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Table of Contents

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 June 30, 2020

OR

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

For the transition period from                      to                

Commission file number: 001-35986

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 August 1, 2020, there were 27,825,428 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

Table of Contents

Esperion Therapeutics, Inc.

INDEX

    

Page

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Balance Sheets at June 30, 2020 and December 31, 2019

3

Condensed Statements of Operations and Comprehensive Income (Loss) for the three and six month periods ended June 30, 2020 and 2019

4

Condensed Statements of Stockholders’ Equity for the three and six month periods ended June 30, 2020 and 2019

5

Condensed Statements of Cash Flows for the three and six month periods ended June 30, 2020 and 2019

6

Notes to Condensed Financial Statements

7

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

21

Item 3. Quantitative and Qualitative Disclosures About Market Risk

31

Item 4. Controls and Procedures

32

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

33

Item 1A. Risk Factors

33

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

34

Item 6. Exhibits

34

Signatures

36

2

Table of Contents

Esperion Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except share data)

    

June 30, 

    

December 31, 

2020

2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

298,489

$

166,130

Restricted cash

928

Short-term investments

 

2,247

 

34,651

Prepaid clinical development costs

 

890

 

6,081

Inventories

8,248

Other prepaid and current assets

 

11,497

 

3,924

Total current assets

 

321,371

 

211,714

Property and equipment, net

 

1,512

 

1,145

Right of use operating lease assets

6,175

1,532

Other long-term assets

1,294

56

Total assets

$

330,352

$

214,447

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

29,690

$

28,856

Accrued clinical development costs

 

19,641

 

17,511

Other accrued liabilities

 

21,908

 

11,871

Revenue interest liability

9,276

5,236

Deferred revenue from collaborations

1,134

2,152

Operating lease liabilities

2,232

454

Total current liabilities

83,881

66,080

Revenue interest liability

157,015

127,308

Operating lease liabilities

3,967

1,109

Total liabilities

244,863

194,497

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 June 30, 2020 and December 31, 2019

 

 

Common stock, $0.001 par value; 120,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 27,751,655 shares issued and outstanding at June 30, 2020 and 27,497,911 shares issued and outstanding at December 31, 2019

 

28

 

27

Additional paid-in capital

 

734,365

 

715,166

Accumulated other comprehensive income

 

 

23

Accumulated deficit

 

(648,904)

 

(695,266)

Total stockholders’ equity

 

85,489

 

19,950

Total liabilities and stockholders’ equity

$

330,352

$

214,447

See accompanying notes to the condensed financial statements.

3

Table of Contents

Esperion Therapeutics, Inc.

Condensed Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share and per share data)

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

Revenues:

Product sales, net

$

609

$

$

1,467

$

Collaboration revenue

211,627

982

212,609

146,401

Total Revenues

212,236

982

214,076

146,401

Operating expenses:

Cost of goods sold

398

429

Research and development

34,987

42,788

69,689

89,096

Selling, general and administrative

 

47,681

 

13,492

 

89,234

 

25,674

Total operating expenses

 

83,066

 

56,280

 

159,352

 

114,770

Income (loss) from operations

 

129,170

 

(55,298)

 

54,724

 

31,631

Interest expense

(4,640)

(8,811)

Other income, net

 

81

 

1,077

 

449

 

1,527

Net income (loss)

$

124,611

$

(54,221)

$

46,362

$

33,158

Net income (loss) per common share - basic

$

4.50

$

(2.01)

$

1.68

$

1.23

Net income (loss) per common share - diluted

$

4.32

$

(2.01)

$

1.60

$

1.16

Weighted-average shares outstanding - basic

 

27,665,728

 

26,968,818

 

27,592,479

 

26,906,149

Weighted-average shares outstanding - diluted

28,854,445

 

26,968,818

 

28,948,058

 

28,518,015

Other comprehensive income (loss):

Unrealized gain (loss) on investments

$

(9)

$

95

$

(23)

$

303

Comprehensive income (loss)

$

124,602

$

(54,126)

$

46,339

$

33,461

See accompanying notes to the condensed financial statements.

4

Table of Contents

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

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income

    

Equity

Balance December 31, 2019

 

27,497,911

$

27

$

715,166

$

(695,266)

$

23

$

19,950

Exercise of stock options

 

40,133

 

1

 

1,013

 

 

 

1,014

Vesting of restricted stock units

10,089

Stock-based compensation

7,053

7,053

Other comprehensive loss

(14)

(14)

Net loss

(78,249)

(78,249)

Balance March 31, 2020

27,548,133

$

28

$

723,232

$

(773,515)

$

9

$

(50,246)

Exercise of stock options

160,024

 

 

3,738

 

 

 

3,738

Vesting of restricted stock units

43,498

Stock-based compensation

7,395

7,395

Other comprehensive loss

(9)

(9)

Net income

124,611

124,611

Balance June 30, 2020

27,751,655

$

28

$

734,365

$

(648,904)

$

$

85,489

See accompanying notes to the condensed financial statements.

5

Table of Contents

Esperion Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

Six Months Ended June 30, 

    

2020

    

2019

Operating activities

Net income

$

46,362

$

33,158

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

 

224

 

126

Accretion of premiums and discounts on investments

 

(93)

 

(121)

Non-cash interest expense related to the revenue interest liability

8,811

Stock-based compensation expense

 

14,448

 

13,199

Changes in assets and liabilities:

Prepaids and other assets

 

(2,382)

 

1,840

Deferred revenue

(1,018)

3,599

Inventories

(8,248)

Other long-term assets

(1,238)

Accounts payable

 

921

 

(16,705)

Other accrued liabilities

 

12,257

 

2,586

Net cash provided by operating activities

 

70,044

 

37,682

Investing activities

Purchases of investments

 

(4,420)

 

Proceeds from sales/maturities of investments

 

36,895

 

72,835

Purchase of property and equipment

 

(776)

 

(423)

Net cash provided by investing activities

 

31,699

 

72,412

Financing activities

Proceeds from revenue interest liability

25,000

124,649

Proceeds from exercise of common stock options

 

4,752

 

3,556

Payments on revenue interest liability

(64)

Net cash provided by financing activities

 

29,688

 

128,205

Net increase in cash and cash equivalents

 

131,431

 

238,299

Cash, cash equivalents and restricted cash at beginning of period

 

167,058

 

36,973

Cash, cash equivalents and restricted cash at end of period

$

298,489

$

275,272

Supplemental disclosure of cash flow information:

Issuance costs from revenue interest agreement not yet paid

$

$

240

Purchase of property and equipment not yet paid

6

285

Non cash right of use asset

(7)

26

See accompanying notes to the condensed financial statements.

6

Table of Contents

Esperion Therapeutics, Inc.

Notes to the Condensed Financial Statements

(unaudited)

1. The Company and Basis of Presentation

Esperion Therapeutics, Inc. ("the Company”) is the Lipid Management Company, a pharmaceutical company focused on developing and commercializing affordable, oral, once-daily, non-statin medicines 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 medicines that will make a substantial impact on reducing global cardiovascular disease ("CVD"); the leading cause of death around the world. NEXLETOL® (bempedoic acid) and NEXLIZETTM (bempedoic acid and ezetimibe) tablets are the first, oral, once-daily, non-statin LDL-C lowering medicines approved in the U.S. in nearly 20 years for patients with atherosclerotic cardiovascular disease (“ASCVD”) or heterozygous familial hypercholesterolemia (“HeFH”).

On February 21, 2020, the Company announced that the U.S. Food and Drug Administration (“FDA”) approved NEXLETOL an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with HeFH or established ASCVD who require additional lowering of LDL-C. The effect of NEXLETOL on cardiovascular morbidity and mortality has not been determined. NEXLETOL is the first oral, once-daily, non-statin LDL-C lowering medicine approved since 2002 for indicated patients. NEXLETOL became commercially available on March 30, 2020.

On February 26, 2020, the Company announced that the FDA approved NEXLIZET as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with HeFH or established ASCVD who require additional lowering of LDL-C. The effect of NEXLIZET on cardiovascular morbidity and mortality has not been determined. NEXLIZET is the first non-statin, LDL-C lowering fixed combination drug product ever approved. NEXLIZET became commercially available on June 4, 2020.

On January 31, 2020, the Committee for Medicinal Products for Human Use ("CHMP") of the European Medicines Agency ("EMA") adopted a positive opinion for the Marketing Authorisation Applications ("MAAs") of both bempedoic acid and the bempedoic acid / ezetimibe combination tablets, recommending approval for the treatment of hypercholesterolemia and mixed dyslipidemia. On April 6, 2020, the Company announced that the European Commission (“EC”) approved the NILEMDO™ (bempedoic acid) and NUSTENDI™ (bempedoic acid and ezetimibe) tablets for the treatment of hypercholesterolemia and mixed dyslipidemia. The decision is applicable to all 27 European Union member states plus the United Kingdom, Iceland, Norway and Liechtenstein. NILEMDO (bempedoic acid) and NUSTENDI (bempedoic acid and ezetimibe) are the branded products names for bempedoic acid and the bempedoic acid / ezetimibe combination tablets in Europe. NILEMDO is the first, oral, non-statin, LDL-C lowering medicines approved in Europe in almost two decades for indicated patients, and NUSTENDI is the first non-statin, LDL-C lowering combination medicine ever approved in Europe.

On April 17, 2020, the Company entered into a license and collaboration agreement (the "Otsuka Agreement") with Otsuka Pharmaceutical Co., Ltd. ("Otsuka"). Pursuant to the Otsuka Agreement, the Company granted Otsuka exclusive development and commercialization rights to NEXLETOL and NEXLIZET in Japan. Otsuka will be responsible for all development, regulatory, and commercialization activities in Japan. In addition, Otsuka will fund all clinical development costs associated with the program in Japan. The Company received an upfront cash payment of $60 million in April 2020 and will receive up to an additional $450 million in total development and sales milestones. The Company will also receive tiered royalties ranging from 15 percent to 30 percent on net sales in Japan.

On June 18, 2020, the Company entered into an amendment to the license and collaboration agreement ("LCA Amendment") with Daiichi Sankyo Europe GmbH ("DSE") dated as of January 2, 2019. In June 2020, the Company completed the transfer of the MAAs for NILEMDO and NUSTENDI. Pursuant to the terms of the amendment, DSE paid the Company the second $150 million milestone based on completion of the NUSTENDI MAA transfer rather than the first product sale in the EU. Prior to the execution of the LCA Amendment, the milestone payment was due upon the first commercial sale in Europe, which is anticipated later this year. Additionally, the Company and DSE have agreed to expand the territory in which DSE has exclusive commercialization rights to NILEMDO and NUSTENDI to include Turkey. DSE's designated affiliate in Turkey will be solely responsible, at its sole cost and expense, for all regulatory matters relating to such products in Turkey, including obtaining Regulatory Approval for such product in Turkey.

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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. The Company received approval by the FDA in February 2020 to commercialize NEXLETOL and NEXLIZET in the U.S., and accordingly commenced principal operations on March 30, 2020 with the commercialization of NEXLETOL. The Company is subject to risks and uncertainties which include the need to successfully commercialize its products, research, develop, and clinically test therapeutic products; obtain regulatory approvals for its products; expand its management, commercial 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 net product sales, collaboration agreements with DSE and Otsuka, entered into on January 2, 2019 and April 17, 2020, respectively, 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 products and product candidates through a combination of collaborations with third parties, strategic alliances, licensing arrangements, permitted debt financings, permitted royalty-based financings, and permitted private and public equity offerings or through other sources.

If adequate funds are not available, the Company may not be able to continue the development of its current products or future product candidates, or to commercialize its current or future product candidates, if approved.

Basis of Presentation

The accompanying condensed interim 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, but that is not required for interim reporting purposes, 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, 2019, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. 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, net revenues, expenses and related disclosures. Actual results could differ from those estimates.

Concentration of Risk

The Company enters into a limited number of distribution agreements with distributors and specialty pharmacies. The Company's net product sales are with these customers. As of June 30, 2020, one customer accounted for all of the Company's net trade receivables.

Inventories

Inventories are stated at the lower of cost or net realizable value and recognized on a first-in, first-out ("FIFO") method. The Company uses standard cost to determine the cost basis for inventory. Inventory is capitalized based on when future economic benefit is expected to be realized. The Company began capitalizing inventory upon receiving FDA approval for NEXLETOL and NEXLIZET on February 21, 2020 and February 26, 2020, respectively. Prior to the FDA approval of NEXLETOL and NEXLIZET, expenses associated with the manufacturing of the Company's products were recorded as research and development expense.

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The Company analyzes its inventory levels on a periodic basis to determine if any inventory is at risk for expiration prior to sale or has a cost basis that is greater than its estimated future net realizable value. Any adjustments are recognized through cost of sales in the period in which they are incurred.

Revenue Recognition

In accordance with ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for the goods or services provided. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: identify the contracts with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when or as the entity satisfies a performance obligation. At contract inception the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. The Company derives revenue through two primary sources: collaboration revenue and product sales. Collaboration revenue consists of the collaboration payments to the Company for collaboration arrangements outside of the United States for the development, manufacturing and commercialization of the Company's product candidates by the Company's partners and product sales consists of sales of NEXLETOL and NEXLIZET.

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. 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 agreements may require the Company to deliver various rights, services, and/or goods across the entire life cycle of a product or product candidate. In an 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.

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. The Company recognizes regulatory and approval milestones consideration when it is probable that a future reversal is unlikely to occur. For sales based milestones and royalties based on sales of product in a territory, the Company applies the sales-based royalty exception in ASC 606-10-55-65 to all of these milestones and royalties.

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 contracted supply agreements with collaborators, the Company may manufacture and supply quantities of active pharmaceutical ingredient (“API”) or bulk tablets reasonably required by collaboration partners for the development or sale of licensed products in their respective territory. The Company recognizes revenue when the collaboration partner has obtained control of the API or bulk tablets. The Company records the costs related to the supply agreement in cost of goods sold on the condensed statements of operations and comprehensive income (loss).

Under the Company's collaboration agreements, 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.

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b.Product Sales, Net

On February 21, 2020, the Company announced that the FDA approved NEXLETOL as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with HeFH or established ASCVD who require additional lowering of LDL-C. On February 26, 2020, the Company announced that the FDA approved NEXLIZET as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with HeFH or established ASCVD who require additional lowering of LDL-C. On March 30, 2020, NEXLETOL was commercially available in the U.S. through prescription and on June 4, 2020, NEXLIZET was commercially available in the U.S. through prescription. Net product sales totaled $0.6 million and $1.5 million for the three and six months ended June 30, 2020, respectively.

The Company sells NEXLETOL and NEXLIZET to wholesalers in the U.S and, in accordance with ASC 606, recognizes revenue at the point in time when the customer is deemed to have obtained control of the product. The customer is deemed to have obtained control of the product at the time of physical receipt of the product at the customers’ distribution facilities, or free on board (“FOB”) destination, the terms of which are designated in the contract.

Product sales are recorded at the net selling price, which includes estimates of variable consideration for which reserves are established for (a) rebates and chargebacks, (b) co-pay assistance programs, (c) distribution fees, (d) product returns, and (e) other discounts. Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as current contractual and statutory requirements, and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company's best estimates of the amount of consideration to which it is entitled based on the terms of the applicable contract. The amount of variable consideration may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Given the early stage of the Company’s commercial operations it has provided constraint of its variable consideration due to its potential consumption trends. Actual amounts of consideration ultimately received may differ from the Company's estimates. If actual results in the future vary from estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known.

Liabilities for co-pay assistance, expected product returns, rebates, and distributor fees are classified as “Other accrued liabilities” in the condensed balance sheets. Discounts, such as prompt pay discounts, and chargebacks are recorded as a reduction to trade accounts receivable, which is included in “Other prepaid and current assets” in the condensed balance sheets.

Forms of Variable Consideration

Rebates and Chargebacks: The Company estimates reductions to product sales for Public Health Service Institutions, such as Medicaid, Medicare and Veterans' Administration ("VA") programs, as well as certain other qualifying federal and state government programs, and other group purchasing organizations. The Company estimates these reductions based upon the Company's contracts with government agencies and other organizations, statutorily defined discounts and estimated payor mix. These organizations purchase directly from the Company's wholesalers at a discount and the wholesalers charge the Company back the difference between the wholesaler price and the discounted price. The Company's liability for Medicaid rebates consists of estimates for claims that a state will make for a current quarter. The Company's reserve for this discounted pricing is based on expected sales to qualified healthcare providers and the chargebacks that customers have already claimed.

Co-pay assistance: Eligible patients who have commercial insurance may receive assistance from the Company to reduce the patient's out of pocket costs. The Company will buy down the difference between the amount of the eligible patient's co-pay when the drug is purchased at the pharmacy at a determined price. Liabilities for co-pay assistance are calculated by actual program participation from third-party administrators.

Distribution Fees: The Company has written contracts with its customers that include terms for distribution fees and costs for inventory management. The Company estimates and records distribution fees due to its customers based on gross sales.

Product Returns: The Company generally offers a right of return based on the product’s expiration date and certain spoilage and damaged instances. The Company estimates the amount of product sales that may be returned and records the estimate as a reduction of product sales in the period the related product sales is recognized. The Company’s estimates for expected returns are based primarily on an ongoing analysis of sales information and visibility into the inventory remaining in the distribution channel.

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Discounts: The Company provides product discounts, such as prompt pay discounts, to its customers. The Company estimates cash discounts based on terms in negotiated contracts and the Company’s expectations regarding future payment patterns.

Recently Implemented Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-13 which requires financial instruments to be recognized at an estimate of current expected credit losses. As part of the ASU, financial assets measured at amortized cost will be presented at the net amount expected to be collected. In addition, companies will recognize an allowance for credit losses on available-for-sale investments rather than reducing the amortized cost in an other-than-temporary impairment. The Company has chosen the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of available-for-sale debt securities in identifying and measuring an impairment. The Company adopted the standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company's balance sheets, statements of operations or statements of cash flows.

In August 2018, the FASB issued ASU 2018-15 which includes provisions to clarify customer's accounting for implementation costs incurred in a cloud computing arrangement. Under the updated guidance, a customer in a cloud computing arrangement that is a service contract should follow the internal-use software guidance to determine how to account for costs incurred in implementation. The updated guidance also requires certain classification on the balance sheets, statements of operations and statements of cash flows as well as additional quantitative and qualitative disclosures. The Company adopted the standard effective January 1, 2020 and has chosen to adopt the standard prospectively. Implementation costs for cloud computing arrangements are capitalized in "Other prepaid and current assets" on the Company's balance sheets. The adoption of this standard did not have a material impact to the Company's balance sheets, statements of operations or statements of cash flows.

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, 2019.

3. Collaborations with Third Parties

DSE 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 tablets 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 also is responsible to supply DSE with certain manufacturing supply of the API or bulk tablets. 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 “DSE JCC”). The DSE 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.

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Agreement Terms Amendment

On June 18, 2020, the Company entered into an amendment to the license and collaboration agreement with DSE, dated as of January 2, 2019. In June, the Company completed the transfer of the MAAs for NILEMDO and NUSTENDI. Pursuant to the terms of the amendment, DSE paid the Company the second $150.0 million milestone based on completion of the NUSTENDI MAA transfer rather than the first product sale in the EU, as previously agreed. Additionally, the Company and DSE have agreed to expand the DSE Territory, or the territory in which DSE has exclusive commercialization rights to NILEMDO and NUSTENDI to include Turkey. DSE's designated affiliate in Turkey will be solely responsible, at its sole cost and expense, for all regulatory matters relating to such products in Turkey, including obtaining regulatory approval for such products in Turkey.

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. In the three and six months ended June 30, 2019, the Company recognized $1.0 million and $146.4 million of collaboration revenue, respectively. In the three and six months ended June 30, 2020, the Company recognized approximately $0.7 million and $1.6 million, respectively, related to the on-going performance obligation for the ongoing regulatory efforts related to the MAA in the DSE Territory, which was transferred to DSE in June 2020.

In addition, in the three and six months ended June 30, 2020, the Company recognized the $150.0 million milestone as collaboration revenue based on the successful transfer of the NUSTENDI MAA. In the three and six months ended June 30, 2020, the Company recognized collaboration revenue of $1.0 million related to the sales of bulk tablets of NILEMDO and NUSTENDI to DSE pursuant to the Supply Agreement that was executed with DSE.

All remaining 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 development activities, regulatory approvals and sales-based milestones. Additionally, the Company expects that any consideration related to royalties and sales-based milestones will be recognized when the subsequent sales occur.

Otsuka Agreement Terms

On April 17, 2020, the Company entered into the Otsuka Agreement with Otsuka. Pursuant to the Otsuka Agreement, the Company granted Otsuka exclusive development and commercialization rights to NEXLETOL and NEXLIZET in Japan. Otsuka will be responsible for all development, regulatory, and commercialization activities in Japan. In addition, Otsuka will fund all clinical development costs associated with the program in Japan.

Pursuant to the agreement, the consideration consists of a $60.0 million upfront cash payment and the Company will be eligible to receive additional payments of up to $450.0 million if certain regulatory and commercial milestones are achieved by Otsuka. The potential future milestone payments include up to $20.0 million upon first JNDA submissions in the Otsuka Territory, up to $70.0 million upon the first NHI Price Listing for NEXLETOL in the Otsuka Territory, and up to $50.0 million upon the achievement of the primary major adverse cardiovascular events (“MACE”) in the CLEAR Outcomes study and the CV risk reduction rate on the U.S. 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 up to $310.0 million related to total net sales achievements for Otsuka in Japan. Finally, the Company will receive tiered fifteen percent (15%) to thirty percent (30%) royalties on net sales in Japan.

The agreement calls for both parties to participate in a Joint Collaboration Committee (the "Otsuka JCC"). The Otsuka JCC is comprised of executive management from each company and Otsuka will lead in all aspects related to development and commercialization in the Otsuka Territory.

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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 $60.0 million should be included in the transaction price and related to the performance obligation under the agreement to the license to the Company's intellectual property. In the three and six months ended June 30, 2020, the Company recognized $60.0 million of collaboration revenue related to the $60.0 million upfront payment.

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 development activities, regulatory approvals and sales-based milestones. 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. Inventories

Inventories as of June 30, 2020 and December 31, 2019 consist of the following (in thousands):

    

June 30, 2020

    

December 31, 2019

Raw materials

$

4,961

$

Work in process

 

2,869

 

Finished goods

 

418

 

$

8,248

$

The Company has entered into a contract manufacturing agreement with a third party commercial manufacturing organization for the production of certain inventory supplies of NEXLETOL and NEXLIZET. The agreement has an initial term of three years and will renew automatically for successive periods of one year each unless terminated by either party. Under the agreement the Company is obligated to purchase minimum order commitments on a rolling twelve-month period for the batches of inventory supplies produced.

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.

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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. On November 6, 2019, the court held a hearing on the motion to dismiss. On February 13, 2020, the court granted the motion to dismiss with prejudice and entered judgment in the Company’s favor. On March 16, 2020, the plaintiff filed a notice of appeal to the Supreme Court of Delaware. On June 1, 2020, the plaintiff filed his opening brief on appeal to the Supreme Court of Delaware. On July 1, 2020, the Company and the defendants filed an answering brief. 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 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.

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, 2019 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 short-term investments:

June 30, 2020

    

    

Gross

    

Gross

    

Estimated

Amortized

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

(in thousands)

Cash equivalents:

Money market funds

$

287,632

$

$

$

287,632

Short-term investments:

Commercial paper

 

2,247

 

 

 

2,247

Total

$

289,879

$

$

$

289,879

December 31, 2019

    

    

Gross

    

Gross

    

Estimated

Amortized

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

(in thousands)

Cash equivalents:

Money market funds

$

20,970

$

$

$

20,970

U.S. treasury notes

2,497

2,497

Commercial paper

4,494

4,494

Short-term investments:

Certificates of deposit

245

245

U.S treasury notes

 

29,155

 

23

 

 

29,178

Commercial paper

 

5,228

 

 

 

5,228

Total

$

62,589

$

23

$

$

62,612

At June 30, 2020, remaining contractual maturities of investments classified as current on the balance sheets were less than 12 months.

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During the three and six months ended June 30, 2020, other income, net in the statements of operations includes interest income on investments of $0.1 million and $0.5 million, respectively, and income for the accretion of premiums and discounts on investments of less than $0.1 million and $0.1 million, respectively. During the three and six months ended June 30, 2019, other income, net in the statements of operations includes interest income on investments of $1.0 million and $1.4 million, respectively, 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 income (loss) to other income in the statements of operations during the three and six months ended June 30, 2020 and 2019.

In the three and six months ended June 30, 2020, there were no allowances for credit losses and all unrealized gains (losses) for available-for-sale securities were recognized in accumulated other comprehensive income. As of June 30, 2020, the Company had no accrued interest receivables.

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 that have been measured at fair value on a recurring basis:

Description

    

Total

    

Level 1

    

Level 2

    

Level 3

(in thousands)

June 30, 2020

Assets:

Money market funds

$

287,632

$

287,632

$

$

Investments:

Commercial paper

 

2,247

 

 

2,247

 

Total assets at fair value

$

289,879

$

287,632

$

2,247

$

December 31, 2019

Assets:

Money market funds

$

20,970

$

20,970

$

$

Investments:

Certificates of deposit

 

245

 

245

 

 

U.S. treasury notes

 

31,675

 

31,675

 

 

Commercial paper

 

9,722

 

 

9,722

 

Total assets at fair value

$

62,612

$

52,890

$

9,722

$

There were no transfers between Levels 1, 2 or 3 during the three and six months ended June 30, 2020 and 2019.

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 tablets and other working capital needs. Pursuant to the RIPA, the Company received $125.0 million at closing, less certain issuance costs. The Company is also entitled to receive up to approximately $75.0 million in

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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”). In March 2020, the Company received $25.0 million from Oberland upon receiving regulatory approval of NEXLETOL.

As consideration for such payments, the Purchasers have a right to receive certain revenue interests (the “Revenue Interests”) from the Company based upon net sales of the Company’s certain products 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, as of June 30, 2020, the Company has recorded a liability, referred to as the “Revenue interest liability” in the condensed balance sheets, of $166.3 million, net of $0.5 million of capitalized 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.

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 $4.6 million and $8.8 million in interest expense related to this arrangement for the three and six months ended June 30, 2020, respectively.

The Company received $125.0 million in exchange for entering into the RIPA and $25.0 million in March 2020 upon receiving regulatory approval of NEXLETOL. The effective annual imputed interest rate is 10.1%. 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 six months ended June 30, 2020:

    

(in thousands)

Revenue interest liability at December 31, 2019

$

132,544

Oberland funding for regulatory approval of NEXLETOL

 

25,000

Interest expense recognized

 

8,811

Revenue Interests payments

(64)

Revenue interest liability at June 30, 2020

$

166,291

9. Other Accrued Liabilities

Other accrued liabilities consist of the following:

    

June 30, 

    

December 31, 

2020

2019

(in thousands)

Accrued compensation

$

10,868

$

7,818

Accrued professional fees

 

5,864

 

3,842

Accrued inventory

 

1,771

 

Accrued other

 

3,405

 

211

Total other accrued liabilities

$

21,908

$

11,871

10. Stock Compensation

Employee Stock Purchase Plan

In April 2020, the board of directors approved the Esperion Therapeutics, Inc. 2020 Employee Stock Purchase Plan (the "ESPP") which was approved by the Company's shareholders on May 28, 2020. The ESPP allows eligible employees to authorize payroll deductions of up to 10% of their base salary or wages up to $25,000 annually to be applied toward the purchase of shares of the Company's common stock on the last trading day of the offering period. Participating employees will purchase shares of the Company's common stock at a discount of up to 15% on the lesser of the closing price of the Company's common stock on the NASDAQ Global Select Market (i) on the first trading day of the offering period or (ii) the last day of any offering period. Offering periods under the ESPP will generally be in six month increments, commencing on September 1 and March 1 of each calendar year with the administrator having the right to establish different offering periods.

The following table summarizes the activity relating to the Company’s options to purchase common stock for the six months ended June 30, 2020:

Weighted-Average

Weighted-Average

Exercise

Remaining

Aggregate

Number of

Price

Contractual

Intrinsic

    

Options

    

Per Share

    

Term (Years)

    

Value

(in thousands)

Outstanding at December 31, 2019

 

4,677,929

$

39.31

 

6.82

$

109,054

Granted

 

234,940

$

61.14

Forfeited or expired

 

(134,945)

$

56.38

Exercised

 

(200,157)

$

23.74

Outstanding at June 30, 2020

 

4,577,767

$

40.61

 

6.10

$

72,396

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The following table summarizes information about the Company’s stock option plan as of June 30, 2020:

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 June 30, 2020

 

4,577,767

$

40.61

 

6.10

$

72,396

Exercisable at June 30, 2020

 

3,195,452

$

35.88

 

5.12

$

65,786

Stock-based compensation related to stock options was $5.5 million and $11.1 million for the three and six months ended June 30, 2020, respectively, including $0.3 million and $0.5 million for the three and six months ended June 30, 2020, respectively, that were capitalized into inventory, and $6.2 million and $12.6 million for the three and six months ended June 30, 2019, respectively. As of June 30, 2020, there was $44.0 million of unrecognized stock-based compensation expense related to unvested options, which will be recognized over a weighted-average period of 2.4 years.

The following table summarizes the activity relating to the Company’s RSUs for the six months ended June 30, 2020:

    

    

Weighted-Average 

Number of

Fair Value Per 

RSUs

Share

Outstanding and unvested at December 31, 2019

 

245,966

$

44.45

Granted

 

322,167

$

52.82

Forfeited

(28,921)

$

44.70

Vested

 

(53,587)

$

51.98

Outstanding and unvested at June 30, 2020

 

485,625

$

49.16

Stock-based compensation related to RSUs was approximately $1.8 million and $3.3 million for the three and six months ended June 30, 2020, respectively, including $0.1 million and $0.1 million for the three and six months ended June 30, 2020, respectively, that were capitalized into inventory, and $0.4 million and $0.6 million for the three and six months ended June 30, 2019, respectively. As of June 30, 2020, there was $21.5 million of unrecognized stock-based compensation expense related to unvested RSUs, which will be recognized over a weighted-average period of 3.2 years.

11. 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 six months ended June 30, 2020, the right of use operating lease assets and operating lease liabilities recognized on the condensed balance sheet increased by $4.6 million and $4.6 million from December 31, 2019, respectively, due to the addition of automobile leases and IT equipment associated with the onboarding of the Company’s commercial salesforce to support the commercialization of NEXLETOL and NEXLIZET. During the three and six months ended June 30, 2020, the Company recognized $0.6 million and $0.8 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 $0.6 million and $0.8 million, respectively, which were included in operating cash flows on the condensed statements of cash flows. During the three and six months ended June 30, 2019, the Company recognized less than $0.1 million and $0.1 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 less than $0.1 million and $0.1 million, respectively, which were included in operating cash flows on the condensed statements of cash flows. At June 30, 2020, the weighted-average remaining lease term of operating leases was 2.7 years and the weighted average discount rate was 3.6%. There were no right-of-use assets obtained in exchange for lease obligations in the six months ended June 30, 2020 or 2019. The Company had no additional operating and finance leases that have not yet commenced as of June 30, 2020 or 2019.

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The following table summarizes the Company’s future maturities of operating lease liabilities as of June 30, 2020:

    

(in thousands)

2020 (remaining)

$

1,209

2021

 

2,380

2022

 

2,333

2023

 

584

2024

 

Total lease payments