UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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(Exact name of registrant as specified in its charter)
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(Address of principal executive office) (Zip Code)
Registrant’s telephone number, including area code:
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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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.
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Non-accelerated filer ☐ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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As of November 1, 2019, there were
Esperion Therapeutics, Inc.
INDEX
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Esperion Therapeutics, Inc.
Condensed Balance Sheets
(in thousands, except share data)
| September 30, |
| December 31, | |||
2019 | 2018 | |||||
(unaudited) | ||||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash | | — | ||||
Short-term investments |
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Prepaid clinical development costs |
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Right of use operating lease assets | | — | ||||
Other prepaid and current assets |
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Total current assets |
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Property and equipment, net |
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Intangible assets |
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Long-term investments |
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Right of use operating lease assets | | — | ||||
Total assets | $ | | $ | | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued clinical development costs |
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Other accrued liabilities |
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Deferred revenue from collaborations | | — | ||||
Operating lease liabilities | | — | ||||
Total current liabilities | | | ||||
Revenue interest liability | | — | ||||
Operating lease liabilities | | — | ||||
Total liabilities | | | ||||
Commitments and contingencies (Note 5) | ||||||
Stockholders’ equity: | ||||||
Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes to the condensed financial statements.
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Esperion Therapeutics, Inc.
Condensed Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2019 |
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| 2019 |
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Revenues: | ||||||||||||
Collaboration Revenue | $ | | $ | — | $ | | $ | — | ||||
Total Revenues | | — | | — | ||||||||
Operating expenses: | ||||||||||||
Research and development | $ | | $ | | $ | | $ | | ||||
General and administrative |
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Total operating expenses |
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Loss from operations |
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Interest expense | ( | — | ( | ( | ||||||||
Other income, net |
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Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net loss per common share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted-average shares outstanding - basic and diluted |
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Other comprehensive loss: | ||||||||||||
Unrealized gain on investments | $ | | $ | | $ | | $ | | ||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( |
See accompanying notes to the condensed financial statements.
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Esperion Therapeutics, Inc.
Condensed Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)
Accumulated | |||||||||||||||||
Additional | Other | Total | |||||||||||||||
Common Stock | Paid-In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Equity | ||||||
Balance December 31, 2018 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Exercise of stock options |
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Vesting of restricted stock units | | — | — | — | — | — | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Other comprehensive gain | — | — | — | — | | | |||||||||||
Net income | — | — | — | | — | | |||||||||||
Balance March 31, 2019 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Exercise of stock options | | — | | — | — | | |||||||||||
Exercise of warrants | | — | — | — | — | — | |||||||||||
Vesting of restricted stock units |
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Stock-based compensation |
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Other comprehensive gain |
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Net loss |
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Balance June 30, 2019 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Exercise of stock options | | — | | — | — | | |||||||||||
Vesting of restricted stock units |
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Stock-based compensation |
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Other comprehensive gain |
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Net loss |
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Balance September 30, 2019 |
| | $ | | $ | | $ | ( | $ | | $ | |
Accumulated | |||||||||||||||||
Additional | Other | Total | |||||||||||||||
Common Stock | Paid-In | Accumulated | Comprehensive | Stockholders’ | |||||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Equity | ||||||
Balance December 31, 2017 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Exercise of stock options |
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Exercise of warrants |
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Vesting of restricted stock units |
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Stock-based compensation |
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Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||
Balance March 31, 2018 | | $ | | $ | | $ | ( | $ | ( | $ | | ||||||
Exercise of stock options | | — | | — | — | | |||||||||||
Vesting of restricted stock units | | — | — | — | — | — | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Other comprehensive gain |
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Net loss |
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Balance June 30, 2018 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Exercise of stock options | | — | | — | — | | |||||||||||
Vesting of restricted stock units | | — | — | — | — | — | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Other comprehensive gain |
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Net loss |
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| — |
| — |
| ( |
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| ( | |||||
Balance September 30, 2018 |
| | $ | | $ | | $ | ( | $ | ( | $ | |
See accompanying notes to the condensed financial statements.
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Esperion Therapeutics, Inc.
Condensed Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30, | ||||||
| 2019 |
| 2018 | |||
Operating activities | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation expense |
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Accretion of premiums and discounts on investments |
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Non-cash interest expense related to the revenue interest liability | | — | ||||
Stock-based compensation expense |
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Changes in assets and liabilities: | ||||||
Prepaids and other assets |
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Deferred revenue | | — | ||||
Accounts payable |
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Other accrued liabilities |
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Net cash used in operating activities |
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Investing activities | ||||||
Purchases of investments |
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Proceeds from sales/maturities of investments |
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Purchase of property and equipment |
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Net cash provided by investing activities |
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Financing activities | ||||||
Proceeds from revenue interest liability, net of issuance costs | | — | ||||
Proceeds from exercise of common stock options |
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Payments on long-term debt | — | ( | ||||
Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash, cash equivalents and restricted cash at end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: | ||||||
Purchase of property and equipment not yet paid | $ | | $ | | ||
Non cash right of use asset | | — |
See accompanying notes to the condensed financial statements.
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Esperion Therapeutics, Inc.
Notes to the Condensed Financial Statements
(unaudited)
1. The Company and Basis of Presentation
The Company is the Lipid Management Company, a late-stage pharmaceutical company focused on developing and commercializing complementary, cost-effective, convenient, once-daily, oral therapies for the treatment of patients with elevated low density lipoprotein cholesterol ("LDL-C"). Through scientific and clinical excellence, and a deep understanding of cholesterol biology, the experienced Lipid Management Team at Esperion is committed to developing new LDL-C lowering therapies that will make a substantial impact on reducing global cardiovascular disease ("CVD"); the leading cause of death around the world. Bempedoic acid and the bempedoic acid / ezetimibe combination tablet are targeted therapies that are being developed to significantly lower elevated LDL-C levels in patients with hypercholesterolemia, including patients inadequately treated with current lipid-modifying therapies.
On February 11, 2019, the Company submitted the Marketing Authorisation Applications (“MAAs”) for bempedoic acid and the bempedoic acid / ezetimibe combination tablet to the European Medicines Agency (“EMA”). On February 21, 2019, the Company submitted the new drug application (“NDA”) for bempedoic acid and on February 26, 2019, the Company submitted the NDA for the bempedoic acid / ezetimibe combination tablet to the Food and Drug Administration (“FDA”) for LDL-C lowering indications. On February 28, 2019, the EMA completed formal validation of the MAAs for bempedoic acid and the bempedoic acid / ezetimibe combination tablet for LDL-C lowering indications. On May 5, 2019, the Company announced that the FDA accepted the NDAs for bempedoic acid and the bempedoic acid / ezetimibe combination tablet for filing and regulatory review. The Prescription Drug User Fee Act (“PDUFA”) goal date for completion of the bempedoic acid NDA review is set for February 21, 2020, and the PDUFA goal date for completion of the bempedoic acid / ezetimibe combination tablet NDA review is set for February 26, 2020. These dates are consistent with the Company’s expectations and reflect the standard review period. The FDA has communicated that there is no current plan to hold an advisory committee meeting to discuss the applications.
The Company is conducting a global cardiovascular outcomes trial ("CVOT")—known as Cholesterol Lowering via BEmpedoic Acid, an ACL-inhibiting Regimen (CLEAR) Outcomes. The trial is designed to evaluate whether treatment with bempedoic acid reduces the risk of cardiovascular events in patients with statin intolerance (“statin averse”) who have CVD or are at high risk for CVD. The Company initiated the CLEAR Outcomes CVOT in December 2016 and fully enrolled the study with
The Company's primary activities since incorporation have been conducting research and development activities, including nonclinical, preclinical and clinical testing, performing business and financial planning, recruiting personnel, and raising capital. Accordingly, the Company has not commenced principal operations and is subject to risks and uncertainties which include the need to research, develop, and clinically test potential therapeutic products; obtain regulatory approvals for its products and commercialize them, if approved; expand its management and scientific staff; and finance its operations with an ultimate goal of achieving profitable operations.
The Company has sustained annual operating losses since inception and expects such losses to continue over the foreseeable future. While management believes current cash resources and future cash received from the Company's collaboration agreement with Daiichi Sankyo Europe GmbH ("DSE"), entered into on January 2, 2019, and from the Revenue Interest Purchase Agreement (“RIPA”) with Eiger III SA LLC (“Oberland”), an affiliate of Oberland Capital LLC, and the Purchasers named therein, entered into on June 26, 2019, will fund operations for the foreseeable future, management may continue to fund operations and advance the development of the Company's product candidates through a combination of collaborations with third parties, strategic alliances, licensing arrangements, permitted debt financings, permitted royalty-based financings, and private and public and equity offerings or through other sources.
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If adequate funds are not available, the Company may not be able to continue the development of its current or future product candidates, or to commercialize its current or future product candidates, if approved.
Basis of Presentation
The accompanying condensed financial statements are unaudited and were prepared by the Company in accordance with generally accepted accounting principles in the United States of America (“GAAP”). In the opinion of management, the Company has made all adjustments, which include only normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the interim periods presented. Certain prior year amounts have been reclassified to conform with current year presentation. Certain information and disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2018, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the interim periods are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company invests its excess cash in bank deposits, money market accounts, and short-term investments. The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents are reported at fair value.
Restricted Cash
Restricted cash consists of legally restricted amounts held by financial institutions pursuant to contractual arrangements.
Investments
Investments are considered to be available-for-sale and are carried at fair value. Unrealized gains and losses, if any, are reported as a separate component of stockholders’ equity. The cost of investments classified as available-for-sale are adjusted for the amortization of premiums and accretion of discounts to maturity and recorded in other income, net. Realized gains and losses, if any, are determined using the specific identification method and recorded in other income, net. Investments with original maturities beyond 90 days at the date of purchase and which mature at, or less than twelve months from, the balance sheet date are classified as current. Investments with a maturity beyond twelve months from the balance sheet date are classified as long-term.
Concentration of Credit Risk
Cash, cash equivalents, and marketable securities consist of financial instruments that potentially subject the Company to concentrations of credit risk. The Company has established guidelines for investment of its excess cash and believes the guidelines maintain safety and liquidity through diversification of counterparties and maturities.
Segment Information
The Company views its operations and manages its business in
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Fair Value of Financial Instruments
The Company’s cash, cash equivalents, restricted cash and investments are carried at fair value. Financial instruments, including other prepaid and current assets, accounts payable and accrued liabilities are carried at cost, which approximates fair value. Debt is carried at amortized cost, which approximates fair value.
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets, generally three to
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value.
Leases
The Company reviews all arrangements to determine if the contract contains a lease or an embedded lease using the criteria in Accounting Standards Codification (“ASC”) 842. If a lease is identified, the Company reviews the consideration in the contract and separates the lease components from the nonlease components. In addition, the Company reviews the classification of the lease between operating and finance leases. According to ASC 842, lessees should discount lease payments at the lease commencement date using the rate implicit in the lease. If the rate implicit in the lease is not readily determinable, a lessee must use its incremental borrowing rate for purposes of classifying the lease and measuring the right-of-use asset and liability. To the extent the rate is not implicit in the lease, the Company uses the incremental borrowing rate it would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.
Revenue Interest Liability
The revenue interest liability is presented net of deferred issuance costs on the condensed balance sheets. The Company imputes interest expense associated with this liability using the effective interest rate method. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The interest rate on the liability may vary during the term of the agreement depending on a number of factors, including the level of forecasted net sales. The Company evaluates the interest rate quarterly based on its current net sales forecasts utilizing the prospective method.
Revenue Recognition
a. | Collaboration Revenue |
The Company has entered into an agreement related to its activities to develop, manufacture, and commercialize its product candidates. The Company earns collaboration revenue in connection with a collaboration agreement to develop and/or commercialize product candidates where the Company deems the collaborator to be the customer. The Company has adopted ASC 606, Revenue from Contracts with Customers, and under the terms of the standard, revenue is measured as the amount of consideration expected to be entitled to in exchange for transferring promised goods or providing services to a customer. Revenue is recognized when (or as) the Company satisfies performance obligations under the terms of a contract. Depending on the terms of the arrangement, the Company may defer the recognition of all or a portion of the consideration received as the performance obligations are satisfied.
The collaboration agreement may require the Company to deliver various rights, services, and/or goods across the entire life cycle of a product or product candidate. In the agreement involving multiple goods or services promised to be transferred to a customer, the Company must assess, at the inception of the contract, whether each promise represents a separate performance obligation (i.e., is "distinct"), or whether such promises should be combined as a single performance obligation.
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The terms of the agreement typically include consideration to be provided to the Company in the form of non-refundable up-front payments, development milestones, sales milestones, and royalties on sales of products within a respective territory.
At the inception of the contract, the transaction price reflects the amount of consideration the Company expects to be entitled to in exchange for transferring promised goods or services to its customer. In the arrangement where the Company satisfies performance obligation(s) during the regulatory phase over time, the Company recognizes collaboration revenue typically using an input method on the basis of regulatory costs incurred relative to the total expected cost which determines the extent of progress toward completion. The Company reviews the estimate of the transaction price and the total expected cost each period, and makes revisions to such estimates as necessary.
Under the Company's collaboration agreement, product sales and cost of sales may be recorded by the Company's collaborators as they are deemed to be the principal in the transaction. The Company receives royalties from the commercialization of such products, and records its share of the variable consideration, representing a percentage of net product sales, as collaboration revenue in the period in which such underlying sales occur and costs are incurred by the collaborator. The collaborator will provide the Company with estimates of its royalties for such quarter; these estimates are reconciled to actual results in the subsequent quarter, and the royalty is adjusted accordingly, as necessary.
Please refer to the discussion in Note 3 “Collaborations with Third Parties” for further discussion of the accounting related to the collaboration agreement.
Research and Development
Research and development expenses consist of costs incurred to further the Company's research and development activities and include salaries and related benefits, costs associated with clinical activities, nonclinical activities, regulatory activities, manufacturing activities to support clinical activities and commercial product manufacturing supply as the Company approaches anticipated approval, research-related overhead expenses and fees paid to external service providers that conduct certain research and development, clinical, and manufacturing activities on behalf of the Company. Research and development costs are expensed as incurred.
Accrued Clinical Development Costs
Outside research costs are a component of research and development expense. These expenses include fees paid to clinical research organizations and other service providers that conduct certain clinical and product development activities on behalf of the Company. Depending upon the timing of payments to the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs. These accrued or prepaid expenses are based on management's estimates of the work performed under service agreements, milestones achieved and experience with similar contracts. The Company monitors each of these factors and adjusts estimates accordingly.
Income Taxes
The Company utilizes the liability method of accounting for income taxes as required by ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company has incurred annual operating losses since inception. Accordingly, it is not more likely than not that the Company will realize a tax benefit from its deferred tax assets and as such, it has recorded a full valuation allowance.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation-Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized over the requisite service periods of the awards on a straight-line basis at the grant-date fair value calculated using a Black-Scholes option-pricing model. The Company accounts for forfeitures as they occur. Expense is recognized during the period the related services are rendered.
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Recent Accounting Pronouncements
In November 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-08, which clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606 when the collaborative arrangement participant is a customer in the context of a unit of account. The standard is effective for public companies for fiscal years beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted, included in any interim period, provided an entity has already adopted ASC 606 or does so concurrently with the adoption of this guidance. The Company early adopted this guidance as of January 1, 2019, and implemented the new guidance in its consideration of the accounting for the DSE collaboration signed on January 2, 2019. Refer to Note 3 “Collaborations with Third Parties” and the Collaboration Revenue accounting policy above for further information.
In February 2016, the FASB issued ASU 2016-02, which was amended by subsequent updates (collectively the “lease standard” or “ASC 842”), and is intended to improve financial reporting about leasing transactions. The updated guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than twelve months. The Company adopted the standard on January 1, 2019 using the modified retrospective method. Results for the reporting period beginning after December 31, 2018 have been presented in accordance with the standard, while results for prior periods have not been adjusted. The Company recognized $
There have been no other material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
3. Collaborations with Third Parties
Agreement Terms
On January 2, 2019, the Company entered into a license and collaboration agreement with DSE. Pursuant to the agreement, the Company granted DSE exclusive commercialization rights to bempedoic acid and the bempedoic acid / ezetimibe combination tablet in the European Economic Area and Switzerland (“DSE Territory”). DSE will be responsible for commercialization in the DSE Territory. The Company remains responsible for clinical development, regulatory and manufacturing activities for the licensed products globally, including in the DSE Territory.
Pursuant to the agreement, the consideration consists of a $
The agreement calls for both parties to participate in a Joint Collaboration Committee (the “JCC”). The JCC is comprised of executive management from each company and the Company will lead in all aspects related to development and DSE will lead in all aspects related to commercialization in the DSE Territory.
Collaboration Revenue
The Company considered the guidance under ASC 606 and concluded that the agreement was in the scope of ASC 606. The Company concluded that the upfront payment of $
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ended September 30, 2019, in the amounts of $
All future potential milestone amounts were not included in the transaction price, as they were all determined to be fully constrained following the concepts of ASC 606 due to the fact that such amounts hinge on regulatory approval. Additionally, the Company expects that any consideration related to royalties and sales-based milestones will be recognized when the subsequent sales occur.
The Company has not yet recognized any revenue for milestone payments as the related regulatory and commercial milestones have not yet been achieved.
4. Warrants
In connection with the Credit Facility entered into in June 2014, the Company issued a warrant to purchase
5. Commitments and Contingencies
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 the Company and Tim Mayleben, captioned Kevin L. Dougherty v. Esperion Therapeutics, Inc., et al. (No. 16-cv-10089). The lawsuit alleges that the Company 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 the Company’s 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. On May 20, 2016, an amended complaint was filed in the lawsuit and on July 5, 2016, the Company filed a motion to dismiss the amended complaint. On December 27, 2016, the court granted the Company’s motion to dismiss with prejudice and entered judgment in the Company’s favor. On January 24, 2017, the plaintiffs in this lawsuit filed a motion to alter or amend the judgment. In May 2017, the court denied the plaintiff’s motion to alter or amend the judgment. On June 19, 2017, the plaintiffs filed a notice of appeal to the Sixth Circuit Court of Appeals and on September 14, 2017, they filed their opening brief in support of the appeal. The appeal was fully briefed on December 7, 2017, and it was argued before the Sixth Circuit on March 15, 2018. On September 27, 2018, the Sixth Circuit issued an opinion in which it reversed the district court's dismissal and remanded for further proceedings. On October 11, 2018, the Company filed a petition for rehearing en banc and, on October 23, 2018, the Sixth Circuit Court of Appeals directed plaintiffs to respond to that petition. On December 3, 2018, the Sixth Circuit denied the Company's petition for en banc rehearing, and on December 11, 2018, the case was returned to the federal district court by mandate from the Sixth Circuit. On December 26, 2018, the Company filed an answer to the amended complaint, and on March 28, 2019, the Company filed its amended answer to the amended complaint. The Company is unable to predict the outcome of this matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome.
On December 15, 2016, a purported stockholder of the Company filed a derivative lawsuit in the Court of Chancery of the State of Delaware against Tim Mayleben, Roger Newton, Mary McGowan, Nicole Vitullo, Dov Goldstein, Daniel Janney, Antonio Gotto Jr., Mark McGovern, Gilbert Omenn, Scott Braunstein, and Patrick Enright. The Company is named as a nominal defendant. The lawsuit alleges that the defendants breached their fiduciary duties to the Company when they made or approved improper statements on August 17, 2015, regarding the Company’s lead product candidate’s path to FDA approval, and failed to ensure that reliable systems of internal controls were in place at the Company. On February 8, 2019, the Company and defendants filed a motion to dismiss the derivative lawsuit. On April 23, 2019, the plaintiff filed an opposition to the motion to dismiss the derivative lawsuit, and the Company filed a reply brief on May 15, 2019. The lawsuit seeks, among other things, any damages sustained by the Company as a result of the defendants’ alleged breaches of fiduciary duties, including damages related to the above-referenced securities class action, an order directing the Company to take all necessary actions to reform and improve its corporate governance and internal procedures, restitution from the defendants, and attorneys’ fees and costs. The Company is unable to predict the outcome of this
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matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable outcome.
On May 7, 2018, a purported stockholder of the Company filed a putative class action lawsuit in the United States District Court for the Eastern District of Michigan, captioned Kevin Bailey v. Esperion Therapeutics, Inc., et al. (No. 18-cv-11438). An amended complaint was filed on October 22, 2018, against the Company and certain directors and officers. The amended complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 based on allegedly making false and misleading statements and omissions about the safety and tolerability of bempedoic acid, and specifically facts and circumstances surrounding the Phase 3 trial results for bempedoic acid that the Company announced on May 2, 2018. On November 13, 2018, the Company filed a motion to dismiss the amended complaint, and that motion was fully briefed on December 18, 2018. The lawsuit sought, among other things, compensatory damages in connection with an allegedly inflated stock price between February 22, 2017, and May 22, 2018, as well as attorneys’ fees and costs. On February 19, 2019, the court granted the Company’s motion to dismiss with prejudice and entered judgment in the Company’s favor.
There have been no other material changes to the Company’s contractual obligations and commitments and contingencies outside the ordinary course of business from those previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 other than the Revenue Interest Purchase Agreement disclosed in Note 8 “Liability Related to the Revenue Interest Purchase Agreement.”
6. Investments
The following table summarizes the Company’s cash equivalents and investments:
September 30, 2019 | ||||||||||||
|
| Gross |
| Gross |
| Estimated | ||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
Cost | Gains | Losses | Value | |||||||||
(in thousands) | ||||||||||||
Cash equivalents: | ||||||||||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Short-term investments: | ||||||||||||
Certificates of deposit | | — | — | | ||||||||
U.S. treasury notes |
| |
| |
| — |
| | ||||
Total | $ | | $ | | $ | — | $ | |
December 31, 2018 | ||||||||||||
|
| Gross |
| Gross |
| Estimated | ||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||
Cost | Gains | Losses | Value | |||||||||
(in thousands) | ||||||||||||
Cash equivalents: | ||||||||||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Short-term investments: | ||||||||||||
Certificates of deposit | | — | ( | | ||||||||
U.S treasury notes |
| |
| — |
| ( |
| | ||||
U.S. government agency securities |
| |
| — |
| ( |
| | ||||
Long-term investments: | ||||||||||||
Certificates of deposit | | — | ( | | ||||||||
Total | $ | | $ | — | $ | ( | $ | |
At September 30, 2019, remaining contractual maturities of investments classified as current on the balance sheets were less than 12 months and at December 31, 2018, remaining contractual maturities of investments classified as long-term were less than two years.
During the three and nine months ended September 30, 2019, other income, net in the statements of operations includes interest income on investments of $
13
net in the statements of operations includes interest income on investments of $
There were
7. Fair Value Measurements
The Company follows accounting guidance that emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements are defined on a three level hierarchy:
Level 1 inputs: |
| Quoted prices for identical assets or liabilities in active markets; |
Level 2 inputs: | Observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities or other inputs that are observable or can be corroborated by market data; and | |
Level 3 inputs: | Unobservable inputs that are supported by little or no market activity and require the reporting entity to develop assumptions that market participants would use when pricing the asset or liability. |
The following table presents the Company’s financial assets and liabilities that have been measured at fair value on a recurring basis:
Description |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
(in thousands) | ||||||||||||
September 30, 2019 | ||||||||||||
Assets: | ||||||||||||
Money market funds | $ | | $ | | $ | — | $ | — | ||||
Investments: | ||||||||||||
Certificates of deposit |
| |
| |
| — |
| — | ||||
U.S. treasury notes |
| |
| |
| — |
| — | ||||
Total assets at fair value | $ | | $ | | $ | — | $ | — | ||||
December 31, 2018 | ||||||||||||
Assets: | ||||||||||||
Money market funds | $ | | $ | | $ | — | $ | — | ||||
Investments: | ||||||||||||
Certificates of deposit |
| |
| |
| — |
| — | ||||
U.S. treasury notes |
| |
| |
| — |
| — | ||||
U.S. government agency securities |
| |
| — |
| |
| — | ||||
Total assets at fair value | $ | | $ | | $ | | $ | — |
At September 30, 2019, the fair value of the $
There were
8. Liability Related to the Revenue Interest Purchase Agreement
On June 26, 2019, the Company entered into a RIPA with Oberland, as agent for purchasers party thereto (the “Purchasers”), and the Purchasers named therein, to obtain financing in respect to the commercialization and further development of bempedoic acid and the bempedoic acid / ezetimibe combination tablet and other working capital needs. Pursuant to the RIPA, the Company received $
14
in subsequent installments subject to the terms and conditions set forth in the RIPA: (i) $
As consideration for such payments, the Purchasers will have a right to receive certain revenue interests (the “Revenue Interests”) from the Company based upon net sales of the Company’s certain products, once approved, which will be tiered payments initially ranging from
Under the RIPA, the Company has an option (the “Call Option”) to terminate the RIPA and repurchase future Revenue Interests at any time upon advance written notice. Additionally, the Purchasers have an option (the “Put Option”) to terminate the RIPA and to require the Company to repurchase future Revenue Interests upon enumerated events such as a bankruptcy event, an uncured material breach, a material adverse effect or a change of control. If the Put Option is exercised prior to the first anniversary of the closing date by the Purchasers (except pursuant to a change of control), the required repurchase price will be
In addition, the RIPA contains various representations and warranties, information rights, non-financial covenants, indemnification obligations and other provisions that are customary for a transaction of this nature.
In connection with the arrangement, the Company recorded a liability, referred to as the “Revenue interest liability” in the condensed balance sheets, of $
The fair value of the revenue interest liability upon entering into the RIPA was $
15
The following table summarizes the revenue interest liability activity during the nine months ended September 30, 2019:
(in thousands) | |||
Revenue interest liability at June 26, 2019 | $ | | |
Interest expense recognized |
| | |
Capitalized issuance costs |
| ( | |
Revenue interest liability at September 30, 2019 | $ | |
9. Stock Compensation
2017 Inducement Equity Plan
In May 2017, the Company’s board of directors approved the 2017 Inducement Equity Plan (the “2017 Plan”). The number of shares of common stock available for awards under the 2017 Plan was set to
2013 Stock Option and Incentive Plan
In May 2015, the Company's stockholders approved the amended and restated 2013 Stock Option and Incentive Plan (as amended, the “2013 Plan”). The number of shares of common stock available for awards under the 2013 Plan was set to
The 2017 Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), unrestricted stock awards and dividend equivalent rights. The 2013 Plan provides for the granting of stock options, stock appreciation rights, restricted stock awards, RSUs, unrestricted stock awards, cash-based awards, performance share awards and dividend equivalent rights. The Company incurs stock-based compensation expense related to stock options and RSUs. The fair value of RSUs is determined by the closing market price of the Company’s common stock on the date of grant. The fair value of stock options is calculated using a Black-Scholes option pricing model. The Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation—Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized over the requisite service periods of the awards on a straight-line basis at the grant-date fair value. In accordance with the adoption of ASU 2016-09, the Company accounts for forfeitures as they occur.
The following table summarizes the activity relating to the Company’s options to purchase common stock for the nine months ended September 30, 2019:
Weighted-Average | Weighted-Average | |||||||||
Exercise | Remaining | Aggregate | ||||||||
Number of | Price | Contractual | Intrinsic | |||||||
| Options |
| Per Share |
| Term (Years) |
| Value | |||
(in thousands) | ||||||||||
Outstanding at December 31, 2018 |
| | $ | |
| $ | | |||
Granted |
| | $ | | ||||||
Forfeited or expired |
| ( | $ | | ||||||
Exercised |
| ( | $ | | ||||||
Outstanding at September 30, 2019 |
| | $ | |
| $ | |
16
The following table summarizes information about the Company’s stock option plan as of September 30, 2019:
Weighted-Average | Weighted-Average | |||||||||
Exercise | Remaining | Aggregate | ||||||||
Number of | Price | Contractual | Intrinsic | |||||||
| Options |
| Per Share |
| Term (Years) |
| Value | |||
(in thousands) | ||||||||||
Vested and expected to vest at September 30, 2019 |
| | $ | |
| $ | | |||
Exercisable at September 30, 2019 |
| | $ | |
| $ | |
During the three and nine months ended September 30, 2019, the Company recognized $
The following table summarizes the activity relating to the Company’s RSUs for the nine months ended September 30, 2019:
|
| Weighted-Average | |||
Number of | Fair Value Per | ||||
RSUs | Share | ||||
Outstanding and unvested at December 31, 2018 |
| | $ | | |
Granted |
| | $ | | |
Vested |
| ( | $ | | |
Outstanding and unvested at September 30, 2019 |
| | $ | |
During the three and nine months ended September 30, 2019, the Company recognized $
10. Leases
The Company has operating leases primarily related to the Company’s principal executive office, automobile leases and other IT related equipment. The lease for the principal executive office has a lease term of
The following table summarizes the Company’s future maturities of operating lease liabilities as of September 30, 2019:
| (in thousands) | ||
2019 | $ | ||
2020 |
| ||
2021 |
| ||
2022 |
| ||
2023 |
| ||
Total lease payments |
| ||
Less imputed interest |
| ||
Total | $ |
17
The following table summarizes supplemental balance sheet information related to leases as of September 30, 2019:
Operating Leases |
| (in thousands) | |
Right of use operating lease assets (short-term) | $ | ||
Right of use operating lease assets (long-term) |
| ||
Total right of use operating lease assets | $ | ||
Operating lease liabilities (short-term) | $ | ||
Operating lease liabilities (long-term) |
| ||
Total lease obligations under operating leases | $ |
11. Income Taxes
There was
12. Net Loss Per Common Share
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common stock equivalents outstanding for the period, including shares that potentially could be dilutive if they were exercised during the period, determined using the treasury-stock method. For purposes of this calculation, warrants for common stock, stock options and unvested RSUs are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.
The shares outstanding at the end of the respective periods presented below were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:
| September 30, | December 31, | ||
| 2019 |
| 2018 | |
| ||||
Warrants for common stock |
| — | | |
Common shares under option | |