SEC Filing | Esperion Therapeutics, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒

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

For the quarterly period ended September 30, 2019

☐

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		26-1870780
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3891 Ranchero Drive, Suite 150

Ann Arbor, MI 48108

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code:

(734) 887-3903

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	ESPR	NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 1, 2019, there were 27,327,409 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

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Esperion Therapeutics, Inc.

INDEX


		Page

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Balance Sheets at September 30, 2019 and December 31, 2018		3
Condensed Statements of Operations and Comprehensive Loss for the three and nine month periods ended September 30, 2019 and 2018		4
Condensed Statements of Stockholders’ Equity for the three and nine month periods ended September 30, 2019 and 2018		5
Condensed Statements of Cash Flows for the nine month periods ended September 30, 2019 and 2018		6
Notes to Condensed Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

Item 3. Quantitative and Qualitative Disclosures About Market Risk		30

Item 4. Controls and Procedures		30

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		31

Item 1A. Risk Factors		32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		32

Item 6. Exhibits		32

Signatures		34

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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	$	211,978	$	36,973
Restricted cash		928		—
Short-term investments		31,883		99,050
Prepaid clinical development costs		5,653		5,275
Right of use operating lease assets		260		—
Other prepaid and current assets		2,758		1,334
Total current assets		253,460		142,632

Property and equipment, net		958		520
Intangible assets		56		56
Long-term investments		—		243
Right of use operating lease assets		796		—
Total assets	$	255,270	$	143,451

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	23,735	$	44,893
Accrued clinical development costs		20,954		16,039
Other accrued liabilities		9,944		3,401
Deferred revenue from collaborations		2,618		—
Operating lease liabilities		267		—
Total current liabilities		57,518		64,333

Revenue interest liability		128,420		—
Operating lease liabilities		820		—
Total liabilities		186,758		64,333
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 September 30, 2019 and December 31, 2018		—		—
Common stock, $0.001 par value; 120,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 27,178,230 shares issued and outstanding at September 30, 2019 and 26,824,859 shares issued and outstanding at December 31, 2018		27		27
Additional paid-in capital		701,794		677,511
Accumulated other comprehensive income (loss)		11		(319)
Accumulated deficit		(633,320)		(598,101)
Total stockholders’ equity		68,512		79,118
Total liabilities and stockholders’ equity	$	255,270	$	143,451

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		2018		2019		2018
Revenues:
Collaboration Revenue	$	981	$	—	$	147,382	$	—
Total Revenues		981		—		147,382		—

Operating expenses:
Research and development	$	48,281	$	41,551	$	137,377	$	122,015
General and administrative		18,468		9,011		44,142		21,921
Total operating expenses		66,749		50,562		181,519		143,936

Loss from operations		(65,768)		(50,562)		(34,137)		(143,936)

Interest expense		(3,996)		—		(3,996)		(28)
Other income, net		1,387		651		2,914		2,193
Net loss	$	(68,377)	$	(49,911)	$	(35,219)	$	(141,771)

Net loss per common share - basic and diluted	$	(2.52)	$	(1.86)	$	(1.30)	$	(5.30)

Weighted-average shares outstanding - basic and diluted		27,171,769		26,804,026		26,995,661		26,732,733

Other comprehensive loss:
Unrealized gain on investments	$	27	$	216	$	330	$	285
Comprehensive loss	$	(68,350)	$	(49,695)	$	(34,889)	$	(141,486)

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	26,824,859	$	27	$	677,511	$	(598,101)	$	(319)	$	79,118
Exercise of stock options	80,218		—		1,669		—		—		1,669
Vesting of restricted stock units	3,125		—		—		—		—		—
Stock-based compensation	—		—		6,636		—		—		6,636
Other comprehensive gain	—		—		—		—		208		208
Net income	—		—		—		87,379		—		87,379
Balance March 31, 2019	26,908,202	$	27	$	685,816	$	(510,722)	$	(111)	$	175,010
Exercise of stock options	115,612		—		1,887		—		—		1,887
Exercise of warrants	5,813		—		—		—		—		—
Vesting of restricted stock units	7,025		—		—		—		—		—
Stock-based compensation	—		—		6,563		—		—		6,563
Other comprehensive gain	—		—		—		—		95		95
Net loss	—		—		—		(54,221)		—		(54,221)
Balance June 30, 2019	27,036,652	$	27	$	694,266	$	(564,943)	$	(16)	$	129,334
Exercise of stock options	137,878		—		1,201		—		—		1,201
Vesting of restricted stock units	3,700		—		—		—		—		—
Stock-based compensation	—		—		6,327		—		—		6,327
Other comprehensive gain	—		—		—		—		27		27
Net loss	—		—		—		(68,377)		—		(68,377)
Balance September 30, 2019	27,178,230	$	27	$	701,794	$	(633,320)	$	11	$	68,512


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-In		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance December 31, 2017	26,304,669	$	26	$	641,801	$	(396,291)	$	(845)	$	244,691
Exercise of stock options	285,413		1		9,775		—		—		9,776
Exercise of warrants	159,944		—		—		—		—		—
Vesting of restricted stock units	1,562		—		—		—		—		—
Stock-based compensation	—		—		5,921		—		—		5,921
Other comprehensive loss	—		—		—		—		(118)		(118)
Net loss	—		—		—		(46,130)		—		(46,130)
Balance March 31, 2018	26,751,588	$	27	$	657,497	$	(442,421)	$	(963)	$	214,140
Exercise of stock options	49,504		—		1,597		—		—		1,597
Vesting of restricted stock units	625		—		—		—		—		—
Stock-based compensation	—		—		5,723		—		—		5,723
Other comprehensive gain	—		—		—		—		187		187
Net loss	—		—		—		(45,730)		—		(45,730)
Balance June 30, 2018	26,801,717	$	27	$	664,817	$	(488,151)	$	(776)	$	175,917
Exercise of stock options	1,958		—		28		—		—		28
Vesting of restricted stock units	625		—		—		—		—		—
Stock-based compensation	—		—		5,495		—		—		5,495
Other comprehensive gain	—		—		—		—		216		216
Net loss	—		—		—		(49,911)		—		(49,911)
Balance September 30, 2018	26,804,300	$	27	$	670,340	$	(538,062)	$	(560)	$	131,745

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	$	(35,219)	$	(141,771)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		218		191
Accretion of premiums and discounts on investments		(140)		(134)
Non-cash interest expense related to the revenue interest liability		3,996		—
Stock-based compensation expense		19,526		17,139
Changes in assets and liabilities:
Prepaids and other assets		(1,802)		(5,267)
Deferred revenue		2,618		—
Accounts payable		(21,158)		(1,808)
Other accrued liabilities		11,614		11,704
Net cash used in operating activities		(20,347)		(119,946)

Investing activities
Purchases of investments		(26,630)		(25,481)
Proceeds from sales/maturities of investments		94,510		127,408
Purchase of property and equipment		(781)		(46)
Net cash provided by investing activities		67,099		101,881

Financing activities
Proceeds from revenue interest liability, net of issuance costs		124,424		—
Proceeds from exercise of common stock options		4,757		11,401
Payments on long-term debt		—		(1,049)
Net cash provided by financing activities		129,181		10,352

Net increase (decrease) in cash and cash equivalents		175,933		(7,713)
Cash and cash equivalents at beginning of period		36,973		34,468
Cash, cash equivalents and restricted cash at end of period	$	212,906	$	26,755
Supplemental disclosure of cash flow information:
Purchase of property and equipment not yet paid	$	74	$	293
Non cash right of use asset		31		—

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 14,032 patients in August 2019. The primary endpoint of the study is the effect of bempedoic acid on major adverse cardiovascular events (cardiovascular death, non-fatal myocardial infarction, non-fatal stroke, or coronary revascularization; also referred to as "four-component MACE"). CLEAR Outcomes is an event-driven trial and will conclude once the predetermined number of major adverse cardiovascular events (“MACE”) endpoints occur. Based on estimated cardiovascular event rates, the Company expects to meet the target number of events in the second half of 2022. The Company intends to use positive results from this CVOT to support submissions for a CV risk reduction indication in the U.S. and Europe.

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 one operating segment, which is the business of researching, developing and commercializing therapies for the treatment of patients with elevated LDL-C.

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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 ten years. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the related assets.

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. No impairment losses have been recorded through September 30, 2019.

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 $1.0 million and $1.0 million of operating lease assets and operating lease liabilities, respectively, on the Company’s balance sheets as of January 1, 2019, primarily related to the lease agreement for the Company’s principal executive office. Refer to Note 9 “Leases” for more information on the Company’s leases.

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 $150.0 million upfront cash payment as well as $150.0 million cash payment to the Company upon first commercial sales in the DSE Territory. The Company is also eligible to receive a substantial additional regulatory milestone payment upon the grant of the marketing authorisation in the European Union for the CV risk reduction label, depending on the range of relative risk reduction in the CLEAR Outcomes study. In addition, the Company is eligible to receive additional sales milestone payments related to total net sales achievements for DSE in the DSE Territory. Finally, the Company will receive tiered fifteen percent (15%) to twenty-five percent (25%) royalties on net DSE Territory sales.

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 $150.0 million should be included in the transaction price and related to the following performance obligations under the agreement: 1) the license to the Company’s intellectual property and 2) the obligation to provide ongoing regulatory and development activities. The Company used the adjusted market assessment approach in determining the standalone selling price of the Company’s intellectual property and the expected cost plus margin approach in determining the standalone selling price of the Company’s obligation to provide ongoing regulatory and development activities. Accordingly, for the three and nine months ended September 30, 2019, the Company recognized $1.0 million and $147.4 million of collaboration revenue related to the $150.0 million upfront payment, respectively. The $147.4 million relates to the performance obligations for the license to the Company’s intellectual property and a portion of ongoing regulatory and development activities conducted during the period

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ended September 30, 2019, in the amounts of $144.4 million and $3.0 million, respectively. The remaining $2.6 million of the upfront payment was deferred as of September 30, 2019 due to an on-going performance obligation related to the ongoing regulatory efforts related to the MAA in the DSE Territory. This deferred revenue will be recognized ratably over the period leading up to the approval of the MAA acceptance by the EMA.

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 8,230 shares of common stock at an exercise price of $15.19. The warrant was recorded at fair value of $0.1 million to additional paid-in-capital in accordance with ASC 815-10 based upon the allocation of the debt proceeds. During the nine months ended September 30, 2019, 8,230 warrants were net exercised for 5,813 shares of the Company’s common stock. As of September 30, 2019, the Company has no warrants outstanding.

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	$	55,199	$	—	$	—	$	55,199
Short-term investments:
Certificates of deposit		245		—		—		245
U.S. treasury notes		31,627		11		—		31,638
Total	$	87,071	$	11	$	—	$	87,082


	December 31, 2018
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(in thousands)
Cash equivalents:
Money market funds	$	34,526	$	—	$	—	$	34,526
Short-term investments:
Certificates of deposit		3,873		—		(7)		3,866
U.S treasury notes		44,897		—		(142)		44,755
U.S. government agency securities		50,598		—		(169)		50,429
Long-term investments:
Certificates of deposit		244		—		(1)		243
Total	$	134,138	$	—	$	(319)	$	133,819

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 $1.2 million and $2.6 million, and income for the accretion of premiums and discounts on investments of $0.2 million and $0.3 million, respectively. During the three and nine months ended September 30, 2018, other income,

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net in the statements of operations includes interest income on investments of $0.6 million and $2.1 million, and income for the accretion of premiums and discounts on investments of less than $0.1 million and $0.1 million, respectively.

There were no unrealized gains or losses on investments reclassified from accumulated other comprehensive loss to other income in the statements of operations during the three and nine months ended September 30, 2019 and 2018.

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	$	55,199	$	55,199	$	—	$	—
Investments:
Certificates of deposit		245		245		—		—
U.S. treasury notes		31,638		31,638		—		—
Total assets at fair value	$	87,082	$	87,082	$	—	$	—
December 31, 2018
Assets:
Money market funds	$	34,526	$	34,526	$	—	$	—
Investments:
Certificates of deposit		4,109		4,109		—		—
U.S. treasury notes		44,755		44,755		—		—
U.S. government agency securities		50,429		—		50,429		—
Total assets at fair value	$	133,819	$	83,390	$	50,429	$	—

At September 30, 2019, the fair value of the $128.4 million revenue interest liability is based on the Company’s current estimates of future revenues expected to be paid to Eiger III SA LLC (“Oberland”), an affiliate of Oberland Capital LLC, over the life of the Revenue Interest Purchase Agreement (“RIPA”). The liability is considered a Level 3 input based on the three level hierarchy. Refer to Note 8 for further information.

There were no transfers between Levels 1, 2 or 3 during the three and nine months ended September 30, 2019 and 2018.

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 $125.0 million at closing, less certain issuance costs. The Company will also be entitled to receive up to approximately $75.0 million

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in subsequent installments subject to the terms and conditions set forth in the RIPA: (i) $25.0 million upon certain regulatory approval of its product candidates and (ii) $50.0 million, at the Company’s option, upon reaching $100.0 million trailing worldwide six-month net sales any time prior to December 31, 2021 (the “Third Payment”).

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 2.5% to 7.5% of the Company’s net sales in the covered territory (the “Covered Territory”); provided that (a) if annual net sales equal or exceed $350.0 million by December 31, 2021 (the “Sales Threshold”), the initially tiered revenue interest rate will be decreased to a single rate of 2.5% of the Company’s net sales in the Covered Territory, beginning on January 1, 2022, and (b) if annual net sales equal or exceed the Sales Threshold and if the Purchasers receive 100% of their invested capital by December 31, 2024, the revenue interest rate will be decreased to a single rate of 0.4% of the Company’s net sales in the Covered Territory beginning on January 1, 2025. If the Third Payment is drawn down by the Company, the applicable royalty rates will increase by one-third. The Covered Territory is the United States, but is subject to expand to include the world-wide net sales if the Company’s annual U.S. net sales are less than $350.0 million for the year ended December 31, 2021. The U.S. net sales milestone thresholds are not to be taken as financial guidance. The Purchasers’ rights to receive the Revenue Interests shall terminate on the date on which the Purchasers have received Revenue Interests payments of 195% of the then aggregate purchase price (the “Cumulative Purchaser Payments”) paid to the Company, unless the RIPA is terminated earlier.

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 120% of the Cumulative Purchaser Payments (minus all payments Company has made to the Purchasers in connection with the Revenue Interests). In all other cases, if the Put Option or the Call Option are exercised, the required repurchase price will be 175% of the Cumulative Purchaser Payments (minus all payments Company has made to the Purchasers in connection with the Revenue Interests), if such option is exercised prior to the third anniversary of the closing date, and 195% of the Cumulative Purchaser Payments (minus all payments Company has made to the Purchasers in connection with the Revenue Interests), if such option is exercised thereafter.

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 $128.4 million, net of $0.6 million of unamortized issuance costs in connection with the RIPA. 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 this 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. Future payments under the RIPA may range from $0.1 million in the next year to a maximum total payment of $243.8 million beyond one year. Per the terms of the agreement, every $100 million of net sales generated, less than or equal to $250 million in an annual aggregate, would result in a repayment obligation of approximately $7.5 million at the stated repayment rate in the first year. In the future, as net sales thresholds set forth in the agreement are met and the repayment percentage rate changes, the amount of the obligation and timing of payment is likely to change. As products are not yet approved for sale, the exact timing or amounts of repayment is likely to change each reporting period. A significant increase or decrease in net sales will materially impact the revenue interest liability, interest expense and the time period for repayment. The Company recorded approximately $4.0 million in interest expense related to this arrangement for the three and nine months ended September 30, 2019.

The fair value of the revenue interest liability upon entering into the RIPA was $125.0 million, with an effective annual imputed interest rate of 12.6%. The Company incurred $0.6 million of issuance costs in connection with the RIPA, which will be amortized to interest expense over the estimated term of the RIPA. Payments made to Oberland as a result of the Company's net sales will reduce the revenue interest liability.

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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	$	125,000
Interest expense recognized		3,996
Capitalized issuance costs		(576)
Revenue interest liability at September 30, 2019	$	128,420

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 750,000, with any shares of common stock that are forfeited, cancelled, held back upon the exercise or settlement of an award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of common stock, or otherwise terminated (other than by exercise) under the 2017 Plan added back to the shares of common stock available for issuance under the 2017 Plan.

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 2,975,000 shares, plus (i) shares of common stock that are forfeited, cancelled, held back upon the exercise or settlement of an award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of common stock or otherwise terminated (other than by exercise) under the 2013 Plan and the Company's 2008 Incentive Stock Option and Restricted Stock Plan are added back to the shares of common stock available for issuance under the 2013 Plan, and (ii) on January 1, 2016, and each January 1, thereafter, the number of shares of common stock reserved and available for issuance under the 2013 Plan will be cumulatively increased by 2.5% of the number of shares of common stock outstanding on the immediately preceding December 31, or such lesser number of shares of common stock determined by the compensation committee.

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	5,303,723	$	37.01	7.42	$	83,473
Granted	542,875	$	46.95
Forfeited or expired	(419,628)	$	47.06
Exercised	(333,708)	$	14.26
Outstanding at September 30, 2019	5,093,262	$	38.73	6.63	$	45,443

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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	5,093,262	$	38.73	6.63	$	45,443
Exercisable at September 30, 2019	3,142,954	$	33.05	5.31	$	39,711

During the three and nine months ended September 30, 2019, the Company recognized $5.5 million and $18.1 million, respectively, of stock-based compensation expense related to stock options. During the three and nine months ended September 30, 2018, the Company recognized $5.3 million and $16.6 million, respectively, of stock-based compensation expense related to stock options. As of September 30, 2019, there was $55.6 million of unrecognized stock-based compensation expense related to unvested options, which will be recognized over a weighted-average period of 2.8 years.

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	37,475	$	66.96
Granted	168,579	$	41.28
Vested	(13,850)	$	66.24
Outstanding and unvested at September 30, 2019	192,204	$	44.48

During the three and nine months ended September 30, 2019, the Company recognized $0.8 million and $1.4 million, respectively, of stock-based compensation expense related to RSUs. During the three and nine months ended September 30, 2018, the Company recognized $0.2 million and $0.5 million, respectively, of stock-based compensation expense related to RSUs. As of September 30, 2019, there was $7.6 million of unrecognized stock-based compensation expense related to unvested RSUs, which will be recognized over a weighted-average period of 3.0 years.

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 5 years and the automobile leases and IT equipment leases primarily have a term of 3 years. During the three and nine months ended September 30, 2019, the Company recognized $0.1 million and $0.2 million, respectively, of operating lease costs, recognized on the Condensed Statements of Operations, and paid cash for the amounts included in the measurement of lease liabilities of $0.1 million and $0.2 million, respectively, which were included in operating cash flows on the Condensed Statements of Cash Flows. At September 30, 2019, the weighted-average remaining lease term of operating leases was 3.8 years and the weighted average discount rate was 7.6%. There were no right-of-use assets obtained in exchange for lease obligations in the nine months ended September 30, 2019. The Company had no additional operating and finance leases that have not yet commenced as of September 30, 2019.

The following table summarizes the Company’s future maturities of operating lease liabilities as of September 30, 2019:


	(in thousands)
2019	$	88
2020		338
2021		321
2022		299
2023		217
Total lease payments		1,263
Less imputed interest		176
Total	$	1,087

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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)	$	260
Right of use operating lease assets (long-term)		796
Total right of use operating lease assets	$	1,056

Operating lease liabilities (short-term)	$	267
Operating lease liabilities (long-term)		820
Total lease obligations under operating leases	$	1,087

11. Income Taxes

There was no provision for income taxes for the three and nine months ended September 30, 2019 and 2018, because the Company has incurred annual operating losses since inception. At September 30, 2019, the Company continues to conclude that it is not more likely than not that the Company will realize the benefit of its deferred tax assets due to its history of losses. Accordingly, a full valuation allowance has been applied against the net deferred tax assets.

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	—	8,230
Common shares under option	5,093,262	5,303,723