Esperion Therapeutics, Inc.
Esperion Therapeutics, Inc. (Form: 10-K, Received: 02/25/2016 16:42:56)

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TABLE OF CONTENTS
PART IV
Esperion Therapeutics, Inc. Index to the Financial Statements

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)    

ý

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

Or

o

 

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: 001-35986

Esperion Therapeutics, Inc.
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  26-1870780
(I.R.S. Employer Identification No.)

3891 Ranchero Drive, Suite 150
Ann Arbor, Michigan 48108

(Address of Principal Executive Offices)

 

48108
(Zip Code)

(734) 887-3903
(Registrant's Telephone Number, Including Area Code)

          Securities registered pursuant to Section 12(b) of the Act:

Title of each class   Name of each exchange on which registered
Common Stock, $0.001 par value   NASDAQ Stock Market LLC

          Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o     No  ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  o     No  ý

          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  ý     No  o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes  ý     No  o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  o     No  ý

          The aggregate market value of the voting stock held by non-affiliates of the registrant on June 30, 2015, based upon the closing price of $81.76 of the registrant's common stock as reported on the NASDAQ Global Market, was $1.60 billion. Shares of the registrant's common stock held by each officer and director and each person known to the registrant to own 10% or more of the outstanding voting power of the registrant have been excluded in that such persons may be deemed affiliates. This determination of affiliate status is not a determination for other purposes.

          As of February 1, 2016, there were 22,540,466 shares of the registrant's common stock, $0.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

          Part III of this Annual Report on Form 10-K incorporates by reference information from the definitive Proxy Statement for the registrant's 2016 Annual Meeting of Shareholders, which is expected to be filed with the Securities and Exchange Commission not later than 120 days after the Registrant's fiscal year ended December 31, 2015.

   


Table of Contents


TABLE OF CONTENTS

 
   
  Page

PART I

Item 1.

 

Business

  4

Item 1A.

 

Risk Factors

  29

Item 1B.

 

Unresolved Staff Comments

  58

Item 2.

 

Properties

  58

Item 3.

 

Legal Proceedings

  58

Item 4.

 

Mine Safety Disclosures

  59

PART II

Item 5.

 

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  60

Item 6.

 

Selected Financial Data

  63

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

  64

Item 7A.

 

Quantitative and Qualitative Disclosures about Market Risk

  75

Item 8.

 

Financial Statements and Supplementary Data

  75

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

  75

Item 9A.

 

Controls and Procedures

  76

Item 9B.

 

Other Information

  79

PART III

Item 10.

 

Directors, Executive Officers and Corporate Governance

  80

Item 11.

 

Executive Compensation

  80

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

  80

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

  80

Item 14.

 

Principal Accounting Fees and Services

  80

PART IV

Item 15.

 

Exhibits and Financial Statement Schedules

  81

Signatures

  82

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Forward-Looking Statements

        This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

        The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

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        These forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, so you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in Item 1.A. Risk Factors, that could cause actual future results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

        You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to the Annual Report on Form 10-K with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

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PART I

         All brand names or trademarks appearing in this report are the property of their respective holders. Unless the context requires otherwise, references in this report to "Esperion" the "Company," "we," "us," and "our" refer to Esperion Therapeutics, Inc.

Item 1.    Business

Overview

        We are a pharmaceutical company focused on developing and commercializing first-in-class, oral, low-density lipoprotein cholesterol, or LDL-C, lowering therapies for the treatment of patients with elevated LDL-C. ETC-1002, or bempedoic acid, our lead product candidate, is an inhibitor of ATP Citrate Lyase, or ACL, a well-characterized enzyme on the cholesterol biosynthesis pathway. Bempedoic acid inhibits cholesterol synthesis in the liver, decreases intracellular cholesterol and up-regulates LDL-receptors, resulting in increased LDL-C clearance and reduced plasma levels of LDL-C. We held an End-of-Phase 2 meeting with the Food and Drug Administration, or the FDA, in August 2015. We initiated a global Phase 3 long-term safety and tolerability study of bempedoic acid in January 2016, in patients with hyperlipidemia whose LDL-C is not adequately controlled with low- and moderate-dose statins. We own the exclusive worldwide rights to bempedoic acid.

        Statins are the current standard of care for LDL-C lowering for approximately 35 million patients in the United States. However, it is estimated that approximately 10% of these patients are intolerant of statin therapy due to muscle pain or weakness associated with their use. We believe that bempedoic acid, if approved, has the potential to become the preferred once-daily, oral therapy for patients who are unable to tolerate statin therapy. Bempedoic acid is not pharmacologically active in muscle tissue and, thus, has reduced potential for muscle-related side effects. Additionally, because symptoms of muscle pain or weakness occur in up to 20% of patients on statin therapy in clinical practice, we believe that the size of the statin intolerant market is poised to expand as effective and better tolerated non-statin therapies, such as bempedoic acid, become available.

        We were founded in January 2008, by former executives of and investors in the original Esperion Therapeutics, Inc., a biopharmaceutical company which was primarily focused on the research and development of therapies to regulate high-density lipoprotein cholesterol, or HDL-C. After successfully completing a Phase 2a clinical study with its synthetic HDL-C therapy ETC-216, the original Esperion was acquired by Pfizer Inc. in 2004. Bempedoic acid was first discovered at the original Esperion and we subsequently acquired the rights to the product from Pfizer in 2008.

Bempedoic Acid

        Bempedoic acid, our lead product candidate, is an inhibitor of ACL, a well-characterized enzyme on the cholesterol biosynthesis pathway. Bempedoic acid inhibits cholesterol synthesis in the liver, decreases intracellular cholesterol and up-regulates LDL-receptors, resulting in increased LDL-C clearance and reduced plasma levels of LDL-C. Bempedoic acid is being developed for patients with elevated LDL-C.

        Bempedoic acid is differentiated from statins because it acts at an earlier step in the cholesterol biosynthetic pathway. Bempedoic acid is converted to the CoA form in the liver, a required biochemical step for the inhibition of ACL, an enzyme upstream of HMG-CoA reductase, whereas statins directly inhibit the rate-limiting enzyme HMG-CoA reductase. Reductions in LDL-C levels resulting from statin therapy are primarily due to reduced cholesterol synthesis and an increase in the number of LDL-receptors in the liver. It is believed that the muscle-related side effects experienced by some patients taking statins could result from inhibition of cholesterol synthesis in skeletal muscle tissue. The CoA form of bempedoic acid also achieves reduction in LDL-C levels by the inhibition of cholesterol

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synthesis and an increase in the number of LDL-receptors in the liver, but it is not formed in skeletal muscle tissue. As a result, we believe bempedoic acid has reduced potential to cause muscle-related side effects. Bempedoic acid has been shown to provide incremental lowering of LDL-C when used in combination with both ezetimibe and statins. We plan to file an Investigational New Drug Application for the fixed-dose combination of bempedoic acid and ezetimibe for statin intolerant patients in the fourth quarter of 2016.

Cardiovascular Disease and Elevated LDL-C

        Cardiovascular disease, which results in heart attacks, strokes and other cardiovascular events, represents the number one cause of death and disability in western societies. The American Heart Association, or AHA, estimates that approximately 800,000 deaths in the United States were caused by cardiovascular disease in 2013.

        Elevated LDL-C is well-accepted as a significant risk factor for cardiovascular disease and the CDC estimates that 78 million U.S. adults have elevated levels of LDL-C. A consequence of elevated LDL-C is atherosclerosis, which is a disease that is characterized by the deposition of excess cholesterol and other lipids in the walls of arteries as plaque. The development of atherosclerotic plaques often leads to cardiovascular disease. The risk relationship between elevated LDL-C and cardiovascular disease was first defined by the Framingham Heart Study, which commenced in 1948 to define the factors that contributed to the development of cardiovascular disease. The study enrolled participants who did not have any form of cardiovascular disease and followed them over a long period of time. Elevated LDL-C was identified early on as key risk factor for the eventual development of cardiovascular disease.

        The hypothesis that lowering elevated levels of LDL-C would translate into reduced risk of cardiovascular disease was first proven in 1984 with the publication of the Lipid Research Clinics Coronary Primary Prevention Trial. In this study, treatment with cholestyramine, a bile acid sequestrant, showed a 20% reduction in LDL-C and, importantly, a 19% reduction in risk of cardiovascular disease death or nonfatal myocardial infarction, or heart attack. This was the first major clinical study to demonstrate a direct relationship between lowering LDL-C levels and reduced risk of major cardiovascular events.

        The first marketed statin, lovastatin, was approved for use in the United States in 1987 as a therapy to lower elevated LDL-C levels. That same year, the National Cholesterol Education Program issued its first guidelines for the diagnosis and treatment of patients with elevated LDL-C. Over the subsequent 22 years, seven more statins were approved for use to lower elevated LDL-C levels.

        In 1994 the first clinical outcomes study with a statin was published. This study demonstrated a significant reduction in risk for total mortality and major cardiovascular events. A series of additional clinical outcomes studies with statins have each shown that lowering elevated LDL-C translated into reduced risk for major cardiovascular events. The relationship between the extent of LDL-C lowering and reduction in cardiovascular risk appeared to be linear, which has supported a hypothesis that lower LDL-C is better for cardiovascular risk. This hypothesis was tested and proven in the TNT (Treating to New Targets) study where an on-treatment LDL-C level of 77 mg/dL associated with 80 mg of atorvastatin treatment translated into a statistically significant 22% reduction in risk of major cardiovascular events as compared with the 101 mg/dL on-treatment LDL-C level associated with 10 mg of atorvastatin.

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Major completed clinical outcomes studies with statin therapies

Study name
  4S   WOSCOPS   AFCAPS/TexCAPS   TNT   JUPITER

Study drug

 

Simvastatin

 

Pravastatin

 

Lovastatin

 

Atorvastatin

 

Rosuvastatin

No. of patients

 

4,444

 

6,595

 

6,605

 

10,001

 

17,803

Study design

 

Placebo controlled,
monotherapy

 

Placebo controlled,
monotherapy

 

Placebo controlled,
monotherapy

 

Low dose vs high
dose atorvastatin

 

Placebo controlled,
monotherapy

Patient population

 

Secondary prevention

 

Primary Prevention

 

Primary Prevention

 

Secondary Prevention

 

Primary Prevention

Baseline LDL-C (mg/dL)

 

188

 

192

 

156

 

98

 

108

LDL-C reduction

 

35%

 

26%

 

26%

 

21%

 

50%

CV RRR

 

35%

 

31%

 

37%

 

22%

 

44%

        Most recently, in November 2014, the results of the IMPROVE-IT (IMProved Reduction of Outcomes: Vytorin Efficacy International Trial) study was presented at the Scientific Sessions of the AHA. 18,144 patients with acute coronary syndrome were enrolled in IMPROVE-IT and were randomized to receive either 40 mg of simvastatin or 10 mg of ezetimibe/40 mg of simvastatin, and were followed until > 5,250 events (cardiovascular death, heart attack, documented unstable angina requiring hospitalization, coronary revascularization or stroke) occurred. The addition of ezetimibe to simvastatin resulted in a 6.4% relative risk reduction (p=0.016) in the aggregate of the events described above. This was the first study to demonstrate incremental clinical benefit with a non-statin added to a statin.

        The direct relationship between lower LDL-C levels and reduced risk for major cardiovascular events has been consistently demonstrated in 18 clinical studies completed over the last 28 years involving more than 90,000 patients. As a result, physicians are highly focused on lowering LDL-C levels in their patients, and we believe there is a trend towards even more aggressive LDL-C lowering. For example, in the United States, increased attention has been placed on aggressive LDL-C management by organizations such as the National Cholesterol Education Program, or NCEP, the AHA and the American College of Cardiology, or ACC. Additionally, both the Canadian Cardiovascular Society and the Joint British Societies have supported even lower LDL-C treatment targets for high-risk patients. This has led to the combination of statins with other treatments, such as Zetia.

        In July 2004, the NCEP issued an update to its Adult Treatment Panel III clinical practice guidelines on cholesterol management, advising physicians to consider new, more intensive treatment options for people at very high risk, high risk and moderately high risk for cardiovascular disease. The LDL-C goals in these updated clinical practice guidelines, which are presented below, contemplate initiating drug therapy at lower LDL-C thresholds, thus expanding the number of potential patients for LDL-C lowering therapy.


NCEP ATP III Clinical Practice Guidelines

Patient Cardiovascular Disease Risk
  LDL-C Goal

Very High Risk

  < 70 mg/dL

Cardiovascular Disease and Cardiovascular Disease Risk Equivalent

  < 100 mg/dL

Multiple (2+) Risk Factors

  < 130 mg/dL

0 - 1 Risk Factor

  < 160 mg/dL

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        In November 2013, ACC and the AHA issued new guidelines for the treatment of elevated cholesterol. For the first time in more than 20 years, the new guidelines do not include specific, numerical LDL-C treatment goals for patients with elevated LDL-C. However, the guidelines strongly recommend the use of more potent statins and intensive statin therapy in patients with elevated LDL-C. The new guidelines also significantly expanded the number of patients eligible for statin therapy, including patients with a history of cardiovascular disease including stroke, patients with both Type 1 and Type 2 diabetes, all patients with LDL-C ³ 190 mg/dL and patients with a 10-year risk of > 7.5% of developing cardiovascular disease. Also for the first time, the guidelines acknowledge the existence of statin intolerance, and incorporate statin intolerance into the consideration of treatment choices and into the evaluation of statin safety.

        Other organizations continue to utilize goals of treatment in their guidelines. The National Lipid Association guidelines established < 100 mg/dL as the LDL-C goal of treatment for patients at low, moderate and high risk. Patients considered to be at very high risk have a goal of < 70 mg/dL of LDL-C. The International Atherosclerosis Society has recommended optimal LDL-C levels of < 100 mg/dL for patients who have not had a cardiovascular event, and < 70 mg/dl for patients who have had a cardiovascular event.

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Currently Approved Therapies

        The following table illustrates common therapies used to treat elevated LDL-C:

Class of Therapy
  Labeled Indication   Average
LDL-C
Change from
Baseline
  Key Issues/Side Effects

Statins            

  Reduction in LDL-C in patients with elevated LDL-C

Reduction in total mortality

Reduction in risk of major adverse cardiovascular events (MACE) in multiple populations that were tested

  Up to 63%  

Skeletal muscle effects

FDA recently warned that the use of statins is associated with increases in HbA1c and fasting serum glucose levels

Bile acid sequestrants            

 

Reduction in LDL-C in patients with elevated LDL-C (1)

Retard the rate of progression and increase the rate of regression of coronary atherosclerosis

 

Up to 20%

 

Limited LDL-C lowering

Gastrointestinal disorders

Cholesterol absorption inhibitors            

 

Reduction in LDL-C in patients with elevated LDL-C

 

Up to 18%

 

Limited LDL-C lowering

Niacin            

 

Reduction in LDL-C;

Reduction in recurrent nonfatal myocardial infarction (MI) in patients with prior history of MI

 

Up to 17%

 

Flushing (i.e., warmth or redness) hepatic toxicity and skeletal muscle effects

Limited LDL-C lowering

Fibrates            

 

Reduction in triglycerides and LDL-C in patients with hypertriglyceridemia or mixed dyslipidemia

Reduction in risk of developing coronary heart disease (CHD) in patients with Type IIb Fredericksons hyperlipidemia and no prior history of CHD

 

Up to 21%

 

Gallstones, skeletal muscle effects and liver disorders

Limited LDL-C lowering

Proprotein convertase subtilisin kexin 9 (PCSK9) inhibitors            

 

Reduction in LDL-C as adjunct to maximally tolerated statin therapy in patients with HeFH and/or ASCVD

 

Up to 64%

 

High cost as biologic, injectable route of administration

No effect on CRP

Fixed combination therapies with statins            

 

Reduction in LDL-C in patients with elevated LDL-C

 

Up to 63%

 

Same side effects as statins


(1)
Welchol, a bile acid sequestrant, is also approved for improving glycemic control in adults with Type 2 diabetes.

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    Other Approved Therapies for Specific Populations

        A small subpopulation of patients with extremely elevated levels of LDL-C, estimated to be approximately 300 patients in the U.S., suffer from homozygous familial hypercholesterolemia, or HoFH. HoFH is a serious and rare genetic disease and patients with HoFH lack or have dysfunctional LDL-receptors and cannot remove LDL-particles and LDL-C from the blood. As a result, untreated HoFH patients typically have LDL-C levels in the range of 450 mg/dL to 1,000 mg/dL. Microsomal transfer protein, or MTP inhibitors, a PCSK9 inhibitor and an ApoB antisense oligonucleotide are approved therapies to lower elevated LDL-C levels in patients with a clinical or laboratory diagnosis of HoFH. Given the serious safety concerns with the MTP inhibitor and ApoB antisense oligonucleotide, specifically hepatotoxicity, the FDA has restricted their usage to this narrow subpopulation.

    Statin Therapy

        Statins are the cornerstone of lipid treatment today and are highly effective at lowering LDL-C. This class of drugs includes atorvastatin calcium, marketed as Lipitor®, the most prescribed LDL-C lowering drug in the world and the best-selling pharmaceutical drug in history. Approximately 25% of Americans over the age of 45 from 2005 to 2008 were treated for elevated LDL-C levels with statin therapy, according to a National Health and Nutrition Examination Survey.

        Statins are selective, competitive inhibitors of HMG-CoA reductase, a rate-limiting enzyme in the cholesterol biosynthesis pathway, and work primarily in liver cells. Statin inhibition of cholesterol synthesis increases the number of LDL-receptors on the surface of liver cells. This increase in LDL-receptors increases uptake of LDL-particles into liver cells from the blood, thus lowering LDL-C levels. Statins are also thought to have the potential to inhibit cholesterol synthesis in skeletal muscle. This inhibition could be linked to the myalgia associated with statin use as seen in patients with statin intolerance.

        The benefits of statin use in lowering LDL-C levels and improving cardiovascular outcomes are well documented. Despite the effectiveness of statins and their broad market acceptance, there is a significant subset of patients who are unable to tolerate statins due to muscle pain or weakness, memory loss or increased glucose levels, or who are otherwise unable to reach their LDL-C goal on statin therapy alone. In rare but extreme cases, statins can lead to muscle breakdown, kidney failure and death. In addition, the FDA has recently warned that statins can cause hyperglycemia, an increase in blood sugar levels and create an increased risk of worsening of glycemic control and of new onset diabetes. There are approximately 36 million U.S. adults with elevated LDL-C levels who are not on an LDL-C lowering therapy. For these reasons, we believe there is a need for unique therapies to treat patients with elevated LDL-C.

Statin Intolerance—Initial Market Opportunity for Bempedoic Acid

        We are initially pursuing the development of bempedoic acid as a therapy for patients with elevated LDL-C who are intolerant of statin therapy. Upon approval, we will focus our commercialization efforts on patients with elevated LDL-C who are intolerant of statins. There are currently no approved therapies for patients with elevated LDL-C who are intolerant of statin therapy in the United States.

        Muscle pain or weakness is the most common side effect experienced by statin users and the most common cause for discontinuing therapy. According to the USAGE survey, an approximately 10,000 patient academic study of current and former statin users published during 2012 in the Journal of Clinical Lipidology, 12% of patients on statins discontinue therapy and 62% of these patients cited side effects as the reason for discontinuation. More than 86% of patients who discontinued therapy because of side effects cited muscle pain or weakness as the reason. Based upon these data, approximately 6% of statin users, or more than 3 million adults in the United States, ceased therapy because of muscle pain or weakness and are, therefore, statin intolerant.

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        Moreover, a significant proportion of patients remain on statin therapy despite experiencing muscle-related side effects. The rate of occurrence in the clinical setting, as highlighted by the USAGE survey, is significantly higher than the up to 5% rate reported by subjects in the controlled environment of clinical studies. The USAGE survey reported that 25% of patients currently on statins have muscle-related side effects. Similarly, a study published in the Journal of General Internal Medicine in August 2008, estimated that up to 20% of statin-treated patients in clinical practice complained of muscle pain. Accordingly, we believe that in the presence of a safe and effective non-statin, oral, once-daily, small molecule LDL-C lowering therapy, the statin intolerant market could grow substantially.

Patients with Heterozygous Familial Hypercholesterolemia (HeFH) or Atherosclerotic Cardiovascular Disease (ASCVD) that need additional lowering of LDL-C—Subsequent Market Opportunity for Bempedoic Acid

        We expect bempedoic acid may also be used by patients and physicians as an add-on to maximally tolerated statin therapy for patients with HeFH or ASCVD, that require additional lowering of LDL-C. The severity of elevated LDL-C in these patients, their level of cardiovascular disease risk and their therapeutic options all vary widely.

        Patients with ASCVD and persistently elevated LDL-C despite maximally tolerated statin therapy represent a large population with important unmet medical needs. In a retrospective analysis of United States data, approximately one-third of high-risk patients treated with statin monotherapy for more than three months failed to achieve LDL-C target levels of < 100mg/dL, and more than three-quarters did not achieve the more stringent goal of < 70 mg/dL. Data from the TNT study showed that patients treated with 80 mg of atorvastatin daily demonstrated a major cardiovascular event rate of 8.7% despite having achieved mean LDL-C levels of 77 mg/dL. In this study, the higher-intensity atorvastatin 80 mg regimen lowered both LDL-C and cardiovascular events to a greater extent than the lower-intensity atorvastatin 10 mg regimen. These findings, among others, suggest that residual risk may be due to residual dyslipidemia.

        This has prompted the study of non-statin therapies as add-on treatment to statins for incremental reductions in LDL-C and cardiovascular disease risk. PCSK9 inhibitors were recently granted approval in the United States as an adjunct to maximally tolerated statin therapy for patients in these populations that require additional lowering of LDL-C.

Recently Approved Therapies

    PCSK9 Inhibitors

        A number of larger biopharmaceutical companies have developed, or are currently developing, a new class of biologic therapies that target proprotein convertase subtilisin kexin type 9, or PCSK9, an enzyme that binds LDL-receptors. These PCSK9 inhibitors are injectable, monoclonal antibodies that were evaluated as potential therapies to lower LDL-C. In 2015 the FDA approved two PCSK9 inhibitors: alirocumab, which was developed by Sanofi and Regeneron Pharmaceuticals and evolocumab, which was developed by Amgen, Inc. These therapies were approved as an adjunct to diet and maximally tolerated statin therapy for patients with HeFH or ASCVD that require additional lowering of LDL-C. Additionally, evolocumab was approved as an adjunct to diet and other LDL-C lowering therapies for patients with HoFH. Also, in 2013 Pfizer Inc. announced the initiation of Phase 3 studies of bococizumab, its PCSK9 inhibitor. As described in currently approved U.S. prescribing information, PCSK9 inhibitors have demonstrated reductions of LDL-C of up to 64%. Notwithstanding the LDL-C lowering efficacy of PCSK9 inhibitors, we believe their adoption by patients, physicians, and payors could be adversely impacted by their higher cost, their injectable route of administration, and their inability to positively impact CRP.

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Additional Therapies in Development

    CETP Inhibitors

        A number of larger biopharmaceutical companies have tried to develop a class of therapies that target cholesteryl ester transfer protein, or CETP, which mediates the transfer of cholesteryl esters from HDL-particles to ApoB-containing particles. CETP inhibitors were initially designed to raise levels of HDL-C and are required by FDA to complete cardiovascular outcomes trials, or CVOTs, in Phase 3 prior to approval. Pfizer brought the first drug in this class, torcetrapib, into clinical development but terminated development activities in December 2006, due to an increase in all-cause mortality and cardiovascular events in the ILLUMINATE (Investigation of Lipid Level Management to Understand its Impact in Atherosclerotic Events) study. Two other CETP inhibitors, dalcetrapib from Roche and evacetrapib from Lilly, were investigated in the dal-OUTCOMES and ACCELERATE studies, respectively. The development of dalcetrapib and evacetrapib were terminated in May 2012, and October 2015, respectively, due to insufficient efficacy in their CVOTs. An additional CETP inhibitor, anacetrapib, from Merck, is being developed and is currently being investigated in the Phase 3 REVEAL (Randomized EValuation of the Effects of Anacetrapib through Lipid-modification) study. Anacetrapib has been shown to significantly raise levels of HDL-C and to lower LDL-C. This Phase 3 CVOT is expected to complete and report top-line results in the first half of 2017.

Clinical Experience

        To date, bempedoic acid has been studied in sixteen completed clinical studies across six patient populations: healthy volunteers; patients with elevated LDL-C levels; patients with Type 2 diabetes and elevated LDL-C levels; patients with elevated LDL-C levels and a history of statin intolerance; patients with elevated LDL-C levels taking 10 mg of atorvastatin; and patients with both elevated LDL-C and hypertension. These clinical studies consisted of seven Phase 2 clinical studies and nine Phase 1 clinical studies. The first six clinical studies compared bempedoic acid monotherapy to placebo. In ETC-1002-007, bempedoic acid was administered as an add-on to a 10 mg dose of atorvastatin. In ETC-1002-008, we evaluated the efficacy and safety of bempedoic acid, ezetimibe, and the combination of bempedoic acid and ezetimibe in patients with elevated LDL-C with or without statin intolerance. In ETC-1002-009, we evaluated the efficacy of bempedoic acid in patients with elevated LDL-C already on stable statin therapy. In ETC-1002-014, we explored the safety of bempedoic acid in patients with both elevated LDL-C and hypertension. The individual design and results of each of our completed clinical studies are summarized below.

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Completed Clinical Studies

        To date, we have completed the following clinical studies of bempedoic acid:

 
   
   
  Subjects  
Description
  Title   Treatment Duration   Total   Treated  
ETC-1002-014   Phase 2a exploratory clinical safety study in patients with both elevated LDL-C and hypertension   6 weeks     143     71  

 

 

A randomized, double-blind, multi-center, placebo-controlled, parallel group exploratory study that evaluated 180 mg of bempedoic acid versus placebo in patients with both elevated LDL-C and hypertension

 

 

 

 

 

 

 

 

 

ETC-1002-009

 

Phase 2b clinical study in patients with elevated LDL-C already receiving statin therapy

 

12 weeks

 

 

134

 

 

89

 

 

 

A randomized, double-blind, multi-center placebo-controlled clinical study that evaluated 180 mg and 120 mg of bempedoic acid versus placebo in patients already on stable statin therapy

 

 

 

 

 

 

 

 

 

ETC-1002-008

 

Phase 2b clinical study of safety and efficacy in patients with elevated LDL-C, with or without a history of statin intolerance

 

12 Weeks

 

 

349

 

 

250

 

 

 

A randomized, double-blind, parallel-group, multicenter study to evaluate the efficacy and safety of bempedoic acid monotherapy, ezetimibe monotherapy, and the combination of bempedoic acid and ezetimibe in patients with elevated LDL-C, with or without statin intolerance

 

 

 

 

 

 

 

 

 

ETC-1002-007

 

Phase 2a clinical study of safety and pharmacokinetic interaction in patients with elevated LDL-C on a background of atorvastatin 10 mg

 

8 Weeks

 

 

58

 

 

42

 

 

 

Placebo-controlled, randomized, double-blind, drug interaction study to evaluate the safety, tolerability and effect on atorvastatin pharmacokinetics of bempedoic acid added to atorvastatin 10 mg/day in patients with elevated LDL-C

 

 

 

 

 

 

 

 

 

ETC-1002-006

 

Phase 2a proof-of-concept clinical study in patients with elevated LDL-C and a history of statin intolerance

 

8 Weeks

 

 

56

 

 

37

 

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  Subjects  
Description
  Title   Treatment Duration   Total   Treated  
    Placebo-controlled, randomized, double-blind, multicenter study to evaluate the efficacy and safety of bempedoic acid in patients with elevated LDL-C and a history of statin intolerance                  

ETC-1002-005

 

Phase 2a proof-of-concept clinical study in patients with elevated-LDL-C and Type 2 diabetes

 

4 Weeks

 

 

60

 

 

30

 

 

 

Placebo-controlled, randomized, double-blind, single site clinical study to evaluate the LDL-C lowering efficacy and safety of bempedoic acid in patients with Type 2 diabetes

 

 

 

 

 

 

 

 

 

ETC-1002-004

 

Phase 1b multiple-dose tolerance greater than 120 mg clinical study

 

2 Weeks

 

 

24

 

 

18

 

 

 

Multiple ascending dose clinical study to evaluate safety, tolerability and pharmacokinetics (PK) of bempedoic acid in doses greater than 120 mg once-daily in healthy subjects

 

 

 

 

 

 

 

 

 

ETC-1002-003

 

Phase 2a proof-of-concept clinical study in patients with elevated LDL-C

 

12 Weeks

 

 

177

 

 

133

 

 

 

Placebo-controlled, randomized, double-blind, parallel group, multicenter clinical study to evaluate the LDL-C lowering efficacy and safety of bempedoic acid in patients with elevated LDL-C and either normal or elevated triglycerides

 

 

 

 

 

 

 

 

 

ETC-1002-002

 

Phase 1b multiple-dose tolerance clinical study

 

2 Weeks / 4 Weeks

 

 

53

 

 

39

 

 

 

Multiple ascending dose clinical study to evaluate safety, tolerability, PK and pharmacodynamics (PD) of bempedoic acid in doses of up to 120 mg once-daily in healthy subjects

 

 

 

 

 

 

 

 

 

ETC-1002-001

 

Phase 1a single-dose tolerance clinical study

 

Single Dose

 

 

18

 

 

18

 

 

 

First-in-human single-dose clinical study to evaluate safety, tolerability and PK of bempedoic acid in healthy subjects

 

 

 

 

 

 

 

 

 

        Overall, bempedoic acid has been well-tolerated and associated with no dose-limiting adverse events, or AEs, in 727 subjects who received bempedoic acid in our completed Phase 1 and Phase 2 studies.

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    Phase 2b Clinical Studies

    ETC-1002-009—Phase 2b clinical study in patients with elevated LDL-C already receiving statin therapy

        On March 17, 2015, we announced top-line results for our Phase 2b ETC-1002-009 clinical study. ETC-1002-009 was a randomized, double-blind, multi-center placebo-controlled Phase 2b clinical study that evaluated 180 mg and 120 mg of bempedoic acid versus placebo for 12 weeks in 134 patients already receiving stable statin therapy. The primary endpoint of this clinical study was to assess the LDL-C lowering efficacy of bempedoic acid in patients with elevated LDL-C already on stable statin therapy. Secondary endpoints included assessment of the dose response of bempedoic acid, assessment of the effect of bempedoic acid on additional lipid and cardiometabolic risk markers including hsCRP and characterization of safety, tolerability and rates of muscle-related AEs. The full results of the ETC-1002-009 study were presented at the American Heart Association Scientific Sessions on November 10, 2015. The top-line results of this clinical study are summarized as follows:


LDL-C Percent Change from Baseline to Week 12 Endpoint

 
   
   
   
  Average Additional Percent
Change from Baseline,
Beyond Stable Statin
Therapy Alone
 
 
   
   
  LDL-C
Week 12
Endpoint
Mean (SD)
mg/dL
 
Treatment Group
  Number of
Patients
  LDL-C Baseline
Mean (SD)
mg/dL
  LS Mean (SE)   P Value vs.
placebo
 

bempedoic acid 180 mg

    43   143 (28)   104 (31)   –24% (4)     <0.0001  

bempedoic acid 120 mg

    41   134 (20)   112 (27)   –17% (4)     0.0055  

placebo

    43   132 (22)   128 (31)   –4% (4)      

        LS = least squares; SD = standard deviation; SE = standard error; mITT population


hsCRP Nonparametric Analysis

 
   
   
  Percent Change from Baseline  
Treatment
  Number of
Patients
  Baseline
Level (mg/L)
  Median Change,
Beyond
Stable Statin
Therapy Alone
  P Value vs.
placebo
 

bempedoic acid 180 mg

    38   1.95     –30 %   0.08  

bempedoic acid 120 mg

    38   1.80     –22 %   0.26  

placebo

    39   1.70     0 %    

        mITT population

    LDL-C levels after 12 weeks of treatment of bempedoic acid, the primary endpoint of the study, were reduced by an additional 24% (p<0.0001) for patients dosed with bempedoic acid 180 mg and 17% (p=0.0055) for patients dosed with bempedoic acid 120 mg, beyond stable statin therapy alone, compared to an average reduction of 4% for patients who received placebo.

    hsCRP, a marker of inflammation in coronary disease, was reduced by an additional 30% (p=0.08) for patients dosed with bempedoic acid 180 mg and 22% (p=0.26) for patients dosed with bempedoic acid 120 mg, beyond stable statin therapy alone, after 12 weeks of therapy versus 0% reduction with placebo.

    Discontinuation rates for bempedoic acid were low, less than those seen with placebo, and were not muscle-related.

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    ETC-1002-008—Phase 2b clinical study in patients with elevated LDL-C with or without statin intolerance

        On October 1, 2014, we announced top-line results for our Phase 2b ETC-1002-008 clinical study. ETC-1002-008 was a 12 week Phase 2b clinical study in 349 randomized patients across 65 participating clinical recruitment sites in the United States. The primary endpoint of this clinical study was to assess the LDL-C lowering efficacy of bempedoic acid monotherapy versus ezetimibe monotherapy in patients with elevated LDL-C with or without statin intolerance. Secondary endpoints included characterization of bempedoic acid dose-response, assessment of the effect of bempedoic acid on additional lipid and cardiometabolic biomarkers, characterization of safety, tolerability, and rates of muscle-related AEs and assessment of LDL-C lowering efficacy of bempedoic acid and ezetimibe combination therapy versus ezetimibe alone. The full results of the ETC-1002-008 study were presented at the 64 th  Annual Scientific Session of the ACC on Saturday March 14, 2015. The top-line results of this clinical study are summarized as follows:


LDL-C Percent Change from Baseline to Week 12 Endpoint

 
   
   
   
  Average Percent Change
from Baseline
 
 
   
   
  LDL-C
Week 12
Endpoint
Mean (SD)
mg/dL
 
Treatment Group
  Number of
Patients
  LDL-C Baseline
Mean (SD)
mg/dL
  LS Mean (SE)   P Value vs.
ezetimibe
 

bempedoic acid 120 mg

    97   164 (28)   119 (30)   –27% (1.3)     0.0008  

bempedoic acid 180 mg

    99   166 (24)   115 (25)   –30% (1.3)     <0.0001  

ezetimibe 10 mg

    98   165 (25)   129 (20)   –21% (1.3)      

bempedoic acid 120 mg + ezetimibe 10 mg

    24   161 (26)   92 (29)   –43% (2.6)     <0.0001  

bempedoic acid 180 mg + ezetimibe 10 mg

    22   164 (27)   86 (21)   –48% (2.8)     <0.0001  


hsCRP Nonparametric Analysis

 
   
   
  Percent Change from
Baseline
 
Treatment
  N   Baseline Level
(mg/L)
  Median
Change
  P Value vs.
ezetimibe
 

bempedoic acid 120 mg

    92     1.60     –30 %   £ 0.01  

bempedoic acid 180 mg

    86     2.50     –40 %   £ 0.01  

ezetimibe 10 mg

    94     2.60     –10 %   NS  

bempedoic acid 120 mg + ezetimibe 10 mg

    20     1.85     –38 %   NS  

bempedoic acid 180 mg + ezetimibe 10 mg

    21     1.25     –26 %   £ 0.05  
    LDL-C levels after 12 weeks of treatment of bempedoic acid were reduced by up to 30% for patients dosed with bempedoic acid only, compared to an average reduction of 21% for patients dosed with ezetimibe (p<0.0001).

    LDL-C levels were lowered up to 48% in the bempedoic acid plus ezetimibe combination treatment versus 21% for ezetimibe alone (p<0.0001).

    hsCRP, a marker of inflammation in coronary disease, was reduced by 30% (p £ 0.01) with bempedoic acid 120 mg; by 40% (p £ 0.01) with bempedoic acid 180 mg; versus a 10% reduction with ezetimibe.

    Discontinuation rates and muscle-related AEs with bempedoic acid were comparable to ezetimibe.

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    In an exploratory analysis of the data, there was comparable LDL-C lowering with bempedoic acid between patients who are statin intolerant and those who are statin tolerant.

    Consistent with prior clinical studies with bempedoic acid, no clinically relevant changes in HDL-C or triglycerides were observed.

    Phase 2a Clinical Studies

    ETC-1002-014—Phase 2a exploratory clinical safety study in patients with both elevated LDL-C and hypertension

        On July 28, 2015, we announced top-line results for our Phase 2a ETC-1002-014 exploratory clinical safety study. ETC-1002-014 was a randomized, double-blind, multi-center, placebo-controlled, parallel group exploratory study that evaluated 180 mg of bempedoic acid versus placebo for six weeks in 144 patients with both elevated LDL-C and hypertension. The primary endpoint of this clinical study was to assess the LDL-C lowering efficacy of bempedoic acid monotherapy versus placebo. Secondary endpoints were to characterize the safety and tolerability of bempedoic acid in patients with co-morbid hypertension; assess the effect of bempedoic acid on systolic blood pressure and diastolic blood pressure; assess the effect of bempedoic acid on additional lipid and cardiometabolic risk markers, including hsCRP; and characterize the safety and tolerability of bempedoic acid. A total of 143 patients with elevated LDL-C and hypertension were washed out of any lipid-regulating and blood pressure therapies for up to six weeks prior to initiating therapy with bempedoic acid or placebo. 71 patients received bempedoic acid 180 mg and 72 patients received placebo. The safety and efficacy results from ETC-1002-014 are summarized as follows:

    Bempedoic acid-treated patients achieved LDL-C lowering of 21% at six weeks (24% greater than placebo, p<0.0001).

    Levels of hsCRP were reduced by 25% with bempedoic acid (44% greater than placebo, p<0.0001).

    Bempedoic acid was safe and well-tolerated, with neutral effects on all blood pressure measures and no muscle-related AEs or bempedoic acid-related SAEs. There was no worsening of blood pressure parameters in hypertensive patients treated with bempedoic acid.

Overall Safety Observations

        To date, 727 subjects have been treated with bempedoic acid for periods of up to 12 weeks at maximum repeated doses of 240 mg per day. Bempedoic acid has been safe and well-tolerated with no dose-limiting side effects identified to date in our ongoing or completed clinical studies. No clinical safety trends have emerged to date; although very modest shifts in group mean levels of hemoglobin, uric acid, alkaline phosphatase and homocysteine were identified in some of our completed clinical

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studies, these did not go outside the normal ranges. The clinical relevance of these shifts is not readily apparent and will be monitored in our future clinical studies.

Study
  Phase   Patient Population   Study Design   Duration   Patients
(Treated)
  Doses   LDL
Lowering
Efficacy

ETC-1002-001

  Phase 1a   Healthy subjects   Single dose, PK   Single dose   18 (18)        

ETC-1002-002

  Phase 1b   Healthy subjects   Multiple ascending dose, PK/PD   2/4 weeks   53 (39)   20, 60, 100, 120 mg   Up to 17%

ETC-1002-003

  Phase 2a   Elevated LDL   Placebo controlled   12 weeks   177 (133)   40, 80, 120 mg   Up to 27%

ETC-1002-004

  Phase 1b   Healthy subjects   Multiple ascending dose, PK   2 weeks   24 (18)   40, 180, 220 mg   Up to 36%

ETC-1002-005

  Phase 2a   Elevated LDL; T2DM   Placebo controlled   4 weeks   60 (30)   80, 120 mg   Up to 43%

ETC-1002-006

  Phase 2a   Elevated LDL; statin intolerant   Placebo controlled   8 weeks   56 (37)   60, 120, 180, 240 mg   Up to 32%

ETC-1002-007

  Phase 2a   Elevated LDL; statin add-on   Placebo controlled, 10 mg atorvastatin   8 weeks   58 (42)   60, 120, 180, 240 mg   Up to 22%

ETC-1002-008

  Phase 2b   Elevated LDL; statin intolerant and tolerant   Monotherapy and in combination with ezetimibe   12 weeks   349 (250)   120 mg, 180 mg   Up to 30%

                          Up to 48%

ETC-1002-009

  Phase 2b   Elevated LDL; statin add-on   Placebo controlled,   12 weeks   134 (89)   120mg, 180mg   Up to 24%

ETC-1002-014

  Phase 2a   Elevated LDL; hypertension   Placebo controlled   6 weeks   143 (71)   180mg   Up to 21%

Ongoing Clinical Studies

    ETC-1002-035—Phase 2 clinical study in patients treated with high-dose statin therapy

        ETC-1002-035 is a Phase 2 randomized, double-blind, parallel group study evaluating 60 patients on stable atorvastatin 80 mg per day. All patients in the study will receive 80 mg of atorvastatin for four weeks. Patients will then be randomized to receive either 180 mg of bempedoic acid, or placebo, for four weeks. The study will enroll patients at approximately 20 centers across the United States. The primary objectives of the study are to assess the LDL-C lowering efficacy of bempedoic acid versus placebo on a background of atorvastatin 80 mg, as well as multiple-dose plasma PK of atorvastatin 80 mg alone and in combination with bempedoic acid. Secondary objectives include assessing the effect of bempedoic acid on lipid and cardiometabolic biomarkers, including hsCRP; characterizing the tolerability and safety of bempedoic acid; and evaluating the steady-state plasma PK of bempedoic acid. We initiated ETC-1002-035 in January 2016, and expect to report top-line results in the third quarter of 2016.

    ETC-1002-037—Phase 1 clinical pharmacology study to assess the safety and tolerability of bempedoic acid added-on to maximally tolerated statin therapy

        ETC-1002-037 is a Phase 1, open-label, single-sequence, drug-drug interaction study to assess the effect of steady-state bempedoic acid on the single-dose pharmacokinetics of atorvastatin 80 mg, simvastatin 40 mg, pravastatin 80 mg and rosuvastatin 40 mg in 48 healthy subjects. The primary objective of this study is to assess the single-dose pharmacokinetics of the four high-dose statins alone or in combination with bempedoic acid 180 mg. Secondary objectives include characterizing the safety and tolerability of bempedoic acid alone and when used with high-dose statins. We initiated ETC-1002-037 in February 2016, and expect to report top-line results in the third quarter of 2016.

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    ETC-1002-040—Phase 3 global long-term safety and tolerability study in patients with hyperlipidemia whose LDL-C is not adequately controlled with low- and moderate-dose statins

        ETC-1002-040 is a global Phase 3 randomized, multicenter, double-blind, placebo-controlled study evaluating 180 mg of bempedoic acid versus placebo in 900 patients with hyperlipidemia at high cardiovascular disease risk and whose LDL-C is not adequately controlled with maximally tolerated lipid-modifying therapy. The study will enroll patients at approximately 125 sites in the U.S., Canada and the European Union. The primary objective is to assess safety and tolerability of patients treated with bempedoic acid for 52 weeks. Secondary objectives include assessing the effects of bempedoic acid on other lipid and cardiometabolic risk markers, including LDL-C and hsCRP. We initiated ETC-1002-040 in January 2016, and expect to report top-line results in the fourth quarter of 2017.

Additional Studies

    Phase 3 Clinical Studies and CVOT

        The ETC-1002-040 study marks the launch of our Phase 3 clinical program—known as C holesterol L owering via E TC-1002, an A CL-inhibiting R egimen (CLEAR)—which will be focused on the development of bempedoic acid for statin intolerant patients with uncontrolled LDL-C levels. We expect to provide the global clinical and regulatory development plans for the CLEAR Phase 3 program in the second quarter of 2016. Separately, we expect to announce the design of the planned CVOT for bempedoic acid in statin intolerant patients in the second quarter of 2016.

    Studies in Response to Partial Clinical Holds

        On February 2, 2015, we announced that the FDA removed the PPAR partial clinical hold on bempedoic acid, allowing us to conduct clinical studies of longer than six months in duration. In 2009 the FDA had determined that bempedoic acid was a potential PPAR agonist.

        On July 7, 2015, we announced that the FDA removed the 240 mg partial clinical hold on bempedoic acid, allowing bempedoic acid to be used at doses above 240 mg in clinical studies. In 2012 the FDA limited our ability to dose bempedoic acid above 240 mg in our clinical studies.

    Mechanism of Action

        Bempedoic acid inhibits ACL, an enzyme upstream of HMG-CoA reductase (the molecular target of statins) in the cholesterol synthesis pathway. Like statins, bempedoic acid decreases cholesterol synthesis in the liver, which results in decreased intracellular cholesterol and up-regulated LDL-receptors, resulting in increased LDL-C clearance and decreased plasma levels of LDL-C. Although bempedoic acid and statins both inhibit cholesterol synthesis in liver, an important differentiating feature is that, unlike statins, bempedoic acid is inactive in skeletal muscle. Specifically, bempedoic acid is a prodrug which requires activation by a specific enzyme, acyl-CoA synthetase, or ACS, to convert bempedoic acid to ETC-1002-CoA, the active form of the drug. While this enzyme is present in the liver, it is not found in skeletal muscle. Therefore, bempedoic acid does not appear to inhibit cholesterol biosynthesis in skeletal muscle and has reduced potential for muscle-related adverse effects. These differentiating properties of bempedoic acid provide a mechanistic basis for liver-specific cholesterol synthesis inhibition.

Research and Development Expenses

        Research and development expenses for the year ended December 31, 2015, were $29.9 million.

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Sales and Marketing

        Given our stage of development, we have not yet established a commercial organization or distribution capabilities, nor have we entered into any partnership or co-promotion arrangements with an established pharmaceutical company. To develop the appropriate commercial infrastructure to launch bempedoic acid in the United States, if approved, as a treatment for patients with elevated LDL-C, we would need to invest significant financial and managerial resources. We may engage in partnering discussions with third parties from time to time. If we elect to seek approval and launch commercial sales of bempedoic acid outside of the United States or for broader patient populations in the United States, including statin intolerant patients who are unable to reach their LDL-C goal with a statin therapy, we may either do so on our own or by establishing alliances with one or more pharmaceutical company collaborators, depending on, among other things, the applicable indications, the related development costs and our available resources.

Manufacturing and Supply

        Bempedoic acid is a small molecule drug that is synthesized from readily available raw materials using conventional chemical processes. We currently have no manufacturing facilities and limited personnel with manufacturing experience. We rely on contract manufacturers to produce both drug substances and drug products required for our clinical studies. All lots of drug substance and drug product used in clinical studies are manufactured under current good manufacturing practices. We plan to continue to rely upon contract manufacturers and, potentially, collaboration partners to manufacture commercial quantities of bempedoic acid, if approved.

Licenses

        In April 2008, we entered into an agreement with Pfizer pursuant to which we acquired a worldwide, exclusive, fully paid-up license from Pfizer to certain patent rights owned or controlled by Pfizer relating to bempedoic acid, and we granted Pfizer a worldwide, exclusive, fully paid-up license to certain patent rights owned or controlled by us relating to development programs other than bempedoic acid. The license to us covers the development, manufacture and commercialization of bempedoic acid. We may grant sublicenses under the license. Under the license agreement, Pfizer is restricted from making, using, developing or testing any of the compounds claimed under the same patents that claim or cover the composition of matter of bempedoic acid. Neither party is entitled to any royalties, milestones or any similar development or commercialization payments under the license agreement, and the licenses granted are irrevocable and may not be terminated for any cause, including intentional breaches or breaches caused by gross negligence.

Intellectual Property

        We strive to protect and enhance the proprietary technologies that we believe are important to our business, including seeking and maintaining patents intended to cover our products and compositions, their methods of use and any other inventions that are important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

        Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We also rely on know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain the proprietary position of bempedoic acid and our other development programs.

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        As of December 31, 2015, our patent estate, including patents we own or license from third parties, on a worldwide basis, included approximately 23 issued United States patents and eight pending United States patent applications and 19 issued patents and 15 pending patent applications in other foreign jurisdictions. Of our worldwide patents and pending applications, only a subset relates to our small molecule program which includes our lead product candidate, bempedoic acid. Bempedoic acid is claimed in U.S. Patent No. 7,335,799 that is scheduled to expire in December 2025, which includes 711 days of patent term adjustment, and may be eligible for a patent term extension period of up to five years. U.S. Patent Nos. 9,000,041 and 8,497,301 claim methods of treatment using bempedoic acid. We also have a pending U.S. patent application directed to bempedoic acid. There are currently three issued patents and four pending applications in countries outside the United States that relate to bempedoic acid.

        A subset of this portfolio relates to our planned fixed-dose combination of bempedoic acid and ezetimibe and bempedoic acid and one or more statins. We have one pending U.S. patent application claiming methods of treatment using a fixed-dose combination of bempedoic acid and ezetimibe, and two pending U.S. patent applications claiming methods of treatment using fixed-dose combinations of bempedoic acid and one or more statins.

        We hold an exclusive, worldwide, fully paid-up license from Pfizer to additional patents and patent applications.

        The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the date of filing the non-provisional application. In the United States, a patent's term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier-filed patent. In addition, in certain instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period. However, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also twenty years from the earliest effective filing date. Our issued U.S. patents will expire on dates ranging from 2021 to 2030. However, the actual protection afforded by a patent varies on a claim by claim basis for each applicable product, from country to country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

        Furthermore, the patent positions of biotechnology and pharmaceutical products and processes like those we intend to develop and commercialize are generally uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in such patents has emerged to date in the U.S. The patent situation outside the U.S. is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the U.S. and other countries can diminish our ability to protect our inventions, and enforce our intellectual property rights and more generally, could affect the value of intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.

        The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Our ability to maintain and solidify our proprietary position for our drugs and technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of the patent applications that we may file or license from third parties will result in the issuance of any patents. The issued patents that we own or may receive in the future, may be challenged, invalidated or circumvented, and the rights granted under any issued patents may not provide us with proprietary protection or competitive

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advantages against competitors with similar technology. Furthermore, our competitors may be able to independently develop and commercialize similar drugs or duplicate our technology, business model or strategy without infringing our patents. Because of the extensive time required for clinical development and regulatory review of a drug we may develop, it is possible that, before any of our drugs can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of any such patent.

        As a result of the America Invents Act of 2011, the United States transitioned to a first-inventor-to-file system in March 2013, under which, assuming the other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent. This will require us to minimize the time from invention to the filing of a patent application.

        We may rely, in some circumstances, on trade secrets and unpatented know-how to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our consultants, scientific advisors and contractors and invention assignment agreements with our employees. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. For more information, please see "Risk Factors—Risks Related to our Intellectual Property."

        Our commercial success will also depend in part on not infringing the proprietary rights of third parties. It is uncertain whether the issuance of any third-party patent would require us to alter our development or commercial strategies, or our drugs or processes, obtain licenses or cease certain activities. Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop or commercialize our future drugs may have a material adverse impact on us. If third parties prepare and file patent applications in the U.S. that also claim technology to which we have rights, we may have to participate in interference proceedings in the U.S. Patent and Trademark Office, or USPTO, to determine priority of invention.

        In addition, substantial scientific and commercial research has been conducted for many years in the areas in which we have focused our development efforts, which has resulted in third parties having a number of issued patents and pending patent applications. Patent applications in the U.S. and elsewhere are published only after eighteen months from the priority date. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made. Therefore, patent applications relating to drugs similar to bempedoic acid and any future drugs, discoveries or technologies we might develop may have already been filed by others without our knowledge.

Competition

        Our industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. Key competitive factors affecting the commercial success of our product candidates are likely to be efficacy, safety and tolerability profile, reliability, convenience of dosing, price and reimbursement.

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        The market for cholesterol regulating therapies is especially large and competitive. The product candidates we are currently developing, if approved, will face intense competition, either as monotherapies or as combination therapies.

        Many of our existing or potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a small number of our competitors. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors' drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product candidates. Our competitors may also obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render our drugs non-competitive or obsolete. See "Risk Factors—Risks Related to our Business and the Clinical Development and Commercialization of Bempedoic Acid—Our market is subject to intense competition. If we are unable to compete effectively, our opportunity to generate revenue from the sale of bempedoic acid, if approved, will be materially adversely affected."

Regulatory Matters

    Government Regulation and Product Approval

        Government authorities in the United States at the federal, state and local level, and other countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing, export and import of products such as those we are developing. Our product candidates, including bempedoic acid, must be approved by the FDA through the new drug application, or NDA, process before they may legally be marketed in the United States.

    United States Drug Development Process

        In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The process of obtaining regulatory approvals and compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA's refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. The process required by the FDA before a drug may be marketed in the United States generally involves the following:

    completion of nonclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices regulations;

    submission to the FDA of an IND, which must become effective before human clinical studies may begin;

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    performance of adequate and well-controlled human clinical studies according to Good Clinical Practices, or GCP, to establish the safety and efficacy of the proposed drug for its intended use;

    submission to the FDA of an NDA for a new drug;

    satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with cGMP; and

    FDA review and approval of the NDA.

        The testing and approval process requires substantial time, effort and financial resources and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

        Once a pharmaceutical product candidate is identified for development, it enters the nonclinical, also referred to as preclinical, testing stage. Nonclinical tests include laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as animal studies. An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, to the FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the objectives of the initial clinical study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical study lends itself to an efficacy evaluation. Some nonclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical study on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical studies due to safety concerns or non-compliance, and may be imposed on all drug products within a certain class of drugs. The FDA also can impose partial clinical holds, for example prohibiting the initiation of clinical studies of a certain duration or for a certain dose.

        All clinical studies must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations include the requirement that all research subjects provide informed consent. Further, an institutional review board, or IRB, must review and approve the plan for any clinical study before it commences at any institution. An IRB considers, among other things, whether the risks to individuals participating in the clinical study are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the information regarding the clinical study and the consent form that must be provided to each clinical study subject or his or her legal representative and must monitor the clinical study until completed.

        Each new clinical protocol and any amendments to the protocol must be submitted to the IND for FDA review, and to the IRBs for approval. Protocols detail, among other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety.

        Human clinical studies are typically conducted in three sequential phases that may overlap or be combined:

    Phase 1.   The product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.

    Phase 2.   Involves clinical studies in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage and schedule.

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    Phase 3.   Clinical studies are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling.

        Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA and safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients.

        Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

    U.S. Review and Approval Processes

        The results of product development, nonclinical studies and clinical studies, along with descriptions of the manufacturing process, analytical tests conducted on the drug, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA for a new drug, requesting approval to market the product. The submission of an NDA is subject to the payment of a substantial user fee; a waiver of such fee may be obtained under certain limited circumstances. For example, the agency will waive the application fee for the first human drug application that a small business or its affiliate submits for review.

        In addition, under the Pediatric Research Equity Act of 2003, or PREA, made into permanent law pursuant to Food and Drug Administration Safety and Innovation Act (FDASIA), an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers.

        The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be re-submitted with the additional information. The re-submitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product's identity, strength, quality and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA also can require, or an NDA applicant may voluntarily propose, a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of a drug outweigh its risks. Elements of a REMS may include "dear doctor

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letters," a medication guide, and in some cases restrictions on distribution. These elements are negotiated as part of the NDA approval, and in some cases may delay the approval date. Once adopted, REMS are subject to periodic assessment and modification. The FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. An advisory committee is a panel of experts who provide advice and recommendations when requested by the FDA on matters of importance that come before the agency. The FDA is not bound by the recommendation of an advisory committee.

        The approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA in its present form. The complete response letter usually describes all of the specific deficiencies that the FDA identified in the NDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application or request an opportunity for a hearing.

        If a product receives regulatory approval, the approval may be significantly limited to specific patient populations, therapeutic settings, risk categories of disease, and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require further Phase 3 and Phase 4 testing to be conducted, which involves clinical studies designed to further assess a drug's safety and effectiveness after NDA approval and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.

    Patent Term Restoration and Marketing Exclusivity

        Depending upon the timing, duration and specifics of FDA approval of the use of our product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product's approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration dates, depending on the expected length of the clinical studies and other factors involved in the filing of the relevant NDA, however there can be no assurance that any such extension will be granted to us.

        Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug

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is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and well- controlled clinical studies necessary to demonstrate safety and effectiveness.

        Pediatric exclusivity is another type of exclusivity in the United States. Pediatric exclusivity, if granted, provides an additional six months to an existing exclusivity or statutory delay in approval resulting from a patent certification. This six-month exclusivity, which runs from the end of other exclusivity protection or patent delay, may be granted based on the voluntary completion of a pediatric clinical study in accordance with an FDA-issued "Written Request" for such a clinical study.

        Certain foreign countries permit extension of patent term for a newly approved drug and/or grant a period of data exclusivity and/or market exclusivity. For example, depending upon the timing and duration of the marketing authorization process in certain European countries, a newly approved drug may be eligible for a supplementary protection certification, or SPC, which can extend the basic patent right for the drug for a period up to five years.

    Post-Approval Requirements

        Any drugs for which we receive FDA approval are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements. The FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. Further, manufacturers of drugs must continue to comply with cGMP requirements, which are extensive and require considerable time, resources and ongoing investment to ensure compliance. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

        Drug manufacturers and other entities involved in the manufacturing and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. The cGMP requirements apply to all stages of the manufacturing process, including the production, processing, sterilization, packaging, labeling, storage and shipment of the drug. Manufacturers must establish validated systems to ensure that products meet specifications and regulatory standards, and test each product batch or lot prior to its release. We rely, and expect to continue to rely, on third parties for the production of clinical quantities of our product candidates. Future FDA and state inspections may identify compliance issues at the facilities of our contract

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manufacturers that may disrupt production or distribution or may require substantial resources to correct.

        The FDA may withdraw a product approval if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Further, the failure to maintain compliance with regulatory requirements may result in administrative or judicial actions, such as fines, warning letters, holds on clinical studies, product recalls or seizures, product detention or refusal to permit the import or export of products, refusal to approve pending applications or supplements, restrictions on marketing or manufacturing, injunctions or civil or criminal penalties.

        From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, the FDA regulations and policies are often revised or reinterpreted by the agency in ways that may significantly affect our business and our product candidates. It is impossible to predict whether further legislative or FDA regulation or policy changes will be enacted or implemented and what the impact of such changes, if any, may be.

    Foreign Regulation

        In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical studies and commercial sales and distribution of our product candidates to the extent we choose to sell any products outside of the United States. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical studies or marketing of the product in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical studies, product licensing, pricing and reimbursement vary greatly from country to country. As in the United States, post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution would apply to any product that is approved outside the United States.

Employees

        As of December 31, 2015, we had 32 full-time employees. Two of our employees have Ph.D. degrees and one has an M.D. degree. 17 of our employees are engaged in research and development activities. None of our employees is represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.

Facilities

        Our corporate headquarters are located in Ann Arbor, Michigan where we lease and occupy approximately 7,900 square feet of office space. We lease and occupy an additional 5,500 square feet of office space in Ann Arbor, Michigan to support our clinical development operations. We believe our current facilities will be sufficient to meet our needs until expiration.

Legal Proceedings

        On January 12, 2016, a purported stockholder of the Company filed a putative class action lawsuit in the United States District Court for the Eastern District of Michigan, against us and Tim Mayleben, captioned Kevin L. Dougherty v. Esperion Therapeutics, Inc., et al. (No. 16-cv-10089). The lawsuit alleges that we and Mr. Mayleben violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by allegedly failing to disclose in an August 17, 2015, public statement that the FDA would require a cardiovascular outcomes trial before approving our lead product candidate. The

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lawsuit seeks, among other things, compensatory damages in connection with an allegedly inflated stock price between August 18, 2015, and September 28, 2015, as well as attorneys' fees and costs. In light of, among other things, the early stage of the litigation, we are unable to predict the outcome of this matter and are unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome.

        In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

Available Information

        Our website address is www.esperion.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the investor relations page of our internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Alternatively, these reports may be accessed at the SEC's website at www.sec.gov.

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Item 1A.    Risk Factors

         Except for the historical information contained herein or incorporated by reference, this report and the information incorporated by reference contains forward-looking statements that involve risks and uncertainties. These statements include projections about our accounting and finances, plans and objectives for the future, future operating and economic performance and other statements regarding future performance. These statements are not guarantees of future performance or events. Our actual results could differ materially from those discussed in this report. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in the following section, as well as those discussed in Part II, Item 7 entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere throughout this report and in any documents incorporated in this report by reference.

         You should consider carefully the following risk factors, together with all of the other information included or incorporated in this report. If any of the following risks, either alone or taken together, or other risks not presently known to us or that we currently believe to not be significant, develop into actual events, then our business, financial condition, results of operations or prospects could be materially adversely affected. If that happens, the market price of our common stock could decline, and stockholders may lose all or part of their investment.


Risks Related to our Business and the Clinical Development and Commercialization of Bempedoic Acid

We depend almost entirely on the success of one product candidate, bempedoic acid, which only recently commenced Phase 3 clinical development. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, bempedoic acid.

        We currently have only one product candidate, bempedoic acid, in clinical development, and our business depends almost entirely on its successful clinical development, regulatory approvals and commercialization. We currently have no drug products for sale and may never be able to develop marketable drug products. Bempedoic acid, for which we recently launched our Phase 3 clinical program in January 2016, will require substantial additional clinical development, testing, and regulatory approvals before we are permitted to commence its commercialization. Any other product candidates are still in preclinical development stages. The clinical studies of our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and, if approved, market any product candidate. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through preclinical testing and clinical studies that the product candidate is safe and effective for use in each target indication. This process can take many years and may include post-marketing studies and surveillance, including a Risk Evaluation and Mitigation Strategy, or REMS program, which will require the expenditure of substantial resources beyond the proceeds we have raised. Of the large number of drugs in development in the United States, only a small percentage successfully complete the approval process at the FDA or any other foreign regulatory agency, and are commercialized. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development and clinical programs, we cannot assure you that bempedoic acid or any other of our product candidates will be successfully developed or commercialized.

        We are not permitted to market bempedoic acid in the United States until we receive approval of a New Drug Application, or NDA, from the FDA, or in any foreign countries until we receive the requisite approval from such countries. As a condition to submitting an NDA to the FDA for bempedoic acid to treat patients with elevated LDL-C, we have currently completed two Phase 2b clinical studies and four Phase 2a clinical studies and expect to complete another Phase 2 clinical study, several pivotal Phase 3 clinical studies, one long-term safety study and to at least initiate, and

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potentially complete, a cardiovascular outcomes trial, or CVOT. Obtaining approval of an NDA is a complex, lengthy, expensive and uncertain process, and the FDA may delay, limit or deny approval of bempedoic acid for many reasons, including, among others:

    we may not be able to demonstrate that bempedoic acid is safe and effective in treating patients with elevated LDL-C to the satisfaction of the FDA;

    the results of our clinical studies may not meet the level of statistical or clinical significance required by the FDA for marketing approval;

    the magnitude of the treatment effect must also be clinically meaningful along with the drug's safety for a favorable benefit/risk assessment by the FDA;

    the FDA may disagree with the number, design, size, duration, exposure of patients, or conduct or implementation of our clinical studies;

    the FDA may require that we conduct additional clinical studies;

    the FDA or an applicable foreign regulatory agency may not approve the formulation, specifications or labeling of bempedoic acid;

    the clinical research organizations, or CROs, that we retain to conduct our clinical studies may take actions outside of our control that materially adversely impact our clinical studies;

    the FDA may find the data from preclinical studies and clinical studies insufficient to demonstrate that bempedoic acid's clinical and other benefits outweigh its safety risks;

    the FDA may disagree with our interpretation of data from our preclinical studies and clinical studies;

    the FDA may not accept data generated at our clinical study sites;

    if our NDA, if and when submitted, is reviewed by an advisory committee, the FDA may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA require, as a condition of approval, additional preclinical studies or clinical studies, limitations in approved labeling or distribution and use restrictions;

    the FDA may require the development of a REMS as a condition of approval or post-approval;

    the FDA or the applicable foreign regulatory agency may not approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or

    the FDA may change its approval policies or adopt new regulations.

        Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market bempedoic acid. Moreover, because our business is almost entirely dependent upon this one product candidate, any setback in our pursuit of its regulatory approval would have a material adverse effect on our business and prospects.

Failures or delays in the completion of our Phase 2, pivotal Phase 3 clinical studies or a CVOT of bempedoic acid could result in increased costs to us and could delay, prevent or limit our ability to generate revenue and continue our business.

        In January 2016, we commenced a Phase 2 clinical study in patients treated with high-dose statin therapy, and a Phase 3 long-term safety and tolerability study in patients with hyperlipidemia whose LDL-C is not adequately controlled with low- and moderate-dose statins. Successful completion of such clinical studies are likely prerequisites to submitting an NDA to the FDA and, consequently, the ultimate approval and commercial marketing of bempedoic acid. We do not know whether our ongoing

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Phase 2 or Phase 3 clinical studies will be completed on schedule, if at all. Additionally, we are working to finalize the design of our Phase 3 program and the CVOT, and do not know whether these additional planned Phase 3 clinical studies or CVOT, which will be determined following discussions with the FDA, will begin or be completed on schedule. The commencement and completion of clinical studies can be delayed or prevented for a number of reasons, including, among others:

    the FDA may not agree to the study design or overall program;

    the FDA may place a clinical study on hold;

    delays in reaching or failing to reach agreement on acceptable terms with prospective CROs and study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites;

    inadequate quantity or quality of a product candidate or other materials necessary to conduct clinical studies;

    difficulties or delays obtaining institutional review board, or IRB, approval to conduct a clinical study at a prospective site or sites;

    challenges in recruiting and enrolling patients to participate in clinical studies or in our planned CVOT, including the size and nature of the patient population, the proximity of patients to clinical sites, eligibility criteria for the clinical study, the nature of the clinical study protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical study programs for similar indications;

    severe or unexpected drug-related side effects experienced by patients in a clinical study, including instances of muscle pain or weakness or other side effects previously identified in our completed clinical studies;

    reports from preclinical or clinical testing of other cardiometabolic therapies that raise safety or efficacy concerns; and

    difficulties retaining patients who have enrolled in a clinical study but may be prone to withdraw due to rigors of the study, lack of efficacy, side effects, personal issues or loss of interest.

        Clinical studies may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical study may be suspended or terminated by us, the FDA, the IRBs at the sites where the IRBs are overseeing a clinical study, a data safety monitoring board, or DSMB, overseeing the clinical study at issue or other regulatory authorities due to a number of factors, including, among others:

    failure to conduct the clinical study in accordance with regulatory requirements or our clinical protocols;

    inspection of the clinical study operations or study sites by the FDA or other regulatory authorities that reveals deficiencies or violations that require us to undertake corrective action, including the imposition of a clinical hold;

    unforeseen safety issues;

    changes in government regulations or administrative actions;

    problems with clinical supply materials; and

    lack of adequate funding to continue the clinical study.

Positive results from completed Phase 1 and Phase 2 clinical studies of bempedoic acid are not necessarily predictive of the results of our ongoing Phase 2 and Phase 3 and planned Phase 3 clinical studies and CVOT

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of bempedoic acid, nor do they guarantee approval of bempedoic acid by the FDA. If we cannot replicate the positive results from our completed Phase 1 and Phase 2 clinical studies of bempedoic acid in our ongoing Phase 2 and Phase 3 and planned Phase 3 clinical studies and CVOT, we may be unable to successfully develop, obtain regulatory approval for and commercialize bempedoic acid.

        There is a high failure rate for drugs proceeding through clinical studies. Our ongoing Phase 2 clinical study is evaluating the LDL-C lowering efficacy of bempedoic acid as an add-on to patients on stable atorvastatin. This is the first clinical study in which we are testing bempedoic acid in patients already being administered a high-dose statin. Our ongoing Phase 3 clinical study is evaluating the safety and tolerability of bempedoic acid in patients with hyperlipidemia at high cardiovascular disease risk and whose LDL-C is not adequately controlled with maximally tolerated lipid-modifying therapy. We are working to finalize the design of our Phase 3 program and CVOT. Even if we are able to complete our ongoing Phase 2 and Phase 3 and planned Phase 3 clinical studies and CVOT, which will be determined following discussions with the FDA, of bempedoic acid according to our current development timeline, the positive results from our completed Phase 1 and Phase 2 clinical studies of bempedoic acid may not be replicated in our ongoing Phase 2 or Phase 3 or planned Phase 3 clinical studies or CVOT results, nor do they guarantee approval of bempedoic acid by the FDA in a timely manner or at all. Similarly, success of our program in a statin-intolerant population does not necessarily mean that our statin add-on program will be similarly successful. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical studies after achieving positive results in early stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, preclinical findings made while clinical studies were underway or safety or efficacy observations made in clinical studies, including previously unreported adverse events. In addition, regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development.

        Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical studies nonetheless failed to obtain FDA approval. If we fail to obtain positive results in our ongoing Phase 2 and Phase 3 and planned Phase 3 clinical studies and CVOT of bempedoic acid, the development timeline and regulatory approval and commercialization prospects for our leading product candidate, and, correspondingly, our business and financial prospects, would be materially adversely affected.

We may need substantial additional capital in the future. If additional capital is not available, we will have to delay, reduce or cease operations.

        Although we believe that the net proceeds from our public offerings will be sufficient to fund our operations through at least the end of 2018, we will likely need to raise additional capital thereafter to continue to fund the further development and commercialization of bempedoic acid and our operations. We reported top-line results from our Phase 2b ETC-1002-008 clinical study in October 2014, our Phase 2b ETC-1002-009 clinical study in March 2015, and our Phase 2a ETC-1002-014 exploratory clinical safety study in July 2015. We held our End-of-Phase 2 meeting with the FDA in August 2015. In January 2016, we commenced our Phase 2 ETC-1002-035 clinical study and our Phase 3 ETC-1002-040 clinical study. Our future capital requirements may be substantial and will depend on many factors including:

    the scope, size, rate of progress, results and costs of completing our Phase 3 clinical program of bempedoic acid, which currently includes multiple pivotal Phase 3 clinical studies and one long-term safety study;

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    the scope, size, rate of progress, results and costs of completing our ongoing additional Phase 2 clinical studies of bempedoic acid and our operating costs incurred as we conduct these studies;

    the scope, size, rate of progress, results and costs of initiating and completing our planned CVOT of bempedoic acid;

    the cost, timing and outcome of our efforts to obtain marketing approval for bempedoic acid in the United States, including to fund the preparation and filing of an NDA with the FDA for bempedoic acid and to satisfy related FDA requirements;

    the number and characteristics of any additional product candidates we develop or acquire;

    the costs associated with commercializing bempedoic acid or any future product candidates if we receive marketing approval, including the cost and timing of developing sales and marketing capabilities or entering into strategic collaborations to market and sell bempedoic acid or any future product candidates;

    the cost of manufacturing bempedoic acid or any future product candidates and any products we successfully commercialize; and

    the costs associated with general corporate activities, such as the cost of filing, prosecuting and enforcing patent claims.

        Changing circumstances may cause us to consume capital significantly faster than we currently anticipate. Because the outcome of any clinical study is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development, regulatory approval and commercialization of bempedoic acid and any future product candidates. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. If adequate funds are unavailable to us on a timely basis, or at all, we may not be able to continue the development of bempedoic acid or any future product candidate, or to commercialize bempedoic acid or any future product candidate, if approved, unless we find a partner.

We are an emerging pharmaceutical company and have not generated any revenue from product sales. We have incurred significant operating losses since our inception, and anticipate that we will incur continued losses for the foreseeable future.

        We have a limited operating history on which to base your investment decision. Pharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We were incorporated in January 2008. Our operations to date have been limited primarily to organizing and staffing our company and conducting research and development activities for bempedoic acid. We have never generated any revenue from product sales. We have not obtained regulatory approvals for any of our product candidates. As such, we are subject to all the risks incident to the development, regulatory approval and commercialization of new pharmaceutical products and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors.

        Since our inception, we have focused substantially all of our efforts and financial resources on developing bempedoic acid, which recently commenced Phase 3 clinical development in January 2016. We have funded our operations to date primarily through proceeds from sales of preferred stock, public offerings of common stock, convertible promissory notes and warrants and the incurrence of indebtedness, and we have incurred losses in each year since our inception. Our net losses were $49.8 million, $36.4 million and $26.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, we had an accumulated deficit of $154.2 million. Substantially all of our operating losses resulted from costs incurred in connection with our development program

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and from general and administrative costs associated with our operations. We expect to incur increasing levels of operating losses over the next several years and for the foreseeable future. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders' equity and working capital. We expect our research and development expenses to significantly increase in connection with our additional clinical studies of bempedoic acid and development of any other product candidates we may choose to pursue. In addition, if we obtain marketing approval for bempedoic acid, we will also incur significant sales, marketing and outsourced manufacturing expenses. As a public company, we have incurred and will continue to incur additional costs associated with operating as a public company, particularly now that we are no longer an "emerging growth company." As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

Changes in regulatory requirements, FDA guidance or unanticipated events during our Phase 2 or Phase 3 clinical studies or our planned CVOT of bempedoic acid may occur, which may result in changes to clinical study protocols or additional clinical study requirements, which could result in increased costs to us and could delay our development timeline.

        We are working to finalize the design of our Phase 3 program and our planned CVOT, which will be determined following discussions with the FDA. Changes in regulatory requirements, FDA guidance or unanticipated events during our clinical studies may force us to amend clinical study protocols or the FDA may impose additional clinical study requirements. Significant amendments to our clinical study protocols may require resubmission to the FDA and/or IRBs for review and approval, which may adversely impact the cost, timing and/or successful completion of these studies. If we experience substantial delays completing—or if we terminate—any of our Phase 2 or Phase 3 clinical studies or our planned CVOT, or if we are required to conduct additional clinical studies, the commercial prospects for bempedoic acid may be harmed and our ability to generate product revenue will be delayed.

        We may not be able to identify and enroll the requisite number of patients in our Phase 3 studies or planned CVOT. Even if we are successful in enrolling patients in these studies, we may not ultimately be able to demonstrate sufficient clinical benefits from bempedoic acid and our failure to do so may delay or hinder our ability to obtain FDA approval for bempedoic acid. Our current development timeline for bempedoic acid contemplates initiating and having a CVOT "well underway" by the time bempedoic acid is approved, but does not contemplate completion of such a trial prior to approval. Conducting our planned CVOT will be costly and time-consuming, and a future requirement to complete the CVOT prior to approval of bempedoic acid would adversely affect our development timeline and financial condition.

Even if we receive marketing approval for bempedoic acid, we may still face future development and regulatory difficulties.

        Even if we receive marketing approval for bempedoic acid, regulatory authorities may still impose significant restrictions on bempedoic acid's indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies, such as a CVOT. Bempedoic acid will also be subject to ongoing FDA requirements governing the packaging, storage, labeling, advertising and promotion of the product, recordkeeping and submission of safety updates and other post-marketing information. The FDA has significant post-marketing authority, including, for example, the authority to require labeling changes based on new safety information and to require post-marketing studies or clinical studies to evaluate serious safety risks related to the use of a drug product. The FDA also has the authority to require, as part of an NDA or post-approval, the submission of a REMS. Any REMS

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required by the FDA may lead to increased costs to assure compliance with post-approval regulatory requirements and potential requirements or restrictions on the sale of approved products, all of which could lead to lower sales volume and revenue.

        Manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current Good Manufacturing Practices and other regulations. If we or a regulatory agency discover problems with bempedoic acid, such as adverse events of unanticipated severity or frequency, or problems with the facility where bempedoic acid is manufactured, a regulatory agency may impose restrictions on bempedoic acid, the manufacturer or us, including requiring withdrawal of bempedoic acid from the market or suspension of manufacturing. If we, bempedoic acid or the manufacturing facilities for bempedoic acid fail to comply with applicable regulatory requirements, a regulatory agency may, among other things:

    issue warning letters or untitled letters;

    seek an injunction or impose civil or criminal penalties or monetary fines;

    suspend or withdraw marketing approval;

    suspend any ongoing clinical studies;

    refuse to approve pending applications or supplements to applications submitted by us;

    suspend or impose restrictions on operations, including costly new manufacturing requirements; or

    seize or detain products, refuse to permit the import or export of products, or request that we initiate a product recall.

Even if we receive marketing approval for bempedoic acid in the United States, we may never receive regulatory approval to market bempedoic acid outside of the United States.

        We have not yet selected any markets outside of the United States where we intend to seek regulatory approval to market bempedoic acid. In order to market any product outside of the United States, however, we must establish and comply with the numerous and varying efficacy, safety and other regulatory requirements of other countries. Approval procedures vary among countries and can involve additional product candidate testing and additional administrative review periods. The time required to obtain approvals in other countries might differ from that required to obtain FDA approval. The marketing approval processes in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. In particular, in many countries outside of the United States, products must receive pricing and reimbursement approval before the product can be commercialized. Obtaining this approval can result in substantial delays in bringing products to market in such countries. Marketing approval in one country does not ensure marketing approval in another, but a failure or delay in obtaining marketing approval in one country may have a negative effect on the regulatory process in others. Failure to obtain marketing approval in other countries or any delay or other setback in obtaining such approval would impair our ability to commercialize bempedoic acid in such foreign markets. Any such impairment would reduce the size of our potential market, which could have a material adverse impact on our business, results of operations and prospects.

Even if we receive marketing approval for bempedoic acid, it may not achieve broad market acceptance, which would limit the revenue that we generate from its sales.

        The commercial success of bempedoic acid, if approved by the FDA or other regulatory authorities, will depend upon the awareness and acceptance of bempedoic acid among the medical

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community, including physicians, patients and healthcare payors. Market acceptance of bempedoic acid, if approved, will depend on a number of factors, including, among others:

    bempedoic acid's demonstrated ability to treat statin intolerant patients with elevated LDL-C or as an add-on for patients already on statin therapy and, if required by any applicable regulatory authority in connection with the approval for this or any other indication, to provide patients with incremental cardiovascular disease benefits, as compared with other available therapies;

    the relative convenience and ease of administration of bempedoic acid, including as compared with other treatments for patients with elevated LDL-C;

    the prevalence and severity of any adverse side effects such as muscle pain or weakness;

    limitations or warnings contained in the labeling approved for bempedoic acid by the FDA;

    availability of alternative treatments, including a number of competitive LDL-C lowering therapies already approved, including PCSK9 inhibitors, or expected to be commercially launched in the near future;

    pricing and cost effectiveness;

    the effectiveness of our sales and marketing strategies;

    our ability to increase awareness of bempedoic acid through marketing efforts;

    our ability to obtain sufficient third-party coverage or reimbursement; and

    the willingness of patients to pay out-of-pocket in the absence of third-party coverage.

        If bempedoic acid is approved but does not achieve an adequate level of acceptance by patients, physicians and payors, we may not generate sufficient revenue from bempedoic acid to become or remain profitable. Before granting reimbursement approval, healthcare payors may require us to demonstrate that, in addition to lowering elevated LDL-C levels, bempedoic acid also provides incremental cardiovascular disease benefits to patients. Our efforts to educate the medical community and third-party payors about the benefits of bempedoic acid may require significant resources and may never be successful.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell bempedoic acid, we may not be able to generate any revenue.

        We do not currently have an infrastructure for the sales, marketing and distribution of pharmaceutical products. In order to market bempedoic acid, if approved by the FDA or any other regulatory body, we must build our sales, marketing, managerial, and other non-technical capabilities or make arrangements with third parties to perform these services. If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, or if we are unable to do so on commercially reasonable terms, our business, results of operations, financial condition and prospects will be materially adversely affected.

Even if we obtain marketing approval for bempedoic acid, physicians and patients using other LDL-C lowering therapies may choose not to switch to our product.

        Physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective, safe or convenient treatments enter the market. In addition, patients often acclimate to the brand or type of therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing therapies. If physicians or patients are reluctant to switch from

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existing therapies to bempedoic acid, if approved, our operating results and financial condition would be materially adversely affected.

Guidelines and recommendations published by various organizations may adversely affect the use or commercial viability of bempedoic acid, if approved.

        Government agencies issue regulations and guidelines directly applicable to us and to bempedoic acid, including guidelines generally relating to therapeutically significant LDL-C levels. In addition, professional societies, practice management groups, private health or science foundations and other organizations involved in the research, treatment and prevention of various diseases from time to time publish guidelines or recommendations to the medical and patient communities. These various sorts of recommendations may relate to such matters as product usage and use of related or competing therapies. For example, organizations such as the American Heart Association have made recommendations about therapies in the cardiovascular therapeutics market. Changes to these existing recommendations or other guidelines advocating alternative therapies could result in decreased use of bempedoic acid, if approved, which would adversely affect our results of operations.

Even if approved, reimbursement policies could limit our ability to sell bempedoic acid.

        Market acceptance and sales of bempedoic acid will depend on reimbursement policies and may be affected by healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels for those medications. Cost containment is a primary concern in the U.S. healthcare industry and elsewhere. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that reimbursement will be available for bempedoic acid and, if reimbursement is available, the level of such reimbursement. Reimbursement may impact the demand for, or the price of, bempedoic acid. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize bempedoic acid.

        In some foreign countries, particularly in Canada and European countries, the pricing of prescription pharmaceuticals is subject to strict governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory approval and product launch. To obtain favorable reimbursement for the indications sought or pricing approval in some countries, we may be required to conduct a clinical study that compares the cost-effectiveness of bempedoic acid with other available therapies. If reimbursement for bempedoic acid is unavailable in any country in which we seek reimbursement, if it is limited in scope or amount, if it is conditioned upon our completion of additional clinical studies, or if pricing is set at unsatisfactory levels, our operating results could be materially adversely affected.

Our product development programs for candidates other than bempedoic acid may require substantial financial resources and may ultimately be unsuccessful.

        In addition to the development of bempedoic acid, we may pursue the development of our other two early-stage development programs. Neither of our other potential product candidates has commenced any clinical studies, and there are a number of FDA requirements that we must satisfy before we can commence such clinical studies. Satisfaction of these requirements will entail substantial time, effort and financial resources. We may never satisfy these requirements. Any time, effort and financial resources we expend on our other two early-stage development programs may adversely affect our ability to continue development and commercialization of bempedoic acid, and we may never commence clinical studies of such development programs despite expending significant resources in pursuit of their development. If we do commence clinical studies of our other potential product candidates, such product candidates may never be approved by the FDA.

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Recent federal legislation will increase pressure to reduce prices of pharmaceutical products paid for by Medicare, which could materially adversely affect our revenue, if any, and our results of operations.

        In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the scope of coverage and the price that we receive for any approved products and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may cause a similar reduction in payments from private payors. This legislation may pose an even greater risk to bempedoic acid than some other pharmaceutical products because a significant portion of the target patient population for bempedoic acid would likely be over 65 years of age and, therefore, many such patients will be covered by Medicare.

        In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, the PPACA, became law in the United States. The goal of the PPACA is to reduce the cost of healthcare and substantially change the way healthcare is financed by both governmental and private insurers. While we cannot predict what impact on federal reimbursement policies this legislation will have in general or on our business specifically, the PPACA may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of bempedoic acid, if approved, or any of our future products. In 2012, members of the U.S. Congress and some state legislatures sought to overturn certain provisions of the PPACA including those concerning the mandatory purchase of insurance. However, on June 28, 2012, the United States Supreme Court upheld the constitutionality of these provisions. Members of the U.S. Congress have since proposed a number of legislative initiatives, including possible repeal of the PPACA. We cannot predict the outcome or impact of current proposals or whether new proposals will be made or adopted, when they may be adopted or what impact they may have on us if they are adopted. These challenges add to the uncertainty of the legislative changes as part of ACA.

        Finally, the availability of generic LDL-C lowering treatments may also substantially reduce the likelihood of reimbursement for branded counterparts or other competitive LDL-C lowering therapies, such as bempedoic acid if it is approved for commercial distribution. If we fail to successfully secure and maintain reimbursement coverage for our products or are significantly delayed in doing so, we will have difficulty achieving market acceptance of our products and our business will be harmed.

Recent federal legislation and actions by state and local governments may permit reimportation of drugs from foreign countries into the United States, including foreign countries where the drugs are sold at lower prices than in the United States, which could materially adversely affect our operating results.

        We may face competition for bempedoic acid, if approved, from cheaper LDL-C lowering therapies sourced from foreign countries that have placed price controls on pharmaceutical products. The MMA contains provisions that may change U.S. importation laws and expand pharmacists' and wholesalers' ability to import cheaper versions of an approved drug and competing products from Canada, where there are government price controls. These changes to U.S. importation laws will not take effect unless and until the Secretary of Health and Human Services certifies that the changes will pose no additional risk to the public's health and safety and will result in a significant reduction in the cost of products to consumers. The Secretary of Health and Human Services has so far declined to approve a reimportation plan. Proponents of drug reimportation may attempt to pass legislation that

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would directly allow reimportation under certain circumstances. Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop, including bempedoic acid, and adversely affect our future revenues and prospects for profitability.

The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found to have improperly promoted off-label uses, we may become subject to significant liability.

        The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as bempedoic acid if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or other regulatory agencies as reflected in the product's approved labeling. If we receive marketing approval for bempedoic acid as a therapy for lowering LDL-C levels in statin intolerant patients with elevated LDL-C, the first indication we intend to pursue, physicians may nevertheless prescribe bempedoic acid to their patients in a manner that is inconsistent with the approved label, potentially including as a therapy in addition to statins. If we are found to have promoted such off-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees, corporate integrity agreements or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of bempedoic acid, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

Our market is subject to intense competition. If we are unable to compete effectively, our opportunity to generate revenue from the sale of bempedoic acid, if approved, will be materially adversely affected.

        The LDL-C lowering therapies market is highly competitive and dynamic and dominated by the sale of statin treatments, including the cheaper generic versions of statins. We estimate that the total statin monotherapy and fixed combination market, including generic drugs, accounted for 69% of U.S. sales in the LDL-C lowering market in 2012. Our success will depend, in part, on our ability to obtain a share of the market, initially, for patients who are statin intolerant. Potential competitors in North America, Europe and elsewhere include major pharmaceutical companies, specialty pharmaceutical companies, biotechnology firms, universities and other research institutions and government agencies. Other pharmaceutical companies may develop LDL-C lowering therapies for statin intolerant patients that compete with bempedoic acid, if approved, that do not infringe the claims of our patents, pending patent applications or other proprietary rights, which could materially adversely affect our business and results of operations.

        LDL-C lowering therapies currently on the market that would compete with bempedoic acid include the following:

    Statins, such as Crestor® (rosuvastatin) and Lipitor® (atorvastatin), including their cheaper generic versions;

    Cholesterol absorption inhibitors, such as Zetia® (ezetimibe), a monotherapy marketed by Merck & Co.;

    PCSK9 inhibitors such as Praluent® (alirocumab) and Repatha® (evolocumab), marketed by Sanofi and Amgen Inc. respectively;

    Bile acid sequestrants such as Welchol® (colesevelam), marketed by Daiichi Sankyo Inc.;

    MTP inhibitors, such as JUXTAPID® (lomitapide), marketed by Aegerion Pharmaceuticals, Inc.;

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    Apo B Anti-Sense therapy, such as KYNAMRO® (mipomersen), marketed by Genzyme Corp. a Sanofi company;

    Combination therapies, such as Vytorin® (ezetimibe and simvastatin) and Liptruzet® (ezetimibe and atorvastatin), marketed by Merck & Co., Inc.; and

    Other lipid-lowering monotherapies (including cheaper generic versions), such as Tricor® (fenofibrate) and Niaspan® (niacin extended release), and combination therapies, such as Advicor® (niacin extended release and lovastatin) and Simcor® (niacin extended release and simvastatin), all of which are marketed by AbbVie, Inc.

        Several other pharmaceutical companies have other LDL-C lowering therapies in development that may be approved for marketing in the United States or outside of the United States. Based on publicly available information, we believe the current therapies in development that would compete with bempedoic acid include:

    Bococizumab, a separate PCSK9 inhibitor therapy in Phase 3 clinical testing being developed by Pfizer Inc., and five additional PCSK9 inhibitors in earlier phases of development from Lilly, Novartis, Roche, Kowa and The Medicines Company/Alnylam; and

    CETP inhibitors, such as anacetrapib, a therapy in Phase 3 clinical testing being developed by Merck.

        Many of our potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience discovering and developing drug candidates, obtaining FDA and other marketing approvals of products and commercializing those products. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors' drugs may be more effective, or more effectively marketed and sold, than bempedoic acid, if approved, and may render bempedoic acid obsolete or non-competitive before we can recover the expenses of developing and commercializing it. If approved, bempedoic acid may also compete with unapproved and off-label LDL-C lowering treatments, and following the expiration of additional patents covering the LDL-C lowering market, we may also face additional competition from the entry of new generic drugs. We anticipate that we will encounter intense and increasing competition as new drugs enter the market and advanced technologies become available.

We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.

        The use of bempedoic acid in clinical studies and the sale of bempedoic acid, if approved, exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers or others selling or otherwise coming into contact with bempedoic acid. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:

    withdrawal of patients from our clinical studies;

    substantial monetary awards to patients or other claimants;

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    decreased demand for bempedoic acid or any future product candidates following marketing approval, if obtained;

    damage to our reputation and exposure to adverse publicity;

    increased FDA warnings on product labels;

    litigation costs;

    distraction of management's attention from our primary business;

    loss of revenue; and

    the inability to successfully commercialize bempedoic acid or any future product candidates, if approved.

        We maintain product liability insurance coverage for our clinical studies with a $10.0 million annual aggregate coverage limit. Nevertheless, our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. If and when we obtain marketing approval for bempedoic acid, we intend to expand our insurance coverage to include the sale of commercial products; however, we may not be able to obtain this product liability insurance on commercially reasonable terms. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, business and prospects could be materially adversely affected.

We are subject to healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

        Healthcare providers, physicians and others will play a primary role in the recommendation and prescription of bempedoic acid, if approved. Our future arrangements with third-party payors will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute bempedoic acid, if we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

    The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid.

    The federal False Claims Act imposes criminal and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government.

    The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes

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      obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

    The federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services.

    The federal transparency requirements under the PPACA require manufacturers of drugs, devices, biologics, and medical supplies to report to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests.

    Analogous state laws and regulations, such as state anti-kickback and false claims laws and transparency laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and drug pricing.

        Ensuring that our future business arrangements with third parties comply with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including anticipated activities to be conducted by our sales team, were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines and exclusion from government funded healthcare programs, such as Medicare and Medicaid, any of which could substantially disrupt our operations. If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Our internal computer systems, or those of our third-party clinical research organizations or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our bempedoic acid development programs.

        Despite the implementation of security measures, our internal computer systems and those of our third-party clinical research organizations and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. While we have not experienced any such system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our programs. For example, the loss of clinical study data for bempedoic acid could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of bempedoic acid could be delayed.

Our credit facility imposes significant restrictions on our business, and if we default on our obligations, our lender would have a right to foreclose on substantially all our assets.

        In June 2014, we entered into a loan and security agreement, or loan agreement, with Oxford Finance LLC, or Oxford, pursuant to which, subject to the conditions to borrowing thereunder, we

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borrowed an aggregate principal amount of $5.0 million. The loans are secured by a lien on substantially all of our assets excluding intellectual property.

        We could in the future incur additional indebtedness beyond amounts currently outstanding under our loan agreement with Oxford. Our debt combined with our other financial obligations and contractual commitments could have significant adverse consequences, including:

    requiring us to dedicate a substantial portion of cash flow from operations to the payment of interest on, and principal of, our debt, which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes;

    increasing our vulnerability to adverse changes in general economic, industry and market conditions;

    limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

    placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

    Additionally, with certain exceptions, the loan agreement prohibits us from:

    making any material dispositions of our assets, except for permitted dispositions;

    making any changes in our business, management, ownership, or business locations;

    entering into any merger or consolidation without Oxford's consent;

    acquiring or making investments in any other person other than permitted investments;

    incurring any indebtedness, other than permitted indebtedness;

    granting or permitting liens against our assets, other than permitted liens;

    declaring or paying any dividends or making any other distributions; or

    entering into any material transaction with any affiliate, other than in the ordinary course of business.

        We intend to satisfy our current and future debt service obligations with our cash and cash equivalents and short-term investments and funds from external sources. However, we may not have sufficient funds or may be unable to arrange for additional financing to pay the amounts due under our existing debt. Funds from external sources may not be available on acceptable terms, if at all. In addition, a failure to comply with the covenants under our debt instruments could result in an event of default under those instruments. In the event of an acceleration of amounts due under our debt instruments as a result of an event of default, we may not have sufficient funds and may be unable to arrange for additional financing to repay our indebtedness, and our lender could seek to enforce security interests in the collateral securing such indebtedness. In addition, the covenants under our debt instruments and the pledge of our assets as collateral limit our ability to obtain additional debt financing.


Risks Related to our Intellectual Property

If we are unable to adequately protect our proprietary technology or maintain issued patents which are sufficient to protect bempedoic acid, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

        Our commercial success will depend in part on our success obtaining and maintaining issued patents and other intellectual property rights in the United States and elsewhere and protecting our

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proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

        As of December 31, 2015, Esperion's patent estate, including patents we own or license from third parties, on a worldwide basis, included approximately 23 issued United States patents and eight pending United States patent applications and 19 issued patents and 15 pending patent applications in foreign jurisdictions. Of our worldwide patents and pending applications, only a subset relates to our small molecule program which includes our lead product candidate, bempedoic acid. Bempedoic acid is claimed in U.S. Patent No. 7,335,799 that is scheduled to expire in December 2025, which includes 711 days of patent term adjustment, and may be eligible for a patent term extension period of up to five years. U.S. Patent Nos. 9,000,041 and 8,497,301 claim methods of treatment using bempedoic acid. We also have a pending U.S. patent application directed to bempedoic acid. There are currently three issued patents and four pending applications in countries outside the United States that relate to bempedoic acid.

        A subset of this portfolio relates to our planned fixed-dose combination of bempedoic acid and ezetimibe and bempedoic acid and one or more statins. We have one pending U.S. patent application claiming methods of treatment using a fixed-dose combination of bempedoic acid and ezetimibe, and two pending U.S. patent applications claiming methods of treatment using fixed-dose combinations of bempedoic acid and one or more statins.

        We may not have identified all patents, published applications or published literature that affect our business either by blocking our ability to commercialize our drug candidates, by preventing the patentability of one or more aspects of our drug candidates to us or our licensors or co-owners, or by covering the same or similar technologies that may affect our ability to market our drug candidates. For example, we (or the licensor of a drug candidate to us) may not have conducted a patent clearance search to identify potentially obstructing third party patents. Moreover, patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the U.S. Patent and Trademark Office, or the U.S. PTO, for the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside of the United States are not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. We cannot be certain that we or our licensors or co-owners were the first to invent, or the first to file, patent applications covering our drug candidates. We also may not know if our competitors filed patent applications for technology covered by our pending applications or if we were the first to invent the technology that is the subject of our patent applications. Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our patents.

        Others may have filed patent applications or received patents that conflict with patents or patent applications that we own, have filed or have licensed, either by claiming the same methods, compounds or uses or by claiming methods, compounds or uses that could dominate those owned by or licensed to us. In addition, we may not be aware of all patents or patent applications that may affect our ability to make, use or sell any of our drug candidates. Any conflicts resulting from third-party patent applications and patents could affect our ability to obtain the necessary patent protection for our products or processes. If other companies or entities obtain patents with conflicting claims, we may be required to obtain licenses to these patents or to develop or obtain alternative technology. We may not be able to obtain any such licenses on acceptable terms or at all. Any failure to obtain such licenses could delay or prevent us from using discovery-related technology to pursue the development or commercialization of our drug candidates, which would adversely affect our business.

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        We cannot assure you that any of our patents have, or that any of our pending patent applications will mature into issued patents that will include, claims with a scope sufficient to protect bempedoic acid or any other product candidates. Others have developed technologies that may be related or competitive to our approach, and may have filed or may file patent applications and may have received or may receive patents that may overlap or conflict with our patent applications, either by claiming the same methods or formulations or by claiming subject matter that could dominate our patent position. The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, and, therefore, the issuance, scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented. U.S. patents and patent applications may also be subject to interference proceedings, ex parte reexamination, inter partes review and post-grant review proceedings, supplemental examination and may be challenged in district court. Patents granted in certain other countries may be subjected to opposition or comparable proceedings lodged in various national and regional patent offices. These proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, re- examination, opposition, post-grant review, inter partes review, supplemental examination or revocation proceedings may be costly. Thus, any patents that we may own or exclusively license may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third-party receiving the patent right sought by us, which in turn could affect our ability to develop, market or otherwise commercialize bempedoic acid.

        Furthermore, the issuance of a patent, while presumed valid and enforceable, is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, vendors, former employees and current employees. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries. If these developments were to occur, they could have a material adverse effect on our sales.

        Our ability to enforce our patent rights depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor's or potential competitor's product. Any litigation to enforce or defend our patent rights, if any, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

        In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If, in any proceeding, a court invalidated or found unenforceable our patents covering bempedoic acid, our financial position and results of operations would be materially and adversely impacted. In addition, if a court found that valid, enforceable patents held by third parties covered bempedoic acid, our financial position and results of operations would also be materially and adversely impacted.

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        The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

    any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect bempedoic acid;

    any of our pending patent applications will result in issued patents;

    we will be able to successfully commercialize bempedoic acid, if approved, before our relevant patents expire;

    we were the first to make the inventions covered by each of our patents and pending patent applications;

    we were the first to file patent applications for these inventions;

    others will not develop similar or alternative technologies that do not infringe our patents;

    any of our patents will be valid and enforceable;

    any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

    we will develop additional proprietary technologies or product candidates that are separately patentable; or

    that our commercial activities or products, or those of our licensors, will not infringe upon the patents of others.

        We rely upon unpatented trade secrets, unpatented know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants. We also have agreements with our employees and selected consultants that obligate them to assign their inventions to us. It is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. Furthermore, if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could otherwise become known or be independently discovered by our competitors.

If we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology and products could be significantly diminished.

        We rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, contract manufacturers, vendors and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, we cannot guarantee that we have executed these agreements with each party that may have or have had access to our trade secrets.

        Moreover, because we acquired certain rights to our lead product candidate from Pfizer, we must rely on Pfizer's practices, and those of its predecessors, with regard to parties that may have had access to our trade secrets related thereto before our incorporation. Any party with whom we or they have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.

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Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they disclose such trade secrets, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third-party, our competitive position would be harmed.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing bempedoic acid, if approved.

        Our success will depend in part on our ability to operate without infringing the intellectual property and proprietary rights of third parties. We cannot assure you that our business, products and methods do not or will not infringe the patents or other intellectual property rights of third parties.

        The pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that bempedoic acid or the use of our technologies infringes patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. Any claim relating to intellectual property infringement that is successfully asserted against us may require us to pay substantial damages, including treble damages and attorney's fees if we are found to be willfully infringing another party's patents, for past use of the asserted intellectual property and royalties and other consideration going forward if we are forced to take a license. In addition, if any such claim were successfully asserted against us and we could not obtain such a license, we may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing bempedoic acid.

        Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign our products. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, intellectual property litigation or claims could force us to do one or more of the following:

    cease developing, selling or otherwise commercializing bempedoic acid;

    pay substantial damages for past use of the asserted intellectual property;

    obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and

    redesign, or rename in the case of trademark claims, bempedoic acid to avoid infringing the intellectual property rights of third parties, which may not be possible and, even if possible, could be costly and time-consuming.

        Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition and prospects.

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Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

        The United States has enacted and is currently implementing the America Invents Act of 2011, wide-ranging patent reform legislation. The United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. PTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

        The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

We could become dependent on licensed intellectual property. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing bempedoic acid or other product candidates, if approved.

        In the future, we may enter into license(s) to third-party intellectual property that are necessary or useful to our business. Such license agreement(s) will likely impose various obligations upon us, and our licensor(s) have or may have the right to terminate the license thereunder in the event of a material breach or, in some cases, at will. Future licensor(s) may allege that we have breached our license agreement with them or decide to terminate our license at will, and accordingly seek to terminate our license. If successful, this could result in our loss of the right to use the licensed intellectual property, which could materially adversely affect our ability to develop and commercialize a product candidate or product, if approved, as well as harm our competitive business position and our business prospects.

We do not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

        Filing, prosecuting and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

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        Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to emerging pharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

        Our employees have been previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we are not aware of any claims currently pending against us, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of the former employers of our employees. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize bempedoic acid, which would materially adversely affect our commercial development efforts.


Risks Related to our Dependence on Third Parties

We will be unable to directly control all aspects of our clinical studies due to our reliance on CROs and other third parties that assist us in conducting clinical studies.

        We relied on CROs in our prior clinical studies, and will continue to rely on CROs to conduct our ongoing Phase 2 and Phase 3 and planned Phase 3 clinical studies and CVOT for bempedoic acid. As a result, we will have less direct control over the conduct, timing and completion of these clinical studies and the management of data developed through the clinical studies than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside parties may:

    have staffing difficulties;

    fail to comply with contractual obligations;

    experience regulatory compliance issues;

    undergo changes in priorities or become financially distressed; or

    form relationships with other entities, some of which may be our competitors.

        These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical studies and may subject us to unexpected cost increases that are beyond our control.

        Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording, and reporting the results of clinical studies to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical

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study participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements.

        Problems with the timeliness or quality of the work of any CRO may lead us to seek to terminate our relationship with any such CRO and use an alternative service provider. Making this change may be costly and may delay our clinical studies, and contractual restrictions may make such a change difficult or impossible to effect. If we must replace any CRO that is conducting our clinical studies, our clinical studies may have to be suspended until we find another CRO that offers comparable services. The time that it takes us to find alternative organizations may cause a delay in the commercialization of bempedoic acid or may cause us to incur significant expenses to replicate data that may be lost. Although we do not believe that any CRO on which we may rely will offer services that are not available elsewhere, it may be difficult to find a replacement organization that can conduct our clinical studies in an acceptable manner and at an acceptable cost. Any delay in or inability to complete our clinical studies could significantly compromise our ability to secure regulatory approval of bempedoic acid and preclude our ability to commercialize bempedoic acid, thereby limiting or preventing our ability to generate revenue from its sales.

We rely completely on third-party suppliers to manufacture our clinical drug supplies for bempedoic acid, and we intend to rely on third parties to produce commercial supplies of bempedoic acid and preclinical, clinical and commercial supplies of any future product candidate.

        We do not currently have, nor do we plan to acquire, the infrastructure or capability to internally manufacture our clinical drug supply of bempedoic acid, or any future product candidates, for use in the conduct of our preclinical studies and clinical studies, and we lack the internal resources and the capability to manufacture any product candidates on a clinical or commercial scale. The facilities used by our contract manufacturers to manufacture the active pharmaceutical ingredient and final drug for bempedoic acid, or any future product candidates, must be approved by the FDA and other comparable foreign regulatory agencies pursuant to inspections that would be conducted after we submit our NDA or relevant foreign regulatory submission to the applicable regulatory agency.

        We do not control the manufacturing process of, and are completely dependent on, our contract manufacturers to comply with current Good Manufacturing Practices for manufacture of both active drug substances and finished drug products. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or applicable foreign regulatory agencies, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no direct control over our contract manufacturers' ability to maintain adequate quality control, quality assurance and qualified personnel. Furthermore, all of our contract manufacturers are engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory risks for the production of such materials and products. As a result, failure to satisfy the regulatory requirements for the production of those materials and products may affect the regulatory clearance of our contract manufacturers' facilities generally. If the FDA or a comparable foreign regulatory agency does not approve these facilities for the manufacture of our product candidates or if it withdraws its approval in the future, we may need to find alternative manufacturing facilities, which would adversely impact our ability to develop, obtain regulatory approval for or market our product candidates.

If we do not establish successful collaborations, we may have to alter our development and commercialization plans for bempedoic acid.

        Our drug development programs and commercialization plans for bempedoic acid will require substantial additional cash to fund expenses. We may develop and initially commercialize bempedoic acid in the United States without a partner. However, in order to pursue the broader statin resistant

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market in the United States, we may also enter into a partnership or co-promotion arrangement with an established pharmaceutical company that has a larger sales force and we may enter into collaborative arrangements to develop and commercialize bempedoic acid outside of the United States. We will face significant competition in seeking appropriate collaborators and these collaboration agreements are complex and time-consuming to negotiate. We may not be able to negotiate collaborations on acceptable terms, or at all. If that were to occur, we may have to curtail the development or delay commercialization of bempedoic acid in certain geographies, reduce the scope of our sales or marketing activities, reduce the scope of our commercialization plans, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities outside of the United States on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all.

If a collaborative partner terminates or fails to perform its obligations under an agreement with us, the commercialization of bempedoic acid could be delayed or terminated.

        We are not currently party to any collaborative arrangements for the commercialization of bempedoic acid or similar arrangements, although we may pursue such arrangements before any commercialization of bempedoic acid outside of the United States or to further commercialize bempedoic acid in the broader statin resistant market in the United States, if approved. If we are successful in entering into collaborative arrangements for the commercialization of bempedoic acid or similar arrangements and any of our collaborative partners does not devote sufficient time and resources to a collaboration arrangement with us, we may not realize the potential commercial benefits of the arrangement, and our results of operations may be materially adversely affected. In addition, if any such future collaboration partner were to breach or terminate its arrangements with us, the commercialization of bempedoic acid could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue commercialization of bempedoic acid on our own in such locations.

        Much of the potential revenue from future collaborations may consist of contingent payments, such as payments for achieving regulatory milestones or royalties payable on sales of drugs. The milestone and royalty revenue that we may receive under these collaborations will depend upon our collaborators' ability to successfully develop, introduce, market and sell new products. In addition, collaborators may decide to enter into arrangements with third parties to commercialize products developed under collaborations using our technologies, which could reduce the milestone and royalty revenue that we may receive, if any. Future collaboration partners may fail to develop or effectively commercialize products using our products or technologies because they:

    decide not to devote the necessary resources due to internal constraints, such as limited personnel with the requisite expertise, limited cash resources or specialized equipment limitations, or the belief that other drug development programs may have a higher likelihood of obtaining marketing approval or may potentially generate a greater return on investment;

    decide to pursue other technologies or develop other product candidates, either on their own or in collaboration with others, including our competitors, to treat the same diseases targeted by our own collaborative programs;

    do not have sufficient resources necessary to carry the product candidate through clinical development, marketing approval and commercialization; or

    cannot obtain the necessary marketing approvals.

        Competition may negatively impact a partner's focus on and commitment to bempedoic acid and, as a result, could delay or otherwise negatively affect the commercialization of bempedoic acid outside

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of the United States or in the broader statin resistant market in the United States. If future collaboration partners fail to develop or effectively commercialize bempedoic acid for any of these reasons, our sales of bempedoic acid, if approved, may be limited, which would have a material adverse effect on our operating results and financial condition.


Risks Related to General Business, Employee Matters and Managing Growth

Commencing December 31, 2015, we are no longer an "emerging growth company," and the reduced disclosure requirements applicable to emerging growth companies no longer apply to us.

        Because as of June 30, 2015, the market value of our common stock that was held by non-affiliates exceeded $700 million, we became a large accelerated filer and therefore no longer qualify for status as an "emerging growth company" commencing December 31, 2015. As a large accelerated filer, we are subject to certain disclosure requirements that are applicable to other public companies that have not been applicable to us as an emerging growth company. These requirements include:

    compliance with the auditor attestation requirements in the assessment of our internal control over financial reporting;

    compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

    full disclosure obligations regarding executive compensation; and

    compliance with the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

        We expect that the loss of "emerging growth company" status will substantially increase our costs of complying with these and other requirements of being a large accelerated filer.

We will need to develop and expand our company, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations.

        We expect that we will continue to increase our workforce and the scope of our operations. To manage our anticipated development and expansion, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these development activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure; or give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the development of bempedoic acid. If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than anticipated, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize bempedoic acid, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future development and expansion of our company.

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Our future success depends on our ability to retain members of our senior management team, and to attract, retain and motivate qualified personnel.

        We are highly dependent on members of our senior management team. We have entered into employment agreements with these individuals, but any employee may terminate his or her employment with us. Although we do not have any reason to believe that we will lose the services of these individuals in the foreseeable future, the loss of the services of these individuals might impede the achievement of our research, development and commercialization objectives. We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. Recruiting and retaining qualified scientific personnel and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific personnel from universities and research institutions. Failure to succeed in clinical studies may make it more challenging to recruit and retain qualified scientific personnel.

Our company lacks experience commercializing products, which may have a material adverse effect on our business.

        We will need to transition from a company with a development focus to a company capable of supporting commercial activities. We may be unsuccessful in making such a transition. Our company has never filed an NDA and has not yet demonstrated an ability to obtain marketing approval for or commercialize a product candidate. Therefore, our clinical development and regulatory approval process may involve more inherent risk, take longer, and cost more than it would if we were a company with a more significant operating history and had experience obtaining marketing approval for and commercializing a product candidate.

Our employees may engage in misconduct or other improper activities, including violating applicable regulatory standards and requirements or engaging in insider trading, which could significantly harm our business.

        We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with the regulations of the FDA and applicable non-U.S. regulators, provide accurate information to the FDA and applicable non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of, including trading on, information obtained in the course of clinical studies, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of conduct, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may be ineffective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

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In order to satisfy our obligations as a publicly traded company, we may need to hire qualified accounting and financial personnel with appropriate public company experience.

        As a relatively new public company, we need to establish and maintain effective disclosure and financial controls and our corporate governance practices that we adopted in connection with our initial public offering. We may need to hire additional accounting and financial personnel with appropriate public company experience and technical accounting knowledge, and it may be difficult to recruit and maintain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources from product development efforts.


Risks Related to our Financial Position and Capital Requirements

We have not generated any revenue from bempedoic acid and may never be profitable.

        Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from our lead product candidate, bempedoic acid, and we do not know when, or if, we will generate any revenue. We do not expect to generate significant revenue unless and until we obtain marketing approval of, and begin to sell, bempedoic acid. Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability to:

    successfully complete our Phase 3 clinical program;

    successfully complete our ongoing additional Phase 2 clinical studies;

    initiate and successfully complete our planned CVOT;

    initiate and successfully complete all safety studies required to obtain U.S. and foreign marketing approval for bempedoic acid as a treatment for patients with elevated LDL-C;

    commercialize bempedoic acid, if approved, by developing a sales force or entering into collaborations with third parties; and

    achieve market acceptance of bempedoic acid in the medical community and with third-party payors.

        Absent our entering into a collaboration or partnership agreement, we expect to incur significant sales and marketing costs as we prepare to commercialize bempedoic acid. Even if we initiate and successfully complete our Phase 3 clinical program of bempedoic acid and achieve all clinical endpoints and bempedoic acid is approved for commercial sale, and despite expending these costs, bempedoic acid may not be a commercially successful drug. We may not achieve profitability soon after generating product sales, if ever. If we are unable to generate product revenue, we will not become profitable and may be unable to continue operations without continued funding.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

        We may seek additional capital through a combination of private and public equity offerings, debt financings, royalty-based financings, collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, your ownership interest in our company will be diluted. In addition, the terms of any such securities may include liquidation or other preferences that materially adversely affect your rights as a stockholder. Debt financing, if available, would increase our fixed payment obligations. Debt or royalty-based financings may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic

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partnerships and licensing arrangements with third parties, we may have to relinquish valuable rights to bempedoic acid, our intellectual property, future revenue streams or grant licenses on terms that are not favorable to us.

Our ability to use our net operating loss carryforwards may be subject to limitation.

        At December 31, 2015, we had United States federal net operating loss carryforwards of approximately $137.4 million and state net operating loss carryforwards of approximately $15.4 million. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. In general, an "ownership change" will occur if there is a cumulative change in our ownership by "5-percent shareholders" that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. As a result of prior equity issuances and other transactions in our stock, we have previously experienced "ownership changes" under section 382 of the Code and comparable state tax laws. We may also experience ownership changes in the future as a result of future transactions in our stock. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards or other pre-change tax attributes to offset United States federal and state taxable income is subject to limitations.

Complying with public company reporting and other obligations may strain our financial and managerial resources. Additionally, we are obligated to develop and maintain proper and effective internal control over financial reporting, but we may not complete our analysis of our internal control over financial reporting in a timely manner or these internal controls may not be determined to be effective, either of which may harm investor confidence in us and the value of our common stock.

        As a public company, we are required to comply with applicable provisions of the Sarbanes-Oxley Act of 2002, as well as other rules and regulations promulgated by the SEC and the NASDAQ Stock Market LLC, or NASDAQ, which results in significant initial and continuing legal, accounting, administrative and other costs and expenses. The listing requirements of The NASDAQ Global Market require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel need to devote a substantial amount of time to ensure that we comply with all of these requirements.

        We are subject to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, and the related rules of the SEC that generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Section 404 requires an annual management assessment, as well as an opinion from our independent registered public accounting firm, on the effectiveness of our internal control over financial reporting.

        We are in the costly and challenging process of evaluating and testing our internal controls for the purpose of providing the reports required by these rules. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the course of our review and testing, we may identify deficiencies and be unable to remediate them before we must provide the required reports. Furthermore, if we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. In addition, we are required to timely file accurate quarterly and annual reports with the SEC under the Securities Exchange Act of 1934, or the Exchange Act, as

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amended. In order to report our results of operations and financial statements on an accurate and timely basis, we depend on CROs to provide timely and accurate notice of their costs to us. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from The NASDAQ Global Market or other adverse consequences that would materially harm our business.


Risks Related to the Securities Markets and Investment in our Common Stock

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

        At December 31, 2015, our executive officers, directors and entities affiliated with certain of our directors beneficially owned approximately 32.1% of our outstanding voting common stock. These stockholders have the ability to influence us through their ownership position. These stockholders may be able to determine the outcome of all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our stock price to decline.

        At December 31, 2015, certain holders of shares of our common stock are entitled to rights with respect to the registration under the Securities Act of 1933, as amended, or the Securities Act, of approximately 7.2 million shares of our common stock held by these individuals or entities. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, including shares held by our affiliates as defined in Rule 144 under the Securities Act. Sales of stock by these stockholders could have a material adverse effect on the trading price of our common stock.

        Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

Market volatility may affect our stock price and the value of your investment.

        The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:

    plans for, progress of or results from clinical efficacy or safety studies of bempedoic acid;

    guidance from or communications with the FDA regarding our ongoing or planned clinical studies of bempedoic acid;

    the failure of or delay by of the FDA to approve bempedoic acid in our desired or expected target indications or at all;

    announcements of new products, technologies, commercial relationships, acquisitions or other events by us or our competitors;

    the success or failure of other LDL-C lowering therapies;

    regulatory or legal developments in the United States and other countries;

    failure of bempedoic acid, if approved, to achieve commercial success;

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    fluctuations in stock market prices and trading volumes of similar companies;

    general market conditions and overall fluctuations in U.S. equity markets;

    variations in our quarterly operating results;

    changes in our financial guidance or securities analysts' estimates of our financial performance;

    changes in accounting principles;

    our ability to raise additional capital and the terms on which we can raise it;

    sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

    additions or departures of key personnel;

    discussion of us or our stock price by the press and by online investor communities; and

    other risks and uncertainties described in these risk factors.

        As a result, you may not be able to sell your shares of common stock at or above the price at which you purchase them.

We may be at an increased risk of securities class action litigation.

        Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years. For example, as described further in Part I, Item 3—Legal Proceedings, a purported securities class action lawsuit has been filed naming us and certain of our officers as defendants. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management. This proceeding and any others in which we may become involved could result in substantial costs and a diversion of management's attention and resources, which could harm our business.

If securities or industry analysts cease publishing research or reports or publish misleading, inaccurate or unfavorable research about us, our business or our market, our stock price and trading volume could decline.

        The trading market for our common stock is influenced by the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. We only recently started receiving research coverage by securities and industry analysts. If one or more of the industry analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about our competitors, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, even one that may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

        Provisions in our certificate of incorporation and bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a prohibition

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on actions by written consent of our stockholders and the ability of our board of directors to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirors to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

        We have never declared or paid any cash dividend on our common stock and do not currently intend to do so in the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which you purchased them. Additionally, our ability to pay dividends on our common stock is limited by restrictions under the terms of our Credit Facility with Oxford Finance LLC.

Item 1B.    Unresolved Staff Comments

        None.

Item 2.    Properties

        Our corporate headquarters are located in Ann Arbor, Michigan where we lease and occupy approximately 7,900 square feet of office space. We lease and occupy an additional 5,500 square feet of office space in Ann Arbor, Michigan to support our clinical development operations. We believe our current facilities will be sufficient to meet our needs until expiration.

Item 3.    Legal Proceedings

        On January 12, 2016, a purported stockholder of the Company filed a putative class action lawsuit in the United States District Court for the Eastern District of Michigan, against us and Tim Mayleben, captioned Kevin L. Dougherty v. Esperion Therapeutics, Inc., et al. (No. 16-cv-10089). The lawsuit alleges that we and Mr. Mayleben violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by allegedly failing to disclose in an August 17, 2015, public statement that the FDA would require a cardiovascular outcomes trial before approving our lead product candidate. The lawsuit seeks, among other things, compensatory damages in connection with an allegedly inflated stock price between August 18, 2015, and September 28, 2015, as well as attorneys' fees and costs. In light of, among other things, the early stage of the litigation, we are unable to predict the outcome of this matter and are unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome.

        In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

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Item 4.    Mine Safety Disclosures

        Not applicable

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

        Our common stock began trading on the NASDAQ Global Market on June 26, 2013, under the symbol "ESPR". Prior to that time there was no public market for our common stock. Shares sold in our initial public offering which closed on July 1, 2013, were priced at $14.00 per share.

        On December 31, 2015, the closing price for our common stock as reported on the NASDAQ Global Market was $22.26. The following table sets forth the high and low sales prices per share of our common stock as reported on the NASDAQ Global Market for the period indicated:

Year Ended December 31, 2015
  High   Low  

First Quarter

  $ 118.95   $ 41.00  

Second Quarter

  $ 120.96   $ 72.05  

Third Quarter

  $ 100.98   $ 18.07  

Fourth Quarter

  $ 30.41   $ 21.14  

 

Year Ended December 31, 2014
  High   Low  

First Quarter

  $ 18.83   $ 13.50  

Second Quarter

  $ 15.97   $ 12.75  

Third Quarter

  $ 24.94   $ 13.90  

Fourth Quarter

  $ 42.13   $ 18.00  

Stockholders

        As of February 1, 2016, there were 11 stockholders of record, which excludes stockholders whose shares were held in nominee or street name by brokers.

Performance Graph

        The following graph illustrates a comparison of the total cumulative stockholder return for our common stock since January 1, 2015, to two indices: the NASDAQ Composite Index and the NASDAQ Biotechnology Index. The graph assumes an initial investment of $100 on January 1, 2015, in our common stock, the stocks comprising the NASDAQ Composite Index, and the stocks comprising the NASDAQ Biotechnology Index. Historical stockholder return is not necessarily indicative of the performance to be expected for any future periods.

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Comparison of 1 Year Cumulative Total Return*
Among Esperion Therapeutics, Inc., the NASDAQ Composite Index and
the NASDAQ Biotechnology Index

GRAPHIC


*
$100 invested on January 1, 2015, in stock or index. Fiscal Year ending December 31.

        The performance graph shall not be deemed to be incorporated by reference by means of any general statement incorporating by reference this Form 10-K into any filing under the Securities Act of 1933, as amended or the Exchange Act, except to the extent that we specifically incorporate such information by reference, and shall not otherwise be deemed filed under such acts.

Dividend Policy

        We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Additionally, our ability to pay dividends on our common stock is limited by restrictions under the terms of our Credit Facility with Oxford Finance LLC.

Equity Compensation Plans

        The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 11 of Part III of this Annual Report.

Issuer Purchases of Equity Securities

        We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10-K.

Use of Proceeds from Registered Securities

        On July 1, 2013, we closed the sale of 5,000,000 shares of common stock to the public at an initial public offering, or IPO, price of $14.00 per share. On July 11, 2013, the underwriters exercised their over-allotment option in full, pursuant to which we sold an additional 750,000 shares of common stock at a price of $14.00 per share. The offer and sale of the shares in the IPO was registered under the Securities Act pursuant to registration statements on Form S-1 (File No. 333-188595), which was filed with the SEC on May 14, 2013, and amended subsequently and declared effective on June 25, 2013, and Form S-1MEF (File No. 333-189590), which was filed with the SEC on June 25, 2013, and declared

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effective on June 25, 2013. Following the sale of the shares in connection with the closing of our IPO, the offering terminated. The offering did not terminate before all the securities registered in the registration statements were sold. Credit Suisse Securities (USA) LLC and Citigroup Global Markets Inc. acted as joint book-running managers for the offering and as representatives of the underwriters. JMP Securities LLC and Stifel, Nicolaus & Company, Inc. acted as co-managers for the offering.

        We raised approximately $72.2 million in net proceeds, after deducting underwriting discounts and commissions of approximately $5.6 million and other offering expenses of approximately $2.7 million. No offering expenses were paid directly or indirectly to any of our directors or officers or their associates or persons owning ten percent or more of any class of our equity securities or to any other affiliates.

        As of December 31, 2015, we have used approximately $66.1 million of the net offering proceeds primarily to fund the Phase 2b clinical program of bempedoic acid. We invested a significant portion of the balance of the net proceeds from the offering in cash equivalents and other short-term investments in accordance with our investment policy. As described in our final prospectus filed with the SEC on June 26, 2013, pursuant to Rule 424(b) under the Securities Act, the net proceeds from our IPO funded the clinical development of bempedoic acid through our End-of-Phase 2 meeting with the FDA held in August 2015, and we expect to use the remaining net proceeds from our IPO for working capital and general corporate purposes, including funding the costs of operating as a public company.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

        None.

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Item 6.    Selected Financial Data

        The selected financial data set forth below is derived from our audited consolidated financial statements and may not be indicative of future operating results. The following selected consolidated financial data should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes thereto included elsewhere in this report. The selected financial data in this section are not intended to replace our consolidated financial statements and the related notes. Our historical results are not necessarily indicative of our future results.

 
  Three Months Ended December 31,   Years Ended December 31,  
 
  2015   2014   2013   2012   2011   2015   2014   2013   2012   2011  
 
  (in thousands, except share and per share data)
 

Operating expenses:

                                                             

Research and development

  $ 7,956   $ 6,200   $ 7,338   $ 1,654   $ 1,898   $ 29,802   $ 25,302   $ 16,014   $ 7,998   $ 7,807  

General and administrative

    5,278     3,180     2,398     506     788     20,238     10,922     6,745     2,206     2,357  

Total operating expenses

    13,234     9,380     9,736     2,160     2,686     50,040     36,224     22,759     10,204     10,164  

Loss from operations

    (13,234 )   (9,380 )   (9,736 )   (2,160 )   (2,686 )   (50,040 )   (36,224 )   (22,759 )   (10,204 )   (10,164 )

Total other income (expense)

    112     (77 )   46     (615 )   (158 )   256     (151 )   (3,329 )   (1,538 )   (653 )

Net loss

  $ (13,122 ) $ (9,457 ) $ (9,690 ) $ (2,775 ) $ (2,844 ) $ (49,784 ) $ (36,375 ) $ (26,088 ) $ (11,742 ) $ (10,817 )

Net loss per common share (basic and diluted)

  $ (0.58 ) $ (0.49 ) $ (0.63 ) $ (8.12 ) $ (9.30 ) $ (2.26 ) $ (2.22 ) $ (3.31 ) $ (36.31 ) $ (36.22 )

Weighted average shares outstanding (basic and diluted)

    22,515,136     19,276,639     15,340,713     341,935     305,658     22,019,818     16,374,102     7,885,921     323,382     298,689  

        The table below presents a summary of our balance sheet data as of December 31, 2015, 2014, 2013, 2012 and 2011:

 
  As of December 31,  
 
  2015   2014   2013   2012   2011  
 
  (in thousands)
 

Balance Sheet Data:

                               

Cash and cash equivalents

  $ 77,336   $ 85,038   $ 56,537   $ 6,512   $ 1,571  

Working capital (deficit)

    208,769     101,208     56,417     (10,035 )   525  

Investments

    215,240     56,544     21,062          

Total assets

    295,572     143,276     78,294     7,312     2,180  

Total long-term debt

    2,688     4,231         7,529     6,897  

Common stock

    23     20     15          

Accumulated deficit

    (154,222 )   (104,438 )   (68,063 )   (41,975 )   (30,233 )

Total stockholders' equity (deficit)

    287,259     133,554     74,091     (41,365 )   (30,032 )

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation

         You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under Item 1A. "Risk Factors" and under "Forward-Looking Statements" in this Annual Report on Form 10-K.

Overview

Corporate Overview

        We are a pharmaceutical company focused on developing and commercializing first-in-class, oral, low-density lipoprotein cholesterol, or LDL-C, lowering therapies for the treatment of patients with elevated LDL-C. ETC-1002, or bempedoic acid, our lead product candidate, is an inhibitor of ATP Citrate Lyase, or ACL, a well-characterized enzyme on the cholesterol biosynthesis pathway. Bempedoic acid inhibits cholesterol synthesis in the liver, decreases intracellular cholesterol and up-regulates LDL-receptors, resulting in increased LDL-C clearance and reduced plasma levels of LDL-C. We held an End-of-Phase 2 meeting with the Food and Drug Administration, or FDA, in August 2015. We initiated a global Phase 3 long-term safety and tolerability study of bempedoic acid in January 2016, in patients with hyperlipidemia whose LDL-C is not adequately controlled with low- and moderate-dose statins. We own the exclusive worldwide rights to bempedoic acid.

        We were incorporated in Delaware in January 2008, and commenced our operations in April 2008. Since our inception, we have focused substantially all of our efforts and financial resources on developing bempedoic acid, for which we recently initiated a global long-term safety and tolerability study in January 2016. We have funded our operations to date primarily through proceeds from sales of preferred stock, convertible promissory notes and warrants, public offerings of common stock and the incurrence of indebtedness, and we have incurred losses in each year since our inception.

        On July 1, 2013, we completed the initial public offering, or IPO, of our common stock pursuant to a registration statement on Form S-1 whereby we sold 5,000,000 shares of common stock at a price of $14.00 per share. On July 11, 2013, the underwriters exercised their over-allotment option in full and purchased an additional 750,000 shares of common stock at a price of $14.00 per share. Net proceeds from the IPO were approximately $72.2 million, including proceeds from the exercise of the underwriters' over-allotment option, net of underwriting discounts and commissions and offering expenses. Upon the closing of the IPO, all outstanding shares of our preferred stock were converted into 9,210,999 shares of common stock.

        On October 21, 2014, we completed an underwritten public offering of 4,887,500 shares of common stock, including 637,500 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriters. All the shares were offered by us at a price to the public of $20.00 per share. The aggregate net proceeds received by us from the offering were $91.6 million, net of underwriting discounts and commissions and expenses payable by us.

        On March 24, 2015, we completed an underwritten public offering of 2,012,500 shares of common stock, including 262,500 shares sold pursuant to the full exercise of an over-allotment option granted to the underwriters. All of the shares were offered by us at a price to the public of $100.00 per share. The aggregate net proceeds received by us from the offering were $190.0 million, net of underwriting discounts and commissions and expenses payable by us.

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        We have not commenced principal operations and do not have any products approved for sale. To date, we have not generated any revenue. We have never been profitable and our net losses were $49.8 million, $36.4 million and $26.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. Substantially all of our net losses resulted from costs incurred in connection with research and development programs, general and administrative costs associated with our operations. We expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, including, among others:

    completing the clinical development of bempedoic acid;

    undertaking development activities on a fixed-dose combination of bempedoic acid and ezetimibe;

    initiating a cardiovascular outcomes trial, or CVOT, for bempedoic acid;

    seeking regulatory approval for bempedoic acid;

    commercializing bempedoic acid; and

    operating as a public company.

        Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity or debt financings or through other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy or continue operations. We will need to generate significant revenues to achieve profitability, and we may never do so.

Product Overview

        Bempedoic acid, our lead product candidate, is an inhibitor of ACL a well-characterized enzyme on the cholesterol biosynthesis pathway. Bempedoic acid inhibits cholesterol synthesis in the liver, decreases intracellular cholesterol and up-regulates LDL-receptors, resulting in increased LDL-C clearance and reduced plasma levels of LDL-C. Bempedoic acid is being developed for patients with elevated LDL-C. We acquired the rights to bempedoic acid from Pfizer in 2008. We own the exclusive worldwide rights to bempedoic acid and we are not obligated to make any royalty or milestone payments to Pfizer.

        During the year ended December 31, 2015, we incurred $12.0 million in expenses related to our Phase 2b clinical study in patients with elevated LDL-C already receiving statin therapy (ETC-1002-009), our Phase 2a exploratory clinical safety study in patients with both elevated LDL-C and hypertension (ETC-1002-014), our Phase 3 global long-term safety and tolerability study in patients with hyperlipidemia whose LDL-C is not adequately controlled with low- and moderate-dose statins (ETC-1002-040) and other clinical pharmacology studies.

        During the year ended December 31, 2014, we incurred $14.5 million in expenses related to our Phase 2b clinical study in patients with elevated LDL-C with or without statin intolerance (ETC-1002-008), our Phase 2b clinical study in patients with elevated LDL-C already receiving statin therapy (ETC-1002-009), our Phase 2a exploratory clinical safety study in patients with both elevated LDL-C and hypertension (ETC-1002-014) and other clinical pharmacology studies.

        During the year ended December 31, 2013, we incurred $13.7 million in expenses related to our Phase 2a proof-of-concept clinical study in patients with elevated LDL-C and Type 2 diabetes (ETC-1002-005), our Phase 2a proof-of-concept clinical study in patients with elevated LDL-C and a history of statin intolerance (ETC-1002-006), our Phase 2a clinical study in patients with elevated LDL-C taking 10 mg of atorvastatin (ETC-1002-007) and our Phase 2b clinical study in patients with elevated LDL-C with or without statin intolerance (ETC-1002-008).

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Financial Operations Overview

Revenue

        To date, we have not generated any revenue. In the future, we may never generate revenue from the sale of bempedoic acid or other product candidates. If we fail to complete the development of bempedoic acid or any other product candidates and secure approval from regulatory authorities, our ability to generate future revenue and our results of operations and financial position will be adversely affected.

Research and Development Expenses

        Since our inception, we have focused our resources on our research and development activities, including conducting nonclinical, preclinical and clinical studies. Our research and development expenses consist primarily of costs incurred in connection with the development of bempedoic acid, which include:

    expenses incurred under agreements with consultants, contract research organizations, or CROs, and investigative sites that conduct our preclinical and clinical studies;

    the cost of acquiring, developing and manufacturing clinical study materials;

    employee-related expenses, including salaries, benefits, stock-based compensation and travel expenses;

    allocated expenses for rent and maintenance of facilities, insurance and other supplies; and

    costs related to compliance with regulatory requirements.

        We expense research and development costs as incurred. To date, substantially all of our research and development work has been related to bempedoic acid. Costs for certain development activities, such as clinical studies, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors. Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical studies. We do not allocate acquiring and manufacturing clinical study materials, salaries, stock-based compensation, employee benefits or other indirect costs related to our research and development function to specific programs.

        Our research and development expenses are expected to increase in the foreseeable future. Costs associated with bempedoic acid will increase as we further its clinical development, including in connection with the commencement of our Phase 3 clinical program and our planned CVOT. We cannot determine with certainty the duration and completion costs associated with the ongoing or future clinical studies of bempedoic acid. Also, we cannot conclude with certainty if, or when, we will generate revenue from the commercialization and sale of bempedoic acid, if ever. We may never succeed in obtaining regulatory approval for bempedoic acid. The duration, costs and timing associated with the development and commercialization of bempedoic acid will depend on a variety of factors, including uncertainties associated with the results of our clinical studies and our ability to obtain regulatory approval. For example, if the FDA or another regulatory authority were to require us to conduct clinical studies beyond those that we currently anticipate will be required for the completion of clinical development or post-commercialization clinical studies of bempedoic acid, or if we experience significant delays in enrollment in any of our clinical studies, we could be required to expend significant additional financial resources and time on the completion of clinical development or post-commercialization clinical studies of bempedoic acid.

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General and Administrative Expenses

        General and administrative expenses primarily consist of salaries and related costs for personnel, including stock-based compensation, associated with our executive, accounting and finance, operational and other administrative functions. Other general and administrative expenses include facility-related costs, communication expenses and professional fees for legal, patent prosecution, protection and review, consulting and accounting services.

        We anticipate that our general and administrative expenses will increase in the future in connection with the continued research and development and commercialization of bempedoic acid, increases in our headcount, expansion of our information technology infrastructure, and increased expenses associated with being a public company and complying with exchange listing and Securities and Exchange Commission, or SEC, requirements, including the additional complexities and related costs of our transition from an "emerging growth company" to a "large accelerated filer" under the rules of the SEC. These increases will likely include higher legal, compliance, accounting and investor and public relations expenses.

Interest Expense

        Interest expense consists primarily of cash interest costs associated with our credit facility and non-cash interest costs associated with the amortization of the related debt discount, deferred issuance costs and final payment fee.

Critical Accounting Policies and Significant Judgments and Estimates

        Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments on an ongoing basis, including those related to accrued expenses and stock-based compensation. We base our estimates on historical experience, known trends and events, contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

        Our significant accounting policies are described in more detail in Note 2 to our audited financial statements appearing elsewhere in this Annual Report on Form 10-K. We believe the following accounting policies to be most critical to understanding our results and financial operations.

Accrued Clinical Development Costs

        As part of the process of preparing our financial statements we are required to estimate our accrued expenses. We base our accrued expenses related to clinical studies on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on our behalf. We generally accrue expenses related to clinical studies based on contracted amounts applied to the level of patient enrollment and activity according to the protocol. If timelines or contracts are modified based upon changes in the clinical study protocol or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could

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differ from our estimates. We do not anticipate the future settlement of existing accruals to differ materially from our estimates.

Stock-Based Compensation

        We typically grant stock-based compensation to new employees in connection with their commencement of employment and to existing employees in connection with annual performance reviews. We account for all stock-based compensation payments issued to employees, consultants and directors using an option-pricing model for estimating fair value. Accordingly, stock-based compensation expense is measured based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures. Compensation expense is recognized for the portion that is ultimately expected to vest over the period during which the recipient renders the required services to us using the straight-line method. In accordance with authoritative guidance, the fair value of non-employee stock-based awards is remeasured as the awards vest, and the resulting value, if any, is recognized as expense during the period the related services are rendered.

    Significant Factors, Assumptions and Methodologies Used in Determining Fair Value

        We estimate the fair value of our stock-based awards to employees, consultants and directors using the Black-Scholes option-pricing model. The Black-Scholes model requires the input of subjective assumptions, including (a) the per share fair value of our common stock, (b) the expected stock price volatility, (c) the calculation of the expected term of the award, (d) the risk free interest rate and (e) expected dividends. Due to our limited operating history and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies, which are publicly traded. When selecting these public companies on which we have based our expected stock price volatility, we selected companies with comparable characteristics to us, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of our stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies' shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. We have estimated the expected life of our employee stock options using the "simplified" method, whereby, the expected life equals the arithmetic average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted. We have never paid, and do not expect to pay, dividends in the foreseeable future.

        We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from our estimates. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. To the extent that actual forfeitures differ from our estimates, the difference is recorded as a cumulative adjustment in the period the estimates were revised.

    Fair Value Estimate

        We are required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations with the Black-Scholes option-pricing model. All options to purchase shares of our common stock are intended to be granted with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant.

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        Prior to our IPO, on each grant date we developed an estimate of the fair value of our common stock in order to determine an exercise price for the option grants based in part on input from an independent third- party valuation as there was no active public market for our common stock. Our determinations of the fair value of our common stock were done using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately-Held-Company Equity Securities Issued as Compensation . Our board of directors considered various objective and subjective factors, along with input from management and the independent third-party valuation, to determine the fair value of our common stock, including: external market conditions affecting the biopharmaceutical industry, trends within the biopharmaceutical industry, the prices at which we sold shares of preferred stock, the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant, the results of operations, financial position, status of our research and development efforts, our stage of development and business strategy, the lack of an active public market for our common and our preferred stock, and the likelihood of achieving a liquidity event such as an IPO. Since our IPO, the fair value of our common stock is estimated to be the closing price of our common stock on the NASDAQ Global Market on the applicable date.

Recent Accounting Pronouncements

        In April 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update 2015-03 which simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than as a deferred charge. The recognition and measurement guidance for debt issuance costs are not affected by the amendment. We early-adopted the amendment effective January 1, 2015, which resulted in a change in the balance sheet presentation of net debt; in prior period disclosures the debt issuance costs related to our debt liability were presented on the balance sheet as deferred charges within "Other prepaid and current assets". Upon adoption of the amended guidance, the debt issuance costs associated with our debt liability are presented on the balance sheet as a direct deduction from the carrying amount of the debt liability. Within the December 31, 2015, and December 31, 2014, balance sheets, "Long-term debt, net of discount and issuance costs" includes less than $0.1 million and $0.1 million, respectively, of debt issuance costs.

        In November 2015, the FASB issued Accounting Standards Update 2015-17 which requires that deferred tax assets and liabilities, along with any related valuation allowances, be classified as noncurrent on the balance sheet, effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2016 for public companies, with early adoption permitted. We early-adopted the amendment effective December 31, 2015, classifying all deferred tax assets on the balance sheet as non-current. We have incurred operating losses since inception and have fully reserved our net deferred tax assets. Accordingly, the adoption of this amendment has no impact on the balance sheet presentation of deferred tax assets.

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Results of Operations

    Comparison of the Years Ended December 31, 2015 and 2014

        The following table summarizes our results of operations for the years ended December 31, 2015 and 2014:

 
  Year Ended
December 31,
   
 
 
  2015   2014   Change  
 
  (in thousands)
   
 

Operating Expenses:

                   

Research and development

  $ 29,802   $ 25,302   $ 4,500  

General and administrative

    20,238     10,922     9,316  

Loss from operations

    (50,040 )   (36,224 )   (13,816 )

Other income (expense):

                   

Interest expense

    (520 )   (270 )   (250 )

Other income, net

    776     119     657  

Net loss

  $ (49,784 ) $ (36,375 ) $ (13,409 )

    Research and development expenses

        Research and development expenses for the year ended December 31, 2015, were $29.8 million compared to $25.3 million for the year ended December 31, 2014, an increase of $4.5 million. Research and development expenses were primarily related to the further clinical development of bempedoic acid, including completing our Phase 2b clinical study in patients with elevated LDL-C already receiving statin therapy (ETC-1002-009), our Phase 2a exploratory clinical safety study in patients with elevated LDL-C and hypertension (ETC-1002-014) and our Phase 3 global long-term safety and tolerability study in patients with hyperlipidemia whose LDL-C is not adequately controlled with low- and moderate-dose statins (ETC-1002-040).

    General and administrative expenses

        General and administrative expenses for the year ended December 31, 2015, were $20.2 million compared to $10.9 million for the year ended December 31, 2014, an increase of $9.3 million. The increase in general and administrative expenses was primarily attributable to costs associated with pre-commercialization activities for bempedoic acid, increases in our headcount, which includes increased stock-based compensation expense for awards granted during the period, and other costs to support public company operations and our growth.

    Interest expense

        Interest expense for the year ended December 31, 2015, was $0.5 million compared to $0.3 million for the year ended December 31, 2014. Interest expense was related to our credit facility with Oxford Finance LLC.

    Other income, net

        Other income, net for the year ended December 31, 2015, was approximately $0.8 million compared to approximately $0.1 million for the year ended December 31, 2014. This increase was primarily related to an increase in interest income earned on our cash, cash equivalents and investment securities.

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Results of Operations

    Comparison of the Years Ended December 31, 2014 and 2013

        The following table summarizes our results of operations for the years ended December 31, 2014 and 2013:

 
  Year Ended
December 31,
   
 
 
  2014   2013   Change  
 
  (in thousands)
   
 

Operating Expenses:

                   

Research and development

  $ 25,302   $ 16,014   $ 9,288  

General and administrative

    10,922     6,745     4,177  

Loss from operations

    (36,224 )   (22,759 )   (13,465 )

Other income (expense):

                   

Interest expense

    (270 )   (936 )   666  

Change in fair value of warrant liability

        (2,587 )   2,587  

Other income, net

    119     194     (75 )

Net loss

  $ (36,375 ) $ (26,088 ) $ (10,287 )

    Research and development expenses

        Research and development expenses for the year ended December 31, 2014, were $25.3 million compared to $16.0 million for the year ended December 31, 2013, an increase of $9.3 million. The increase in research and development expenses was primarily related to the further development of bempedoic acid in our Phase 2 clinical program, which includes the completion of our Phase 2b clinical study in patients with elevated LDL-C, with or without statin intolerance (ETC-1002-008), the initiation of our Phase 2b clinical study in patients with elevated LDL-C already receiving statin therapy (ETC-1002-009) and the initiation of our Phase 2a exploratory clinical safety study in patients with both elevated LDL-C and hypertension (ETC-1002-014).

    General and administrative expenses

        General and administrative expenses for the year ended December 31, 2014, were $10.9 million compared to $6.7 million for the year ended December 31, 2013, an increase of $4.2 million. The increase in general and administrative expenses was primarily attributable to costs to support public company operations, increases in our headcount, which includes increased stock-based compensation expense, and other costs to support our growth.

    Interest expense

        Interest expense for the year ended December 31, 2014, was $0.3 million compared to nearly $1.0 million for the year ended December 31, 2013, a decrease of $0.7 million. The decrease in interest expense was primarily related to the conversion of our convertible promissory notes issued in January, September and November 2012, into an aggregate of 16,623,092 shares of Series A preferred stock in February 2013, and the conversion of the 8.931% convertible promissory note issued to Pfizer into 6,750,000 shares of Series A-1 preferred stock on May 29, 2013; partially offset by an increase related to interest expense incurred on our Credit Facility entered into in June 2014.

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    Change in fair value of warrant liability

        The outstanding warrants at June 30, 2013, to purchase 277,690 shares of our common stock required liability classification and mark-to-market accounting at each reporting period in accordance with ASC 480-10 prior to the completion of our IPO. The fair value of the warrants was determined using the Monte Carlo simulation valuation model and resulted in the recognition of a loss of $2.6 million related to the change in fair value for the year ended December 31, 2013.

    Other income, net

        Other income, net for the year ended December 31, 2014, was $0.1 million compared to $0.2 million for the year ended December 31, 2013. This decrease in other income, net was primarily related to gains on the sale of assets in 2013; partially offset by an increase in interest income earned on our cash and cash equivalents.

Liquidity and Capital Resources

        We have funded our operations to date primarily through proceeds from sales of preferred stock, convertible promissory notes and warrants, public offerings of common stock and the incurrence of indebtedness. In July 2013, we completed our IPO, whereby we sold 5,750,000 shares of common stock (including 750,000 shares of common stock sold by us pursuant to the underwriters' exercise in full of their over-allotment option) at a price of $14.00 per share for net proceeds of $72.2 million. In June 2014, we entered into a loan and security agreement, or the Credit Facility, with Oxford Finance LLC whereby we received net proceeds of $4.9 million from the issuance of secured promissory notes under a term loan as part of the facility. In October 2014, we sold 4,887,500 shares of common stock (including 637,500 shares sold by us pursuant to the underwriters' exercise in full of their over-allotment option) at a price to the public of $20.00 per share for net proceeds of $91.6 million. In March 2015, we sold 2,012,500 shares of common stock (including 262,500 shares of common stock sold by us pursuant to the underwriters' exercise in full of their over-allotment option) at a price of $100.00 per share for net proceeds of $190.0 million. To date, we have not generated any revenue and we anticipate that we will continue to incur losses for the foreseeable future.

        As of December 31, 2015, our primary sources of liquidity were our cash and cash equivalents and available-for-sale investments, which totaled $77.3 million and $215.2 million, respectively. We invest our cash equivalents and investments in highly liquid, interest-bearing investment-grade and government securities to preserve principal.

        The following table summarizes the primary sources and uses of cash for the periods presented below:

 
  Year Ended
December 31,
 
 
  2015   2014  
 
  (in thousands)
 

Cash used in operating activities

  $ (38,156 ) $ (32,021 )

Cash used in investing activities

    (160,068 )   (36,598 )

Cash provided by financing activities

    190,522     97,120  

Net (decrease) increase in cash and cash equivalents

  $ (7,702 ) $ 28,501  

    Operating Activities

        We have incurred, and expect to continue to incur, significant costs in the areas of research and development, regulatory and other clinical study costs, associated with our development of bempedoic acid and our operations

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        Net cash used in operating activities totaled $38.2 million and $32.0 million for the years ended December 31, 2015 and 2014, respectively. The primary use of our cash was to fund the development of bempedoic acid, adjusted for non-cash expenses such as stock-based compensation expense, depreciation and amortization and changes in working capital.

    Investing Activities

        Net cash used in investing activities of $160.1 million for the year ended December 31, 2015, consisted primarily of purchases of highly liquid, interest bearing investment-grade and government securities.

    Financing Activities

        Net cash provided by financing activities of $190.5 million for the year ended December 31, 2015, related primarily to the proceeds of our underwritten public offering of common stock.

    Plan of Operations and Funding Requirements

        We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we progress through the clinical development program for bempedoic acid. We expect that our existing cash and cash equivalents and available-for-sale investments will enable us to fund our operating expenses and capital expenditure requirements through at least the end of 2018 and the potential approval of bempedoic acid, and that we will likely need to raise additional capital thereafter to continue to fund the further development and commercialization efforts for bempedoic acid and our operations. We announced top-line results from our Phase 2b ETC-1002-008 and ETC-1002-009 clinical studies in October 2014, and March 2015, respectively, and from our Phase 2a ETC-1002-014 exploratory clinical safety study in July 2015. We held an End-of-Phase 2 meeting with the FDA in August 2015. The FDA has encouraged us to initiate a CVOT promptly, which we plan to undertake and which we expect to result in us expending significantly more resources than if we did not undertake a CVOT. We initiated our global Phase 3 long-term safety and tolerability study in January 2016. We have based these estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of bempedoic acid and the extent to which we may enter into collaborations with pharmaceutical partners regarding the development and commercialization of bempedoic acid, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development and commercialization of bempedoic acid. Our future funding requirements will depend on many factors, including, but not limited to:

    our ability to successfully develop and commercialize bempedoic acid or other product candidates;

    the costs, timing and outcomes of our ongoing and planned clinical studies of bempedoic acid;

    the time and cost necessary to obtain regulatory approvals for bempedoic acid, if at all;

    our ability to establish a sales, marketing and distribution infrastructure to commercialize bempedoic acid in the United States and abroad or our ability to establish any future collaboration or commercialization arrangements on favorable terms, if at all;

    the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and

    the implementation of operational and financial information technology.

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        Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our technologies, future revenue streams or bempedoic acid or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances or licensing arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market bempedoic acid that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

        We were originally party to a single lease that covered both office and laboratory space in Plymouth, Michigan. The Plymouth lease, as amended over time, was scheduled to expire in April 2014. In February 2014, we signed a new lease to move our principal executive offices to Ann Arbor, Michigan, while still maintaining our laboratory space in Plymouth. The Ann Arbor lease has a term of 63 months and provides for fixed monthly rent of approximately $7,900, with monthly rent increasing every 12 months, and also provides for certain rent adjustments to be paid as determined by the landlord. In May 2014, we amended the Plymouth lease to (i) extend the expiration date from April 2014, to April 2017, (ii) adjust the rentable space to 3,045 square feet, (iii) adjust our proportionate share of the landlord's expenses and taxes to 7.40%, (iv) extend our option to renew for one term of three years through written notice to the landlord by February 2017, and (v) decrease the annual base rent to $37,000, subject to certain increases and adjustments. In August 2015, we signed a new lease to increase our office space in Ann Arbor, Michigan to support our growing company and clinical development operations. The second Ann Arbor lease has a term of 49 months and provides for fixed monthly rent of approximately $7,100, with monthly rent increasing every 12 months. In December 2015, we terminated our lease for our laboratory space in Plymouth, Michigan, effective retroactively on October 30, 2015, rather than April 30, 2017, as originally contemplated in the Plymouth lease.

        In June 2014, we entered into a Credit Facility which provided for initial borrowings of $5.0 million and additional borrowings of $15.0 million until March 2015. We received proceeds of $4.9 million, net of issuance costs, from the issuance of secured promissory notes under a term loan as part of the Credit Facility and we have not drawn upon any additional borrowings. Under the Credit Facility we are obligated to make monthly, interest-only payments on any term loans funded until July 1, 2015 and, thereafter, to pay 36 consecutive, equal monthly installments of principal and interest from August 1, 2015, through July 1, 2018. The term loan outstanding under the Credit Facility bears interest at an annual rate of 6.40%. In addition, a final payment equal to 8.0% of any amounts drawn under the Credit Facility is due upon the earlier of the maturity date or prepayment of the term loans.

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        The following table summarizes our future minimum contractual obligations as of December 31, 2015:

 
  Total   Less than
1 Year
  1 - 3 Years   3 - 5 Years   More than
5 Years
 
 
  (in thousands)
 

Operating leases

  $ 705   $ 185   $ 387   $ 133   $  

Debt commitments (1)

    5,144     1,836     3,308          

Total

  $ 5,849   $ 2,021   $ 3,695   $ 133   $  

(1)
The amounts in the table reflect the contractually required principal and fixed interest payments in accordance with the payment schedule. The projected fixed interest payment obligations are based upon debt outstanding as of the balance sheet date and assume retirement at the scheduled maturity date of the loan.

        There have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those disclosed above.

Off-Balance Sheet Arrangements

        We do not currently have, nor did we have during the periods presented, any off-balance sheet arrangements as defined by Securities and Exchange Commission rules.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        We had cash and cash equivalents and available-for-sale investments of approximately $77.3 million and $215.2 million, respectively, at December 31, 2015. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk relates to fluctuations in interest rates which are affected by changes in the general level of U.S. interest rates. Given the short-term nature of our cash equivalents, we believe that a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operation. We do not have any foreign currency or other derivative financial instruments.

        We do not believe that our cash, cash equivalents and available-for-sale investments have significant risk of default or illiquidity. While we believe our cash and cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.

        Inflation generally affects us by increasing our cost of labor and clinical study costs. We do not believe that inflation has had a material effect on our results of operations during the year ended December 31, 2015.

Item 8.    Financial Statements and Supplementary Data

        The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

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Item 9A.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (2) accumulated and communicated to our management, including our President and Chief Executive Officer, who is our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

        As of December 31, 2015, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer has concluded based upon the evaluation described above that, as of December 31, 2015, our disclosure controls and procedures were effective at the reasonable assurance level.

Management's Report on Internal Control over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company's principal executive and principal financial officer and effected by the company's board of preparation of financial statements for external purposes in accordance with GAAP and directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company's assets that could have a material effect on the financial statements.

        Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Our management, with the participation of our principal executive and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2015, based on criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2015, based on those criteria.

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        The effectiveness of the our internal control over financial reporting as of December 31, 2015, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

        There were no changes to our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Esperion Therapeutics, Inc.

        We have audited Esperion Therapeutics, Inc.'s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Esperion Therapeutics, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, Esperion Therapeutics, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Esperion Therapeutics, Inc. as of December 31, 2015 and 2014, and the related statements of operations and comprehensive loss, convertible preferred stock and stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2015, and our report dated February 25, 2016, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Detroit, Michigan
February 25, 2016

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Item 9B.    Other Information

        None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance

        The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2016 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 11.    Executive Compensation

        The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2016 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2016 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

        The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2016 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

Item 14.    Principal Accounting Fees and Services

        The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 2016 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.

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PART IV

Item 15.    Exhibits, Financial Statement Schedules

(a)
The following documents are filed as part of this report:

(1)
Financial Statements:

Report of Independent Registered Public Accounting Firm

  F-2

Balance Sheets

  F-3

Statements of Operations and Comprehensive Loss

  F-4

Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

  F-5

Statements of Cash Flows

  F-6

Notes to Financial Statements

  F-7
(2)
Financial Statement Schedules:
(3)
Exhibits.    The exhibits filed as part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately following our consolidated financial statements. The Exhibit Index is incorporated herein by reference.

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SIGNATURES

        Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

ESPERION THERAPEUTICS, INC.    

Date: February 25, 2016

 

 

By:

 

/s/ TIM M. MAYLEBEN

Tim M. Mayleben
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)

 

 

        Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities indicated below and on the dates indicated:

Signature
 
Title
 
Date

 

 

 

 

 
/s/ TIM M. MAYLEBEN

Tim M. Mayleben
  President, Chief Executive Officer and Director (Principal Executive Officer and Principal Financial Officer)   February 25, 2016

/s/ RICHARD B. BARTRAM

Richard B. Bartram

 

Vice President, Finance (Principal Accounting Officer)

 

February 25, 2016

/s/ ROGER S. NEWTON, PH.D., FAHA

Roger S. Newton, Ph.D., FAHA

 

Executive Chairman, Chief Scientific Officer and Director

 

February 25, 2016

/s/ SCOTT BRAUNSTEIN, M.D.

Scott Braunstein, M.D.

 

Director

 

February 25, 2016

/s/ PATRICK ENRIGHT

Patrick Enright

 

Director

 

February 25, 2016

/s/ DOV A. GOLDSTEIN, M.D.

Dov A. Goldstein, M.D.

 

Director

 

February 25, 2016

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Signature
 
Title
 
Date

 

 

 

 

 
/s/ ANTONIO M. GOTTO, M.D., D. PHIL

Antonio M. Gotto, M.D., D. Phil
  Director   February 25, 2016

/s/ DANIEL JANNEY

Daniel Janney

 

Director

 

February 25, 2016

/s/ MARK E. MCGOVERN, M.D.

Mark E. McGovern, M.D.

 

Director

 

February 25, 2016

/s/ GILBERT S. OMENN, M.D., PH.D.

Gilbert S. Omenn, M.D., Ph.D.

 

Director

 

February 25, 2016

/s/ NICOLE VITULLO

Nicole Vitullo

 

Director

 

February 25, 2016

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Esperion Therapeutics, Inc.
Index to the Financial Statements

Contents

Report of Independent Registered Public Accounting Firm

  F-2

Financial Statements

   

Balance Sheets

  F-3

Statements of Operations and Comprehensive Loss

  F-4

Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

  F-5

Statements of Cash Flows

  F-6

Notes to Financial Statements

  F-7

F-1


Table of Contents


Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Esperion Therapeutics, Inc.

        We have audited the accompanying balance sheets of Esperion Therapeutics, Inc. as of December 31, 2015 and 2014, and the related statements of operations and comprehensive loss, convertible preferred stock and stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Esperion Therapeutics, Inc. at December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

        We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Esperion Therapeutics, Inc.'s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2016, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Detroit, Michigan
February 25, 2016

F-2


Table of Contents


Esperion Therapeutics, Inc.

Balance Sheets

(in thousands, except share data)

 
  December 31,
2015
  December 31,
2014
 

Assets

             

Current assets:

             

Cash and cash equivalents

  $ 77,336   $ 85,038  

Short-term investments

    134,925     20,803  

Prepaid clinical development costs

    888     366  

Other prepaid and current assets

    1,245     492  

Total current assets

    214,394     106,699  

Property and equipment, net

   
807
   
780
 

Intangible assets

    56     56  

Long-term investments

    80,315     35,741  

Total assets

  $ 295,572   $ 143,276  

Liabilities and stockholders' equity

   
 
   
 
 

Current liabilities:

             

Accounts payable

  $ 707   $ 2,040  

Current portion of long-term debt

    1,604     638  

Accrued clinical development costs

    2,191     1,978  

Other accrued liabilities

    1,123     835  

Total current liabilities

    5,625     5,491  

Long-term debt, net of discount

   
2,688
   
4,231
 

Total liabilities

    8,313     9,722  

Commitments and contingencies (Note 5)

             

Stockholders' equity:

             

Preferred stock, $0.001 par value; 5,000,000 shares authorized and no shares issued or outstanding as of December 31, 2015 and December 31, 2014          

         

Common stock, $0.001 par value; 120,000,000 shares authorized as of December 31, 2015 and December 31, 2014; 22,518,907 shares issued and 22,516,508 outstanding at December 31, 2015 and 20,352,876 shares issued and 20,343,325 outstanding at December 31, 2014

    23     20  

Additional paid-in capital

    441,940     238,031  

Accumulated other comprehensive loss

    (482 )   (59 )

Accumulated deficit

    (154,222 )   (104,438 )

Total stockholders' equity

    287,259     133,554  

Total liabilities and stockholders' equity

  $ 295,572   $ 143,276  

   

See accompanying notes to the financial statements.

F-3


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Esperion Therapeutics, Inc.

Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

 
  Year Ended December 31,  
 
  2015   2014   2013  

Operating expenses:

                   

Research and development

  $ 29,802   $ 25,302   $ 16,014  

General and administrative

    20,238     10,922     6,745  

Total operating expenses

    50,040     36,224     22,759  

Loss from operations

    (50,040 )   (36,224 )   (22,759 )

Interest expense

   
(520

)
 
(270

)
 
(936

)

Change in fair value of warrant liability

            (2,587 )

Other income, net

    776     119     194  

Net loss

  $ (49,784 ) $ (36,375 ) $ (26,088 )

Net loss per common share (basic and diluted)

  $ (2.26 ) $ (2.22 ) $ (3.31 )

Weighted-average shares outstanding (basic and diluted)

    22,019,818     16,374,102     7,885,921  

Other comprehensive loss:

   
 
   
 
   
 
 

Unrealized loss on investments

  $ (423 ) $ (56 ) $ (3 )

Total comprehensive loss

  $ (50,207 ) $ (36,431 ) $ (26,091 )

   

See accompanying notes to the financial statements.

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Esperion Therapeutics, Inc.

Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

(in thousands, except share data)

 
  Series A Convertible
Preferred Stock
  Series A 1
Convertible
Preferred Stock
   
   
   
  Deficit
Accumulated
During the
Development
Stage
   
   
 
 
  Common Stock    
  Accumulated
Other
Comprehensive
Loss
  Total
Stockholders'
Equity
(Deficit)
 
 
  Additional
Paid-In
Capital
 
 
  Shares   Amount   Shares   Amount   Shares   Amount  

Balance December 31, 2012

    23,975,000   $ 23,975       $     346,478   $   $ 610   $ (41,975 ) $   $ (41,365 )

Issuance of Series A preferred stock in exchange for convertible promissory notes

    16,623,092     16,623                                  

Issuance of Series A preferred stock, net of issuance costs ($120)

    17,000,000     16,880                                  

Issuance of Series A-1 preferred stock in exchange for convertible promissory notes, net of issuance costs ($53)

            6,750,000     7,750                          

Early exercise of stock options and vesting of restricted stock

                    25,765         21             21  

Preferred shares converted into common stock

    (57,598,092 )   (57,478 )   (6,750,000 )   (7,750 )   9,210,999     9     65,216             65,225  

Issuance of common stock from initial public offering, net of issuance costs ($2,671)

                    5,750,000     6     72,188             72,194  

Reclassification of warrants from liabilities to equity

                            2,852             2,852  

Exercise of stock options

                    24,171         28             28  

Stock-based compensation

                            1,227             1,227  

Other comprehensive loss

                                    (3 )   (3 )

Net loss

                                (26,088 )       (26,088 )

Balance December 31, 2013

                    15,357,413     15     142,142     (68,063 )   (3 )   74,091  

Issuance of common stock from public offering, net of issuance costs ($260)

                    4,887,500     5     91,620             91,625  

Issuance of warrants in connection with issuance of notes

                            78             78  

Early exercise of stock options and vesting of restricted stock

                            39             39  

Exercise of stock options

                    107,963         473             473  

Stock-based compensation

                            3,679             3,679  

Other comprehensive loss

                                    (56 )   (56 )

Net loss

                                (36,375 )       (36,375 )

Balance December 31, 2014

                    20,352,876     20     238,031     (104,438 )   (59 )   133,554  

Issuance of common stock from public offering, net of issuance costs ($199)

                    2,012,500     3     189,980             189,983  

Early exercise of stock options and vesting of restricted stock

                            26             26  

Exercise of stock options

                    128,086         1,177             1,177  

Exercise of warrants

                    25,445                      

Stock-based compensation

                            12,726             12,726  

Other comprehensive loss

                                    (423 )   (423 )

Net loss

                                (49,784 )       (49,784 )

Balance December 31, 2015

      $       $     22,518,907   $ 23   $ 441,940   $ (154,222 ) $ (482 ) $ 287,259  

   

See accompanying notes to the financial statements.

F-5