-funded warrant. The pre-funded warrants are exercisable immediately and are exercisable for one share of the Company's common stock. The exercise price of each pre-funded warrant is $0.0001 per share of common stock. Since the $0.0001 price per share represents little consideration and is non-substantive in relation to the $20.9999 price per pre-funded warrant and the $21.00 price per share of the common stock offered to the public, and as the warrants are immediately exercisable with no further vesting conditions or contingencies associated with them, the shares underlying the warrants are therefore included in the calculation of basic net loss per common share.
The Company’s potentially dilutive shares, which include outstanding stock options, restricted stock units, and shares issuable upon conversion of the 2025 Notes and 2029 Notes, are considered to be common stock equivalents and are not included in the calculation of diluted net loss per share because their effect is anti-dilutive.
Basic and diluted net income (loss) per share is calculated as follows (net loss amounts are stated in thousands):
Three Months Ended March 31,
20242023
SharesNet Income (loss)EPSSharesNet Income (loss)EPS
Continuing operations77,136,493 $(135,958)$(1.76)68,174,099 $(96,564)$(1.42)
Discontinued operations77,136,493 $(103)$ 68,174,099 $10,233 $0.15 
Basic and diluted loss per share77,136,493 $(136,061)$(1.76)68,174,099 $(86,331)$(1.27)
The following common stock equivalents have been excluded because they were anti-dilutive:
Three Months Ended March 31,
20242023
Convertible debt11,697,952 11,697,952 
Options10,927,909 10,546,780 
Restricted stock3,769,139 3,278,797 
Total anti-dilutive shares26,395,000 25,523,529 

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NOTE 13.  COMMITMENTS AND CONTINGENCIES
Commitments
Certain of the Company's contractual arrangements with contract manufacturing organizations ("CMOs") require binding forecasts or commitments to purchase minimum amounts for the manufacture of drug product supply, which may be material to the Company's financial statements.
Contingencies
In November 2020, the Company completed the acquisition of Orphan Technologies Limited (“Orphan”), including Orphan’s rare metabolic disorder drug pegtibatinase. The Company acquired Orphan by purchasing all of the outstanding shares. Under the Agreement, the Company has also agreed to make contingent cash payments up to an aggregate of $427.0 million based on the achievement of certain development, regulatory and commercialization events as set forth in the Agreement, as well as additional tiered mid-single digit royalty payments based upon future net sales of any pegtibatinase products in the US and Europe, subject to certain reductions as set forth in the Agreement, and a contingent payment in the event a pediatric rare disease voucher for any pegtibatinase product is granted.
Substantially all of the value of the assets acquired was concentrated within pegtibatinase, and as of the acquisition date, the Company did not anticipate any economic benefit to be derived from pegtibatinase other than the primary indication. Accordingly, the transaction was treated as an asset acquisition with amounts charged to acquired in-process research and development (IPR&D) expense for the acquired in-process research and development on the date of acquisition.
In accordance with ASC 450, Contingencies, contingent cash payments will be accrued for when it is probable that a liability has been incurred and the amount can be reasonably estimated. In March 2024, the Company recognized $65.2 million in IPR&D expense upon the achievement of a development milestone, which is recorded in accrued expenses of the Consolidated Balance Sheets as of March 31, 2024 and will be paid in the second quarter of 2024.
Legal Proceedings
From time to time in the normal course of business, the Company is subject to various legal matters such as threatened or pending claims or litigation. Although the results of claims and litigation cannot be predicted with certainty, the Company does not believe it is a party to any claim or litigation in which the outcome, if determined adversely to it, would individually or in the aggregate be reasonably expected to have a material adverse effect on its results of operations or financial condition.

NOTE 14.  SHARE-BASED COMPENSATION
Stock Options
The following table summarizes stock option activity during the three months ended March 31, 2024:
 Shares Underlying OptionsWeighted Average Exercise PriceWeighted Average Remaining Contractual Life (years)Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 202310,211,353 $21.52 4.91$ 
Granted1,323,800 8.91— — 
Exercised  — — 
Forfeited/canceled(271,109)22.31— — 
Outstanding at March 31, 202411,264,044 $20.02 5.26$ 
Vested and expected to vest at March 31, 202411,264,044 $20.02 5.26$ 
At March 31, 2024, unamortized stock compensation for stock options was $26.3 million, with a remaining weighted-average recognition period of 2.8 years.
At March 31, 2024, outstanding options to purchase 8.2 million shares of common stock were exercisable with a weighted-average exercise price per share of $20.99.
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Restricted Stock Units
Service Based Restricted Stock Units
The following table summarizes the Company’s service based restricted stock unit activity during the three months ended March 31, 2024:
 Number of Restricted Stock UnitsWeighted Average Grant Date Fair Value
Unvested at December 31, 20232,874,046 $22.97 
Granted1,856,715 8.96 
Vested(741,712)23.49 
Forfeited/canceled(133,302)22.46 
Unvested at March 31, 20243,855,747 $16.14 
At March 31, 2024, unamortized stock compensation for service based restricted stock units was $55.0 million, with a remaining weighted-average recognition period of 3.0 years.
Performance Based Restricted Stock Units
The following table summarizes the Company’s performance based restricted stock unit activity during the three months ended March 31, 2024:
 Number of Restricted Stock UnitsWeighted Average Grant Date Fair Value
Unvested at December 31, 2023175,458 $25.61 
Granted107,000 8.93 
Vested  
Forfeited/canceled  
Unvested at March 31, 2024282,458 $19.29 
At March 31, 2024, unamortized stock compensation for performance based restricted stock units was $2.6 million, with a remaining weighted-average recognition period of 1.4 years.
Share-Based Compensation
Total share-based compensation presented in the Consolidated Statements of Stockholders' Equity includes both continuing operations and discontinued operations. The following table sets forth share-based compensation for continuing operations for the three months ended March 31, 2024 and 2023 (in thousands):
 Three Months Ended March 31,
 20242023
Research and development$3,657 $4,433 
Selling, general and administrative6,101 9,038 
Total share-based compensation$9,758 $13,471 

NOTE 15. INVENTORY
Inventory consisted of the following at March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Raw materials$29,838 $33,790 
Work in process9,329 4,727 
Finished goods3,139 2,387 
Total inventory$42,306 $40,904 
Classified as:
Inventory$4,532 $9,410 
Long-term inventory37,774 31,494 
Total inventory$42,306 $40,904 
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The balance classified as long-term inventory consists of raw materials and work in process for FILSPARI as of March 31, 2024 and December 31, 2023. The Company maintains levels of these inventories beyond a one-year production plan to limit exposure to potential supply disruption. Such inventories are classified as long-term.

NOTE 16. ACCOUNTS RECEIVABLE
Accounts receivable, net of reserves for prompt pay discounts and expected credit losses, was $22.7 million and $21.2 million at March 31, 2024 and December 31, 2023, respectively. The total reserves for both periods were immaterial.
The Company's evaluation and accounting for credit losses for the current period included an assessment of our aged trade receivables balances and their underlying credit risk characteristics. Our evaluation of past events, current conditions, and reasonable and supportable forecasts about the future resulted in an expectation of immaterial credit losses.

NOTE 17. EQUITY OFFERINGS
Underwritten Public Offering of Common Stock
In February 2023, the Company sold an aggregate of approximately 9.7 million shares of its common stock and pre-funded warrants to purchase 1.25 million shares of its common stock in an underwritten public offering, at a price to the public of $21.00 per share of common stock and $20.9999 per pre-funded warrant. The pre-funded warrants are exercisable immediately, subject to certain beneficial ownership limitations which can be modified by the respective holders with at least 61 days' notice, and are exercisable for one share of the Company's common stock. The exercise price of each pre-funded warrant is $0.0001 per share of common stock. The net proceeds to the Company from the offering, after deducting the underwriting discounts and offering expenses, were approximately $215.8 million.
The pre-funded warrants were classified as a component of permanent stockholders' equity within additional paid-in capital and were recorded at the issuance date using a relative fair value allocation method. The pre-funded warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company's common stock and (vi) meet the equity classification criteria. In addition, such pre-funded warrants do not provide any guarantee of value or return. The Company valued the pre-funded warrants at issuance, concluding that their sale price approximated their fair value, and allocated the aggregate net proceeds from the sale proportionately to the common stock and prefunded warrants, including approximately $24.6 million allocated to the pre-funded warrants and recorded as a component of additional paid-in capital.
At-the-Market Equity Offering
In February 2020, the Company entered into an Open Market Sale Agreement ("ATM Agreement") with Jefferies LLC, as agent (“Jefferies”), pursuant to which the Company may offer and sell, from time to time through Jefferies, shares of its common stock having an aggregate offering price of up to $100.0 million. Of the $100.0 million originally authorized for sale under the ATM Agreement, approximately $28.6 million were sold under the Company’s prior registration statement on Form S-3 (Registration No. 333-227182). An additional $51.9 million were sold under the Company's effective registration statement on Form S-3 (Registration Statement No. 333-259311), which included $20.1 million in the year ended December 31, 2022. The Company did not sell any shares under the ATM Agreement during the year ended December 31, 2023 or during the three months ended March 31, 2024. As of March 31, 2024, an aggregate of $19.5 million remained eligible for sale under the ATM Agreement.

NOTE 18. DIVESTITURES
Discontinued Operations
Sale of Bile Acid Product Portfolio
On August 31, 2023, the Company closed the sale of its bile acid business to Mirum Pharmaceuticals pursuant to the terms of the Purchase Agreement dated July 16, 2023 between the Company and Mirum. The assets sold consisted of substantially all of the assets primarily related to the Company’s business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of the products, Chenodal and Cholbam (also known as Kolbam). In connection with the Closing, the Company received an upfront cash payment of $210.0 million.
Pursuant to the Purchase Agreement, after the Closing, the Company is eligible to receive up to $235.0 million upon the achievement of certain milestones based on specified amounts of annual net sales (tiered from $125.0 million to $500.0 million) of the Products. The Company will recognize the contingent consideration receivable in earnings when the target annual sales for the milestones are met and the contingency is resolved.
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The Company's sale of the bile acid business resulted in a gain, net of tax, of $226.0 million, which was recognized in 2023. The net gain consists of net consideration, including the upfront payment and the deduction of investment banker fees owed upon Closing, plus the derecognition of the carrying value of the net liabilities included in the transaction and the immaterial tax due on the sale.
The Company and Mirum have also entered into a transition services agreement ("TSA") pursuant to which the Company has agreed to perform certain services for a period of time following the Closing, with respect to Mirum’s use and operation of the assets purchased in the Purchase Agreement. The TSA is designed to ensure and facilitate an orderly transfer of business operations, and the consideration to be received by the Company primarily consists of cost reimbursement. For the three months ended March 31, 2024, the Company recognized $0.4 million under the TSA, included in continuing operations within other income (expense), net. The balance is included in accounts receivable of the Consolidated Balance Sheets. As part of the TSA, the Company is collecting certain receivables related to purchased assets for a period of time and remitting them to Mirum. The transition services accrual as of March 31, 2024 was $0.6 million, and is included in accrued expenses in the accompanying Consolidated Balance Sheets. TSA services provided by the Company are anticipated to be substantially complete 12 months post-close.
The Company determined that the divestiture represents a strategic shift that will have a major effect on the Company's operations and financial results, and has therefore reflected the bile acid business as a discontinued operation for all periods presented.
Results of discontinued operations are as follows (in thousands):
 Three Months Ended March 31,
 20242023
Net product sales$(63)$26,105 
Total revenue(63)26,105 
Operating expenses:
Cost of goods sold(10)980 
Research and development31 1,751 
Selling, general and administrative19 6,295 
Change in fair value of contingent consideration 6,756 
Total operating expenses40 15,782 
Operating income(103)10,323 
Other income (expenses), net:
Interest expense (90)
Gain on disposal of discontinued operations, net of tax  
Total other income (expense), net (90)
Net income from discontinued operations$(103)$10,233 
The Company held no assets or liabilities of discontinued operations as of March 31, 2024 and December 31, 2023.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (SEC) on February 20, 2024. Past operating results are not necessarily indicative of results that may occur in future periods. In addition, see the discussion under the heading “Forward-Looking Statements” immediately preceding the consolidated financial statements included under Part I of this Quarterly Report on Form 10-Q.
Overview
We are a biopharmaceutical company headquartered in San Diego, California, focused on identifying, developing and delivering life-changing therapies to people living with rare kidney and metabolic diseases. Our approach centers on advancing our innovative pipeline with multiple late-stage clinical programs targeting rare diseases with significant unmet medical needs. Upon approval of any of our late-stage programs, we intend to leverage the skills of our talented commercial organization which has successfully identified, supported and treated patients prescribed our approved products over the last ten years.
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Our Pipeline and Approved Products
We have a diversified pipeline designed to address areas of high unmet need in rare kidney and metabolic diseases. We invest revenues from our commercial portfolio into our pipeline with the goal of delivering new treatments for diseases with limited or no approved therapies.
The following table summarizes the status of our clinical programs, preclinical programs and approved products, each of which is described in further detail below.
4Q23 pipeline graphic.jpg
1
On February 17, 2023, the FDA granted accelerated approval of FILSPARI® (sparsentan) to reduce proteinuria in adults with primary IgAN at risk of rapid disease progression, generally a urine protein-to-creatinine ratio (UPCR) ≥1.5 gram/gram. In September 2023, we announced topline two-year confirmatory secondary endpoint results from the pivotal Phase 3 PROTECT Study and in March 2024, we submitted a supplemental New Drug Application (sNDA) for conversion of the existing U.S. accelerated approval of FILSPARI to full approval, as described below. In May 2024, the FDA accepted the sNDA and granted Priority Review with a PDUFA target action date of September 5, 2024.
2On May 1, 2023, we announced topline primary efficacy results from the pivotal Phase 3 DUPLEX Study, as described below.

FILSPARI® (sparsentan)
On February 17, 2023, the FDA granted accelerated approval of FILSPARI® (sparsentan) to reduce proteinuria in adults with primary IgAN at risk of rapid disease progression, generally a UPCR ≥1.5 gram/gram. FILSPARI became commercially available in the U.S. beginning the week of February 27, 2023, and we are providing a comprehensive patient support program throughout the patient’s treatment journey.
This indication was granted under accelerated approval based on reduction in proteinuria. The continued approval of FILSPARI may be contingent upon confirmation of a clinical benefit in the Phase 3 PROTECT Study. As described in more detail below, in September 2023, we announced topline two-year confirmatory secondary endpoint results from the PROTECT Study, and in December 2023, we announced the completion of a successful pre-NDA meeting with the FDA for FILSPARI in IgAN. In March 2024, we submitted a supplemental New Drug Application (sNDA) for conversion of the existing U.S. accelerated approval of FILSPARI to full approval. In May 2024, we announced that the FDA has accepted and granted Priority Review of the sNDA to convert FILSPARI from accelerated approval to full approval for the treatment of IgAN in the U.S. The FDA assigned a PDUFA target action date of September 5, 2024.
FILSPARI, a once-daily, oral medication is designed to selectively target two critical pathways in the disease progression of IgAN (endothelin 1 and angiotensin-II) and is the first and only non-immunosuppressive therapy approved for the treatment of this condition.
FILSPARI is a dual endothelin angiotensin receptor antagonist (DEARA). Pre-clinical data have shown that blockade of both endothelin type A and angiotensin II type 1 pathways in forms of rare chronic kidney disease, reduces proteinuria, protects podocytes and prevents glomerulosclerosis and mesangial cell proliferation. Sparsentan has been granted Orphan Drug Designation for the treatment of IgAN in the U.S. and the European Economic Area countries (the “EEA”) and FILSPARI has been granted seven years of Orphan Drug Exclusivity in the U.S. for the reduction of proteinuria in adults with primary IgAN at risk of rapid disease progression.
IgAN is characterized by hematuria, proteinuria, and variable rates of progressive renal failure. With an estimated prevalence of up to 150,000 people in the United States and greater numbers in Europe and Asia, IgAN is the most common primary glomerular disease. Most patients are diagnosed between the ages of 16 and 35, with up to 40% progressing to kidney failure within 15 years. FILSPARI is the first and only non-immunosuppressive therapy approved for this condition. We estimate approximately 30,000 to 50,000 patients in the United States to be addressable under FILSPARI's accelerated approval indication statement, with the potential to grow with full approval.
Data to support the accelerated approval of FILSPARI was generated from the Phase 3 PROTECT Study, the largest head-to-head interventional study to date in IgAN. It is a global, randomized, multicenter, double-blind, parallel-arm, active-controlled clinical trial that evaluated the safety and efficacy of 400mg
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of sparsentan, compared to 300mg of irbesartan, in 404 patients ages 18 years and up with IgAN and persistent proteinuria despite available ACE or ARB therapy, and is currently ongoing in the open label extension phase of the study.
The PROTECT Study protocol provided for an unblinded analysis of at least 280 patients to be performed after 36 weeks of treatment to evaluate the primary efficacy endpoint - the change in proteinuria (UPCR) at week 36 from baseline. Secondary efficacy endpoints include the rate of change in estimated glomerular filtration rate (eGFR) following the initiation of randomized treatment over 58-week and 110-week periods, as well as the rate of change in eGFR over 52-week and 104-week periods following the first six weeks of randomized treatment in approximately 380 patients. In August 2021, we announced positive topline interim results from the ongoing Phase 3 PROTECT Study. The PROTECT Study met its pre-specified interim primary efficacy endpoint with statistical significance. After 36 weeks of treatment, patients receiving FILSPARI achieved a mean reduction in proteinuria from baseline of 49.8 percent, compared to a mean reduction in proteinuria from baseline of 15.1 percent for irbesartan-treated patients (p<0.0001). Results from the interim assessment in the PROTECT Study showed that FILSPARI was well tolerated with a clearly defined safety profile that has been consistent across all clinical trials conducted to date. In PROTECT, at the interim assessment, the most common adverse reactions (≥ 5%) were peripheral edema, hypotension (including orthostatic hypotension), dizziness, hyperkalemia, and anemia. FILSPARI is available only through a risk evaluation and mitigation strategy (REMS) approved by the FDA.
Per request from the FDA, the efficacy data contained in the FDA-approved label under accelerated approval is a post-hoc sensitivity analysis that evaluates the first 281 randomized patients, a subset of the full trial population. The mean reduction in proteinuria from baseline in the post-hoc sensitivity analysis is 45% for FILSPARI versus 15% for the active control, irbesartan. Both the pre-specified and post-hoc sensitivity analyses have demonstrated that FILSPARI achieves a rapid and sustained reduction in proteinuria, with statistically significant and clinically meaningful improvement compared to the active comparator irbesartan.
In September 2023, we announced topline two-year confirmatory secondary endpoint results from the PROTECT Study; eGFR total and chronic slope are the secondary confirmatory endpoints for the U.S. and the EU, respectively. FILSPARI demonstrated long-term kidney function preservation and achieved a clinically meaningful difference in eGFR total and chronic slope versus irbesartan, narrowly missing statistical significance in eGFR total slope while achieving statistical significance in eGFR chronic slope for purposes of regulatory review in the EU. All topline efficacy endpoints favored FILSPARI as compared to irbesartan. A preliminary review of the safety results through 110 weeks of treatment indicates FILSPARI was generally well-tolerated and the overall safety profile in the study has been consistent between treatment groups. In December 2023, we announced the completion of a successful pre-NDA meeting with the FDA for FILSPARI in IgAN. In March 2024, we submitted a supplemental New Drug Application (sNDA) for conversion of the existing U.S. accelerated approval of FILSPARI to full approval. In May 2024, we announced that the FDA has accepted and granted Priority Review of the sNDA to convert FILSPARI from accelerated approval to full approval for the treatment of IgAN in the U.S. The FDA assigned a PDUFA target action date of September 5, 2024.
In April 2024, we and our partner CSL Vifor announced that the European Commission has granted conditional marketing authorization (“CMA”) for FILSPARI (sparsentan) for the treatment of adults with primary IgAN with a urine protein excretion ≥1.0 g/day (or urine protein-to-creatinine ratio ≥0.75 g/g). The CMA is granted for all member states of the European Union, as well as in Iceland, Liechtenstein and Norway. The European Commission's decision follows the positive opinion from the Committee for Medicinal Products for Human Use (“CHMP”) in February 2024, based on results from the pivotal Phase 3 PROTECT Study of FILSPARI in IgAN. Under the terms of our license agreement with CSL Vifor, we will be entitled to receive a regulatory milestone payment of $17.5 million upon receipt of full regulatory approval by the European Commission for IgAN, and we anticipate receiving an additional milestone payment upon achievement of market access initiatives in certain countries. We also expect to make a milestone payment of $5.8 million to Ligand Pharmaceuticals in the second quarter of 2024. CSL Vifor expects to submit an application for full approval in mid-2024. The first launch of FILSPARI in Europe is expected in the second half of 2024.
In January 2024, we announced our entry into an exclusive licensing agreement with Renalys Pharma, Inc. ("Renalys"), to bring sparsentan to patients in Japan and other countries in Asia, for the treatment of IgAN. Renalys will hold regional rights to sparsentan for Japan, South Korea, Taiwan, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Following successful meetings with the Pharmaceuticals and Medical Devices Agency (PMDA) in 2023, Renalys plans to initiate an open label registrational study of sparsentan in Japan in the second quarter of 2024 to support potential approval of sparsentan in Japan. Results from the urine protein/creatinine ratio (UP/C) endpoint in the study are expected in the second half of 2025 to support a submission for approval to PMDA. Under the terms of the licensing agreement, Renalys will be responsible for development, regulatory matters, and commercialization in the licensed territories.
Clinical-Stage Programs:
Sparsentan for the treatment of FSGS
Sparsentan has been granted Orphan Drug Designation for the treatment of FSGS in the U.S. and the EEA.
FSGS is a leading cause of kidney failure and nephrotic syndrome. There are currently no FDA-approved pharmacologic treatments for FSGS and there remains a high unmet need for patients living with FSGS as off-label treatments such as ACE/ARBs, steroids, and immunosuppressant agents are effective in only a subset of patients and use of some of these off-label treatments may be further inhibited by their safety profiles. Every year approximately 5,400 patients are diagnosed with FSGS and we estimate that there are more than 40,000 FSGS patients in the United States and a similar number in Europe with approximately half of them being candidates for sparsentan.
In 2016, we generated positive data from our Phase 2 DUET study in FSGS. In 2018, we announced the initiation of the Phase 3 clinical trial designed to serve as the basis for an NDA and MAA filing for sparsentan for the treatment of FSGS (the "DUPLEX Study"). The DUPLEX Study is a global, randomized, multicenter, double-blind, parallel-arm, active-controlled clinical trial evaluating the safety and efficacy of sparsentan in 371 patients. The DUPLEX Study protocol provided for an unblinded analysis of at least 190 patients to be performed after 36 weeks of treatment to evaluate the interim efficacy endpoint - the proportion of patients achieving a FSGS partial remission of proteinuria endpoint (FPRE), which is defined as urine protein-to-creatinine ratio (UPCR) ≤1.5 g/g and a >40% reduction in UPCR from baseline, at week 36. In February 2021, we announced that the ongoing Phase 3 DUPLEX Study achieved its pre-specified interim FSGS partial remission of proteinuria endpoint following the 36-week interim period. After 36 weeks of treatment, 42.0 percent of patients receiving sparsentan achieved FPRE, compared to 26.0 percent of irbesartan-treated patients (p=0.0094). Following engagement with the FDA on the interim
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proteinuria analysis and a subsequent eGFR data-cut, we elected to forego the previously planned submission for accelerated approval and pursue a potential traditional approval upon completion of the DUPLEX Study.
In May 2023, we announced topline primary efficacy results from the pivotal Phase 3 DUPLEX Study of sparsentan in FSGS. The confirmatory primary endpoint of the DUPLEX Study designed to support traditional regulatory approval was the rate of change in eGFR over 108 weeks of treatment. At the end of the 108-week double-blind period, sparsentan was observed to have a 0.3 mL/min/1.73m2 per year (95% CI: -1.74, 2.41) favorable difference on eGFR total slope and a 0.9 mL/min/1.73m2 per year (95% CI: -1.27, 3.04) favorable difference on eGFR chronic slope compared to the active control irbesartan, which was not statistically significant. After 108 weeks of treatment, sparsentan achieved a mean reduction in proteinuria from baseline of 50%, compared to 32% for irbesartan. Although the DUPLEX Study did not achieve its two-year primary endpoint with statistical significance over the active control irbesartan, we are encouraged by the results, including the secondary endpoints on proteinuria and exploratory endpoints, including renal outcomes, which trended favorably for sparsentan. In addition, a review of the safety results through 108 weeks of treatment indicate sparsentan was generally well-tolerated and the overall safety profile in the study to date was generally consistent between treatment groups.
In December 2023, we announced that we completed our planned Type C meeting with the FDA to discuss previously reported results from the Phase 3 DUPLEX Study of sparsentan in FSGS. The FDA acknowledged the high unmet need for approved therapies as well as the challenges in studying FSGS but indicated that the two-year results from the Phase 3 DUPLEX Study alone are not sufficient to support an sNDA submission. The FDA acknowledged the work being done by the larger nephrology community to better understand proteinuria and eGFR as endpoints in clinical trials of FSGS and indicated a willingness to continue to engage with us on a potential path forward for sparsentan in FSGS following our consideration of additional evidence. Together with CSL Vifor, we also plan to engage with the EMA to determine the potential for a subsequent variation to the Conditional Marketing Authorization (CMA) of sparsentan for the treatment of FSGS, if the MAA of sparsentan in IgA nephropathy is approved. Given the high unmet need of FSGS patients, with no medicines currently approved for the condition, and the challenges associated with studying FSGS due to its heterogeneity and other attributes, we are conducting additional analyses of FSGS data and intend to engage with regulators to evaluate potential regulatory pathways for a sparsentan FSGS indication.
If sparsentan receives marketing authorization in any of the licensed territories covered by the exclusive license to CSL Vifor, CSL Vifor will be responsible for all commercialization activities in such licensed territories. If sparsentan receives marketing authorization in any of the territories covered by the exclusive license to Renalys, Renalys will be responsible for all development, regulatory matters, and commercialization activities in such licensed territories. We remain responsible for the clinical development of sparsentan in the applicable territories and we will retain all rights to sparsentan in the United States and rest of world outside of the territories licensed to CSL Vifor and Renalys, provided that CSL Vifor has a right of negotiation to expand the licensed territories into Canada, China, Brazil and/or Mexico.
Pegtibatinase
Pegtibatinase is a novel investigational human enzyme replacement candidate being evaluated for the treatment of classical homocystinuria (HCU). Classical HCU is a rare metabolic disorder characterized by elevated levels of plasma homocysteine that can lead to vision, skeletal, circulatory and central nervous system complications. It is estimated that there are approximately 7,000 to 10,000 people living with HCU globally. Pegtibatinase has been granted Rare Pediatric Disease, Fast Track and Breakthrough Therapy designations by the FDA, as well as orphan drug designation in the United States and European Union.
In December 2021, we announced positive topline results from the Phase 1/2 COMPOSE Study, a double blind, randomized, placebo-controlled dose escalation study to assess its safety, tolerability, pharmacokinetics, pharmacodynamics and clinical effects in patients with classical HCU. Pegtibatinase demonstrated dose-dependent reductions in total homocysteine (tHcy) during the 12 weeks of treatment, and in the highest dose cohort to date evaluating 1.5mg/kg of pegtibatinase twice weekly (BIW), treatment with pegtibatinase resulted in rapid and sustained reductions in total homocysteine (tHcy) through 12 weeks of treatment, including a 55.1% mean relative reduction in tHcy from baseline as well as maintenance of tHcy below a clinically meaningful threshold of 100 μmol. Additionally, in a dose-dependent manner in the study to date, methionine levels were substantially reduced and cystathionine levels were substantially elevated following treatment with pegtibatinase, suggesting that pegtibatinase acts in a manner similar to the native CBS enzyme.
In May 2023, we announced positive topline results from the sixth cohort of the Phase 1/2 COMPOSE Study, which was initiated to inform and refine formulation work for future development and commercial purposes and to further evaluate the dose response curve for pegtibatinase, and to further inform our pivotal development program to ultimately support potential approval of pegtibatinase for the treatment of HCU. In this cohort, five patients were randomized in a blinded fashion to receive 2.5mg/kg of lyophilized pegtibatinase or placebo twice weekly (BIW), with four patients assigned to the treatment group. In this highest dose cohort to date, treatment with pegtibatinase resulted in rapid and sustained reductions in total homocysteine (tHcy), with a 67.1% mean relative reduction in tHcy from baseline, as well as maintenance of mean tHcy below the clinically meaningful threshold of 100 μmol, over weeks 6 to 12. In the double-blind period, pegtibatinase was generally well-tolerated, with no discontinuations due to treatment-related adverse events.
In December 2023, we initiated the pivotal Phase 3 HARMONY Study to support the potential approval of pegtibatinase for the treatment of classical HCU. The HARMONY Study is a global, randomized, multi-center, double-blind, placebo-controlled Phase 3 clinical trial designed to evaluate the efficacy and safety of pegtibatinase as a novel treatment to reduce total homocysteine (tHcy) levels. In the beginning of 2024, the first patients were dosed in the HARMONY Study. Topline results from the HARMONY Study are expected in 2026.
We acquired pegtibatinase as part of the November 2020 acquisition of Orphan Technologies Limited.
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Preclinical Programs:
We are a participant in a Cooperative Research and Development Agreement (CRADA), which forms a multi-stakeholder approach to pool resources with leading experts, and incorporate the patient perspective early in the therapeutic identification and development process. We are partnering with the National Institutes of Health’s National Center for Advancing Translational Sciences (NCATS) and a leading patient advocacy organization, Alagille Syndrome Alliance, aimed at the identification of potential small molecule therapeutics for Alagille syndrome (ALGS). There are no treatment options currently approved for ALGS.
We are party to a collaboration agreement with PharmaKrysto Limited and their early-stage cystinuria discovery program, whereby we are responsible for funding all research and development expenses for the pre-clinical activities associated with the cystinuria program.
Other Commercial Products:
Thiola and Thiola EC (tiopronin)
Thiola and Thiola EC are approved by the FDA for the treatment of cystinuria, a rare genetic cystine transport disorder that causes high cystine levels in the urine and the formation of recurring kidney stones. Due to the larger stone size, cystine stones may be more difficult to pass, often requiring surgical procedures to remove. More than 80 percent of people with cystinuria develop their first stone by the age of 20. More than 25 percent will develop cystine stones by the age of 10. Recurring stone formation can cause loss of kidney function in addition to substantial pain and loss of productivity associated with renal colic and stone passage. While a portion of people living with the disease are able to manage symptoms through diet and fluid intake, the prevalence of cystinuria in the US is estimated to be 10,000 to 12,000, indicating that there may be as many as 4,000 to 5,000 affected individuals with cystinuria in the US that would be candidates for Thiola or Thiola EC.
In June 2019 we announced that the FDA approved 100mg and 300mg tablets of Thiola EC, an enteric-coated formulation of Thiola, to be used for the treatment of cystinuria. Thiola EC offers the potential for administration with or without food, and the ability to reduce the number of tablets necessary to manage cystinuria. Thiola EC became available to patients in July 2019.
In May 2021, a generic option for the 100mg version of the original formulation of Thiola (tiopronin tablets) became available and in June 2022, a second option for the 100mg version of the original formulation of Thiola (tiopronin tablets) was approved. These generic versions of the original formulation of Thiola have impacted our sales, and these or additional generic versions of either formulation could have a material adverse impact on sales. During 2023, two generic versions of Thiola EC (100mg and 300mg) were approved by the FDA. Following receipt of paragraph IV certification notices from these manufacturers, we and our licensor Mission Pharmacal entered into agreements with these manufacturers in order to settle disputes around patent validity and infringement, providing for a license entry date of April 1, 2026 of these generic versions of Thiola EC (100mg and 300mg), or earlier under certain circumstances. On January 30, 2024, the FDA approved an additional generic version of Thiola EC (100mg and 300mg). Accordingly, Thiola EC is subject to immediate generic competition, which could impact our sales of Thiola EC.
Sale of Bile Acid Product Portfolio
On July 16, 2023, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Mirum Pharmaceuticals, Inc. ("Mirum Pharmaceuticals" or “Mirum”), pursuant to which Mirum agreed to purchase substantially all of the assets primarily related to our business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of Chenodal and Cholbam (also known as Kolbam, and together with Chenodal, the “Products”), collectively, the "bile acid business". On August 31, 2023, we consummated the transactions contemplated by the Purchase Agreement (the "Closing"). In connection with the Closing, we received an upfront cash payment of $210.0 million. Pursuant to the Purchase Agreement, after the Closing, we are eligible to receive up to $235.0 million upon the achievement of certain milestones based on specified amounts of annual net sales (tiered from $125.0 million to $500.0 million) of the Products.
A $226.0 million gain, net of tax, was recognized on the transaction as a component of net income from discontinued operations in the Consolidated Statements of Operations. The bile acid business has been classified as a discontinued operation for all periods presented and is excluded from the following discussion of the results of our continuing operations in the results of operations. Refer to Note 18 of our Consolidation Financial Statements for additional information.
Strategic Reorganization
In December 2023, we implemented an approximate 20% workforce reduction focused on non-field-based employees in an effort to align our resources on the ongoing FILSPARI launch and the pivotal Phase 3 HARMONY Study to support the potential approval of pegtibatinase as the first potential disease-modifying treatment for HCU. These restructuring adjustments are expected to result in an estimated annualized savings of approximately $25.0 million beginning in 2024, and an estimated non-recurring charge of approximately $12.0 million to $14.0 million in connection with the restructuring, of which we have recognized a total of $11.7 million as of March 31, 2024, including $0.3 million for the three months ended March 31, 2024. We expect that we will incur the remaining estimated restructuring costs during 2024.
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Results of Operations
Results of operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023
Unless noted otherwise, the discussion below, and the revenue and expense amounts discussed below, are based on and relate to our continuing operations.
Revenue
The following table provides information regarding net product sales (in thousands):
 Three Months Ended March 31,
 20242023Change
Tiopronin products$20,150 $21,174 $(1,024)
FILSPARI19,834 3,004 16,830 
Total net product revenues39,984 24,178 15,806 
License and collaboration revenue1,390 6,710 (5,320)
Total revenue$41,374 $30,888 $10,486 
Net product sales
The increase in total net product revenues for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to a full quarter of FILSPARI sales in 2024, which launched in February 2023.
License and collaboration revenue
The decrease in license and collaboration revenue for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to the $3.3 million sale of active pharmaceutical ingredient to CSL Vifor in March 2023, at cost plus a margin, and a $2.0 million decrease in collaboration revenue associated with the CSL Vifor License Agreement, which is derived from the performance of clinical development activities and based upon the ratio of costs incurred to total estimated costs. We estimate that the remainder of the deferred revenue balance associated with these clinical development activities will be fully realized by mid-2025.
Operating Expenses
The following table provides information regarding operating expenses (in thousands):
 Three Months Ended March 31,
 20242023Change
Cost of goods sold - product sales$1,504 $1,108 $396 
Cost of goods sold - license and collaboration— 3,037 (3,037)
Total cost of goods sold1,504 4,145 (2,641)
Research and development49,420 58,162 (8,742)
Selling, general and administrative64,223 65,950 (1,727)
In-process research and development65,205 — 65,205 
Restructuring259 — 259 
Total operating expenses$180,611