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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 March 31, 2021

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 001-37569

Strongbridge Biopharma plc

(Exact name of Registrant as specified in its charter)

Ireland

 

98-1275166

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

900 Northbrook Drive

Suite 200

Trevose, PA 19053

(Address of principal executive offices)

Registrant’s Telephone Number, Including Area Code: +1 610-254-9200

Securities Registered Pursuant to Section 12(b) of the Exchange Act:

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Ordinary shares, par value $0.01 per share

SBBP

The Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T 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 May 10, 2021, there were 67,588,878 ordinary shares of the registrant issued and outstanding.  

Table of Contents

TABLE OF CONTENTS

 

 

Page

PART I.

Financial Information

1

 

 

Item 1.

Financial Statements

1

 

Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

1

 

Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020

2

 

Consolidated Statements of Shareholders’ Equity

3

 

Consolidated Statements of Cash Flow for the Three Months Ended March 31, 2021 and 2020

4

 

Notes to the Unaudited Consolidated Financial Statements

5

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

 

PART II.

Other Information

24

 

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

25

SIGNATURES

26

Solely for convenience, the trademarks and trade names in this Quarterly Report on Form 10-Q (this “Quarterly Report”) are referred to without the ® and symbols, but absence of such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. The trademarks, trade names and service marks appearing in this Quarterly Report are the property of their respective owners.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

STRONGBRIDGE BIOPHARMA plc

Consolidated Balance Sheets

(In thousands, except share and per share data)

(unaudited)

March 31, 

    

December 31, 

    

2021

2020

ASSETS

Current assets:

Cash and cash equivalents

$

73,898

$

87,522

Accounts receivable

2,846

2,801

Inventory

1,007

1,103

Prepaid expenses and other current assets

 

1,913

 

926

Total current assets

 

79,664

 

92,352

Property and equipment, net

 

205

 

216

Right-of-use asset, net

544

597

Intangible asset, net

 

18,832

 

20,088

Goodwill

 

7,256

 

7,256

Other assets

 

1,549

 

591

Total assets

$

108,050

$

121,100

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

5,738

$

1,483

Accrued and other current liabilities

 

16,238

 

19,648

Total current liabilities

 

21,976

 

21,131

Long-term debt, net

17,399

17,114

Warrant liability

5,715

4,941

Supply agreement liability, noncurrent

6,471

11,556

Other long-term liabilities

642

753

Total liabilities

 

52,203

 

55,495

Commitments and contingencies (Note 8)

Shareholders’ equity:

Deferred shares, $1.098 par value, 40,000 shares authorized, issued and outstanding at March 31, 2021 and December 31, 2020

44

44

Ordinary shares, $0.01 par value, 600,000,000 shares authorized; 67,545,369 and 67,243,772 shares issued and outstanding at March 31, 2021 and December 31, 2020

 

675

 

672

Additional paid-in capital

 

372,500

 

370,447

Accumulated deficit

 

(317,372)

 

(305,558)

Total shareholders’ equity

 

55,847

 

65,605

Total liabilities and shareholders’ equity

$

108,050

$

121,100

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1

Table of Contents

STRONGBRIDGE BIOPHARMA plc

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(unaudited)

Three Months Ended

March 31, 

    

2021

    

2020

 

Total revenues

$

8,382

$

6,674

Cost and expenses:

Cost of sales (excluding amortization of intangible asset)

411

969

Selling, general and administrative

10,946

10,403

Research and development

 

5,839

 

7,552

Amortization of intangible asset

1,256

1,256

Total cost and expenses

 

18,452

 

20,180

Operating loss

 

(10,070)

 

(13,506)

Other (expense) income, net:

Interest expense

(782)

Unrealized (loss) gain on fair value of warrants

(774)

580

Other (expense) income, net

 

(188)

 

228

Total other (expense) income, net

 

(1,744)

 

808

Loss before income taxes

 

(11,814)

 

(12,698)

Income tax benefit (expense)

 

 

Net loss

(11,814)

(12,698)

Other comprehensive loss:

 

 

Unrealized gain on marketable securities

3

Comprehensive loss

$

(11,814)

$

(12,695)

Net loss attributable to ordinary shareholders:

Basic

$

(11,814)

$

(12,698)

Diluted

$

(11,814)

$

(13,278)

Net loss per share attributable to ordinary shareholders:

Basic

$

(0.18)

$

(0.23)

Diluted

$

(0.18)

$

(0.24)

Weighted-average shares used in computing net loss per share attributable to ordinary shareholders:

Basic

 

67,375,383

 

54,231,024

Diluted

 

67,375,383

 

54,444,681

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2

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STRONGBRIDGE BIOPHARMA plc

Consolidated Statement of Shareholders’ Equity

(In thousands, except share amounts)

(unaudited)

 

    

Additional

    

    

Accumulated Other

    

Total

 

Deferred Shares

Ordinary Shares

Paid-In

Accumulated

Comprehensive

Shareholders’

 

Shares

    

Amount

    

Shares

    

Amount

    

Capital

Deficit

Income

Equity

 

Balance—December 31, 2019

40,000

$

44

54,205,852

$

542

$

332,085

$

(260,483)

3

$

72,191

Net loss

(12,698)

(12,698)

Stock-based compensation

1,751

1,751

Ordinary shares issued, net of shares withheld for employee taxes

41,649

*

(68)

(68)

Unrealized gain on marketable securities

3

3

Balance—March 31, 2020

40,000

$

44

54,247,501

$

542

$

333,768

$

(273,181)

6

$

61,179

Balance—December 31, 2020

40,000

44

67,243,772

672

370,447

(305,558)

65,605

Net loss

(11,814)

(11,814)

Stock-based compensation

2,277

2,277

Common stock issued, net of shares withheld for employee taxes

242,129

3

(400)

(397)

Exercise of stock options

48,157

*

138

138

Issuance of shares, net of expenses

11,311

*

38

38

Balance—March 31, 2021

40,000

$

44

67,545,369

$

675

$

372,500

$

(317,372)

$

55,847

* Represents an amount less than $1.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

Table of Contents

STRONGBRIDGE BIOPHARMA plc

Consolidated Statements of Cash Flow

(In thousands)

(unaudited)

Three Months Ended

March 31, 

2021

2020

Cash flows from operating activities:

Net loss

$

(11,814)

$

(12,698)

Adjustments to reconcile net loss income to net cash used in operating activities:

Stock-based compensation

 

2,277

 

1,751

Amortization of intangible asset

1,256

1,256

Change in fair value of warrant liability

774

(580)

Amortization of debt discounts and debt issuance costs

 

285

 

Accretion of discounts on marketable securities

(48)

Depreciation

 

21

 

21

Changes in operating assets and liabilities:

Accounts receivable

(45)

(401)

Inventory

(865)

101

Prepaid expenses and other current assets

 

(987)

 

79

Other assets

55

266

Accounts payable

 

4,256

 

1,954

Accrued and other liabilities

(8,606)

(6,941)

Net cash used in operating activities

 

(13,393)

 

(15,240)

Cash flows from investing activities:

Sales and maturities of marketable securities

14,830

Purchases of property and equipment

(10)

 

Net cash (used in) provided by investing activities

 

(10)

 

14,830

Cash flows from financing activities:

Payments related to tax withholding for net-share settled equity awards

(397)

(68)

Proceeds from exercise of stock options

138

Proceed from issuance of ordinary shares in connection with at-the-market offering, net

38

Net cash used in financing activities

 

(221)

 

(68)

Net decrease in cash and cash equivalents

 

(13,624)

 

(478)

Cash and cash equivalents—beginning of period

 

87,522

 

57,032

Cash and cash equivalents—end of period

$

73,898

$

56,554

Supplemental disclosures of cash flow information:

Cash paid during the year for:

 

 

Interest

$

499

$

Income taxes other, net of refunds

$

1,301

$

Supplemental non-cash financing activities:

Changes in unrealized gain on marketable securities

$

$

3

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

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STRONGBRIDGE BIOPHARMA plc

Notes to Unaudited Consolidated Financial Statements

1. Organization

We are a global, commercial-stage biopharmaceutical company focused on the development and commercialization of therapies for rare diseases with significant unmet needs.

Our first commercial product is Keveyis (dichlorphenamide), the first and only treatment approved by the U.S. Food and Drug Administration (the “FDA”) for hyperkalemic, hypokalemic, and related variants of primary periodic paralysis (“PPP”), a group of rare hereditary disorders that cause episodes of muscle weakness or paralysis.

We have two clinical-stage product candidates for rare endocrine diseases, Recorlev and veldoreotide. Recorlev (levoketoconazole), the pure 2S,4R enantiomer of the enantiomeric pair comprising ketoconazole, is a next-generation steroidogenesis inhibitor being investigated as a chronic therapy for adults with endogenous Cushing’s syndrome. Veldoreotide is a next-generation somatostatin analog being investigated for potential applications in conditions amenable to somatostatin receptor activation. Both levoketoconazole and veldoreotide have received orphan designation from the FDA and the European Medicines Agency (“EMA”)

Liquidity

We believe that our cash and cash equivalents of $73.9 million at March 31, 2021, will be sufficient to allow us to fund planned operations for at least 12 months beyond the issuance date of these unaudited consolidated financial statements.

We may never achieve profitability, and unless and until we do, we will continue to need to raise additional capital. We plan to continue to fund our operations and capital funding needs through equity or debt financing along with revenues from Keveyis. There can be no assurances, however, that additional funding will be available on terms acceptable to us.

2. Summary of significant accounting policies and basis of presentation

Basis of presentation

These unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). The unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the operating results and financial position for the periods presented.

The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures in the consolidated financial statements. Actual results could differ from those estimates. Results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

These unaudited consolidated financial statements should be read in conjunction with the accounting policies and notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission on March 3, 2021 (the “2020 Annual Report”). Our significant accounting policies are described in Note 2 of the notes to the audited consolidated financial statements included in our 2020 Annual Report. Since the date of those financial statements, there have been no changes to our significant accounting policies.

5

Table of Contents

Leases

We account for leases in accordance with Accounting Standards Codification Topic 842, Leases (“ASC 842”). We determine if an arrangement is a lease at contract inception. A lease exists when a contract conveys to us the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment), and (2) we have the right to control the use of the identified asset.

Operating leases where we are the lessee are included in Right of use (“ROU”) assets and Accrued and other current liabilities and Other long-term liabilities on our Consolidated Balance Sheets. The lease liabilities are initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date.

Key estimates and judgments include how we determined (1) the discount rate we use to discount the unpaid lease payments to present value, (2) lease term and (3) lease payments.

ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Because our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. Our incremental borrowing rate for a lease is the rate of interest we would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The lease term for all of our leases includes the noncancellable period of the lease. Lease payments included in the measurement of the lease asset or liability are comprised of our fixed payments.

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date less any lease incentives received.

For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We monitor for events or changes in circumstances that require a reassessment of a lease. If a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss.

We have elected not to recognize ROU assets and lease liabilities for all short-term leases that have a lease term of 12 months or less. We recognize the lease payments associated with our short-term leases as an expense on a straight-line basis over the lease term. Variable lease payments associated with these leases are recognized and presented in the same manner as for all of our other leases.

Cash, cash equivalents and marketable securities

We consider all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents consist of account balances at banks and money market accounts, respectively.

We occasionally invest our excess cash balances in marketable debt securities of highly rated financial institutions. We seek to diversify our investments and limit the amount of investment concentrations for individual institutions, maturities and investment types. We classify marketable debt securities as available-for-sale and, accordingly, record such securities at fair value. We classify these securities as current assets as these investments are

6

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available to us for use in funding current operations. There were no marketable securities as of March 31, 2021 nor December 31, 2020.

Unrealized gains and losses on marketable debt securities are recorded as a separate component of Accumulated other comprehensive income (loss) included in stockholders’ equity.

Segment information

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions on how to allocate resources and assess performance. We view our operations and manage our business in one operating segment.

Net loss per share

Basic net loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss attributable to shareholders by the weighted-average number of ordinary shares outstanding for the period, including any dilutive effect from outstanding stock options or other equity-based instruments. Shares used in the diluted net loss per share calculations exclude anti-dilutive ordinary share equivalents, which currently consist of outstanding stock options, unvested restricted stock units (“RSUs”), equity-classified warrants and the conversion feature in our outstanding term loan agreement.

The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding for the periods ending March 31, 2021 and 2020, as they would be anti-dilutive:

March 31, 

2021

2020

Warrants

7,368,033

1,803,253

Stock options issued and outstanding

    

8,686,074

10,334,368

Unvested RSUs

3,043,175

925,800

Conversion feature of our outstanding term loan agreement

1,339,285

Due to the gain on the revaluation of warrants for the three months ended March 31, 2020, our warrants that we issued in connection with our private equity placement, were included in the dilutive calculation, therefore excluded from the table above.

Recent accounting pronouncements – not yet adopted

June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires an entity to measure and recognize expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit losses expected to be incurred. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded through net income instead of directly reducing the amortized cost of the investment under the current other-than-temporary impairment model. For smaller reporting companies, the standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

3. Revenue recognition

Product sales, net

We sell Keveyis to one specialty pharmacy provider (the “Customer”), who is the exclusive distributor of Keveyis in the United States. The Customer subsequently resells Keveyis to patients, most of whom are covered by

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payors that may provide for government-mandated or privately negotiated rebates with respect to the purchase of Keveyis.

Revenues from sales of Keveyis are recognized when we satisfy a performance obligation by transferring control of the product to the Customer. Transfer of control occurs upon receipt of the product by the Customer. We expense incremental costs related to the set-up of contracts with the Customer when incurred, as these costs do not meet the criteria for capitalization.

Reserves for variable consideration

Revenues from sales of Keveyis are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and that result from rebates, co-pay assistance and other allowances that are offered between us and the patients’ payors. There is no variable consideration reserve for returns as we do not accept returns of Keveyis. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than the Customer). Where appropriate, these estimates may take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted buying and payment patterns of the Customer. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price 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. Actual amounts of consideration ultimately received may differ from our estimates. We reassess our estimates on an ongoing basis. If actual results in the future vary from our estimates, we will adjust our estimates. Any such adjustments would affect net product revenue and earnings in the period such variances become known.

Trade Discount: We provide the Customer with a discount that is explicitly stated in our contract and is recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we receive sales order management, data and distribution services from the Customer. To the extent the services received are distinct from our sale of Keveyis to the Customer, these payments are classified in selling, general and administrative expenses in our consolidated statement of operations and comprehensive loss.

Funded Co-pay Assistance Program: We contract with a third-party to manage the co-pay assistance program intended to provide financial assistance to qualified insured patients. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with Keveyis that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period. These payments are consideration payable to the Customer and the related reserve is recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included in accrued expenses on the consolidated balance sheet.

Government Rebates: We are subject to discount obligations under state Medicaid programs and Medicare. We estimate our Medicaid and Medicare rebates for the estimated patient mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability, which is included in accrued expenses on the consolidated balance sheet. For Medicaid, accruals are based on estimates of future Medicaid beneficiary utilization applied to the Medicaid unit rebate formula established by the Center for Medicaid and Medicare Services. Manufacturers of pharmaceutical products are responsible for 70% of the patient’s cost of branded prescription drugs related to the Medicare Part D Coverage Gap. In order to estimate the cost to us of this Medicare coverage gap responsibility, we estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under the Medicare Part D program. Our liability for these rebates consists of estimates of claims for the current quarter and estimated future claims that will be made for Keveyis transactions that have been recognized as revenue but remain in the Customer’s inventory at the end of each reporting period.

Temporary Supply and Patient Assistance Programs: We provide free Keveyis to uninsured patients who satisfy pre-established criteria for either the Temporary Supply Program or the Patient Assistance Program. Patients who meet

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the Temporary Supply Program eligibility criteria may receive a temporary supply of free Keveyis for no more than 60 days while there is a determination of the patient’s third-party insurance, prescription drug benefit or other third-party coverage for Keveyis. The Patient Assistance Program provides free Keveyis for up to 12 months to uninsured patients who satisfy pre-established criteria for financial need. We do not recognize any revenue related to these free products and the associated costs are classified in selling, general and administrative expenses in our consolidated statements of operations and comprehensive loss.

4. Fair value measurements

We record financial assets and liabilities at fair value. Because of their short-term nature, the amounts reported in the balance sheet for cash, accounts receivable and accounts payable approximate fair value.

The guidance requires fair value measurements to maximize the use of “observable inputs.” The three-level hierarchy of inputs to measure fair value are as follows: 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Because of their short-term nature, the amounts reported in the balance sheet for cash and accounts payable approximate fair value.

Level 2: Significant observable inputs other than Level 1 prices such as quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The fair values of the outstanding warrants were measured using the Black-Scholes option-pricing model. Inputs used to determine estimated fair value of the warrant liabilities include the estimated term of the warrants, risk-free interest rates, and the expected volatility of the underlying stock. The significant unobservable inputs used in the fair value measurement of the warrant liabilities were the volatility rate and the estimated term of the warrants. Generally, increases and decreases in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement.

We did not have any transfers between the different levels.

The following table presents our assets and liabilities that are measured at fair value on a recurring basis for the periods presented (in thousands):

As of March 31, 2021

 

Level I

Level II

Level III

Total

 

Cash equivalents

73,864

73,864

Total assets

$

73,864

$

$

$

73,864

Warrant liability

5,715

5,715

Total liabilities

$

$

$

5,715

$

5,715

As of December 31, 2020

 

Level I

Level II

Level III

Total

 

Cash equivalents

86,775

86,775

Total assets

$

86,775

$

$

$

86,775

Warrant liability

4,941

4,941

Total liabilities

$

$

$

4,941

$

4,941

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The following table presents a reconciliation of our level 3 warrant liability (in thousands):

    

As of March 31, 2021

Balance as of December 31, 2020

$

4,941

Unrealized loss on fair value of warrants for three months ended March 31, 2021

774

Balance as of March 31, 20201

$

5,715

5. Intangible asset and goodwill

The following represents the balance of our intangible asset and goodwill as follows (in thousands):

As of March 31, 2021

 

Beginning of Period

Amortization

End of Period

 

Keveyis

$

20,088

$

(1,256)

$

18,832

Goodwill

 

7,256

 

7,256

Total

$

27,344

$

(1,256)

$

26,088

Our finite-lived intangible asset consists of acquired developed product rights obtained from our acquisition of Keveyis (dichlorphenamide) from a subsidiary of Taro Pharmaceutical Industries Ltd. (“Taro”).

Pursuant to the terms of the Asset Purchase Agreement and Supply Agreement that we entered into with Taro in December 2016, we paid Taro an upfront payment in two installments of $1 million in December 2016 and $7.5 million in March 2017, and will pay an aggregate of $7.5 million in potential milestone payments upon the achievement of certain product sales targets.  Taro has agreed to continue to manufacture Keveyis for us under an exclusive supply agreement through the orphan exclusivity period. We are obligated to purchase certain annual minimum amounts of product totaling approximately $29 million over a six-year period. We have concluded that the supply price payable by us exceeds fair value and, therefore, have used a discounted cash flow method with a probability assumption to value the payments in excess of fair value at $29.3 million, for which we have recorded an intangible asset and corresponding liability. This liability is being reduced as we purchase inventory over the term of the Supply Agreement that we entered into with Taro.  In addition, we incurred transaction costs of $2.4 million. The transaction resulted in the recording of an intangible asset of $40.2 million. This asset is being amortized over an eight-year period using the straight-line method.

We recorded amortization expense of $1.3 million for the three months ended March 31, 2021 and 2020.

6. Long-term debt

On May 19, 2020, we entered into a $30 million Term Loan Agreement (the “Loan Agreement”) with Avenue Venture Opportunities Fund L.P. (“Avenue”), as administrative agent and collateral agent, and the lenders named therein and from time to time a party thereto (the “Lenders”). Pursuant to the terms of the Loan Agreement, our wholly-owned subsidiary Strongbridge U.S. Inc. (the “Borrower”) borrowed $10 million (the “Initial Loan”) from the Lenders at closing.  As a result of achieving positive top-line data for Recorlev in our Phase 3 LOGICS clinical trial in September 2020, we borrowed an additional $10 million under the Loan Agreement (the “Second Loan”), on December 30, 2020. The remaining $10 million tranche (the “Third Loan”) will become available to us between October 1, 2021 and March 31, 2022 if we achieve FDA approval of Recorlev and subject to Avenue’s investment committee approval.  

The Loan Agreement has a four-year term, no minimum revenue or cash balance financial covenants and an interest-only period for 24 months that can increase to 36 months assuming we receive FDA approval of Recorlev. Amounts borrowed under the Loan Agreement accrue interest at a floating rate per annum (based on a year of 365 days) equal to the sum of (a) the greater of (x) the Prime Rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, and (y) 3.25%, plus (b) 6.75%. The interest rate as of March 31, 2021 was 10%.

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We paid a commitment fee of $200,000 (1% of the amounts of the Initial Loan and the Second Loan) at closing. We are also required to pay the Lenders a final payment fee upon repayment or prepayment of any loans made under the Loan Agreement in accordance with the terms and conditions of the Loan Agreement.

Under the terms of the Loan Agreement, we may prepay all or a portion of the outstanding principal amount of any loans outstanding under the Loan Agreement at any time upon prior notice to the Lenders subject to a prepayment premium (which reduces after the first year) and the payment of the pro rata portion of the final payment fee (to the extent not already paid) based on the amount of loans being prepaid. In certain circumstances, including a change of control and certain asset sales or licensing transactions, we may be required to prepay all or a portion of loans outstanding, and, to the extent required under the terms of the Loan Agreement, the applicable prepayment premium and final payment fee.

As security for our obligations under the Loan Agreement, we entered into a security agreement with Avenue, pursuant to which we granted a lien on substantially all of our assets, including intellectual property, to the Secured Parties (as such term is defined in the Loan Agreement).

Avenue has the right to convert up to $3 million of the aggregate principal amount of any loans outstanding under the Loan Agreement into ordinary shares at a price per share of $2.24. We have accounted for this term as a beneficial conversion feature, and the fair value is recorded in Additional paid-in capital. This amount is recorded as a debt discount and classified as a contra-liability on the consolidated balance sheet and amortized to interest expense over the term of the loan.

In connection with the execution of both the Loan Agreement and the Second Loan, we issued to Avenue warrants to purchase up to an aggregate of 267,390 ordinary shares at an exercise price (the “Exercise Price”) of $1.87 (which is equal to the five-day volume weighted average price as of the trading day immediately prior to execution of the financing agreement) for each of the tranches of debt, respectively. The warrants are exercisable, in full or in part, at any time prior to five years following the issue date for both tranches of the loan. We have accounted for these warrants as equity, and the fair value is recorded into Additional paid-in capital. This amount is recorded as a debt discount and classified as a contra-liability on the consolidated balance sheet and amortized to interest expense over the term of the loan. If we borrow the Third Loan, we will be required to issue to the Lenders or their designees additional warrants to purchase ordinary shares equal to an aggregate of 5% of the Third Loan divided by the Exercise Price, rounded down to the nearest whole share.

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Future principal payments due under the Loan Agreement, if the interest payment only period is not extended beyond the current 24-month period, are as follows (in thousands):

    

Principal

 

Payments

 

2021

$

2022

5,833

2023

10,000

2024

4,167

Total future payments

$

20,000

7. Accrued and other current liabilities

Accrued and other current liabilities consist of the following (in thousands):

March 31, 

December 31, 

 

2021

2020

 

Supply agreement - current portion

$

5,085

$

4,391

Consulting and professional fees

4,155

2,754

Accrued sales allowances

4,190

4,312

Employee compensation

1,572

5,749

Accrued royalties

499

301

Lease liability - current portion

426

415

Severance

211

493

Other

 

92

 

72

Accrued taxes

8

1,161

Total accrued and other current liabilities

$

16,238

$

19,648

8. Commitments and contingencies

(a) Commitments to Taro Pharmaceuticals Industries Ltd.

As of March 31, 2021, our remaining obligation under the Supply Agreement (see note 5) was $14.1 million. The agreement with Taro may extend beyond the orphan exclusivity period unless terminated by either party pursuant to the terms of the agreement. If terminated by Taro at the conclusion of the orphan exclusivity period, we have the right to manufacture the product on our own or have the product manufactured by a third party on our behalf. We are also required to reimburse Taro for its royalty obligation resulting from its sale of Keveyis to us.

(b) Indemnifications

In the ordinary course of business and in connection with the sale of assets and businesses and other transactions, we often agree to indemnify our counterparties against certain liabilities that may arise in connection with a transaction or that are related to events and activities prior to or following a transaction, such as breaches of contracts, unfavorable tax consequences and employee liabilities. If a counterparty were to make a successful indemnification claim against us, we may be required to reimburse the loss and such amount could be material to our consolidated financial statements. Where appropriate, the obligation for such indemnifications is recorded as a liability. Because these agreements generally do not specify the maximum amount of indemnification a counterparty may be entitled to, the overall maximum amount of our potential indemnification liability under these agreements cannot be reasonably estimated. However, we believe that the likelihood of a material liability being triggered under these indemnification obligations is not probable at this time.

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9. Taxes

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts and tax bases of assets and liabilities and operating loss carryforwards and other attributes using enacted rates expected to be in effect when those differences reverse. Valuation allowances are provided against deferred tax assets that are not more likely than not to be realized.

We assess our ability to realize deferred tax assets. Changes in future earnings projections, among other factors, may cause us to adjust our valuation allowance on deferred tax assets. Any such adjustments would impact our income tax expense in the period in which it is determined that these factors have changed.

We did not incur income any tax expense for the three months ended March 31, 2021 and 2020.

10. Ordinary Shares

Equity transactions

We entered into an equity distribution agreement with JMP Securities LLC (“JMP”) on April 28, 2017, pursuant to which we could sell, at our option, from time to time, up to an aggregate of $40 million of our ordinary shares through JMP, as sales agent. The agreement provided for a commission to JMP equal to 3% of the gross proceeds from the sale of our ordinary shares under this at-the-market (“ATM”) facility. Pursuant to the terms of the equity distribution agreement, we reimbursed JMP for certain out-of-pocket expenses, including the fees and disbursements of counsel to JMP, incurred in connection with establishing the ATM facility and provided JMP with customary indemnification rights. During the three months ended March 31, 2021, we sold an aggregate of 11,311 ordinary shares under the ATM facility at an average selling price of $3.36 per share, resulting in net proceeds of approximately $38,000 after payment of fees to JMP of $1,100. This equity distribution agreement was terminated on March 24, 2021.

We entered into an equity distribution agreement with Jefferies LLC (“Jefferies”) on March 25, 2021, pursuant to which we may sell, at our option, from time to time, up to an aggregate of $50 million of our ordinary shares through Jefferies, as sales agent. We will pay Jefferies a commission equal to 3% of the gross proceeds from the sale of our ordinary shares under ATM facility. Pursuant to the terms of the equity distribution agreement, we reimbursed Jefferies for certain out-of-pocket expenses, including the fees and disbursements of counsel to Jefferies, incurred in connection with establishing the ATM facility and have provided Jefferies with customary indemnification rights. During the three months ended March 31, 2021, we did not sell any shares under this agreement.

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Warrants

Our outstanding warrants as of March 31, 2021 are as follows:

    

    

    

Warrants

 

Outstanding

Exercise

    

Expiration

    

Warrants

    

Warrants

March 31, 

Classification

Price

Date

Issued

Exercised

2021

Warrants in connection with private equity placement

    

Liability

    

$

2.50

    

6/28/2022

    

7,000,000

(1,970,000)

5,030,000

Warrants in connection with Horizon and Oxford loan agreement

Equity

$

2.45

12/28/2026

428,571

(267,857)

160,714

Warrants in connection with CRG loan agreement

Equity

$

7.37

7/14/2024

394,289

394,289

Warrants in connection with CRG loan amendment in January 2018

Equity

$

10.00

1/16/2025

1,248,250

1,248,250

Warrants in connection with Avenue Capital loan agreement

Equity

$

1.87

5/19/2025

267,390

267,390

Warrants in connection with Avenue Capital loan agreement

Equity

$

1.87

12/30/2025

267,390

267,390

9,605,890

7,368,033

 

11. Stock-based compensation

Our board of directors has adopted the 2017 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of equity-based awards to new employees. The purpose of the Inducement Plan is to attract valued employees by offering them a greater stake in our success and a closer identity with us, and to encourage ownership of our ordinary shares by such employees. The Inducement Plan became effective on February 23, 2017. As of March 31, 2021, 1,349,603 shares are available for issuance pursuant to the Inducement Plan.

Our board of directors has adopted, and our shareholders have approved, the 2015 Equity Compensation Plan (the “2015 Plan”). The 2015 Plan provides for the grant of incentive stock options to our employees and any parent or subsidiary corporation’s employees, and for the grant of nonstatutory stock options, stock awards, and RSUs to our employees, directors and consultants and our parent or subsidiary corporations’ employees and consultants. The 2015 Plan became effective on September 3, 2015. As of March 31, 2021, 2,056,084 shares are available for issuance pursuant to the 2015 Plan.

Our board of directors has adopted, and our shareholders have approved, the Non-Employee Director Equity Compensation Plan (the “Non-Employee Director Plan”). The Non-Employee Director Plan provides for the grant of nonstatutory stock options, stock awards, and RSUs to our non-employee directors. The Non-Employee Director Plan became effective on September 3, 2015. As of March 31, 2021, 407,247 shares are available for issuance pursuant to the Non-Employee Director Plan.

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A summary of our outstanding stock options as of March 31, 2021 is as follows:

Options Outstanding

 

    

    

    

Weighted-

    

 

Average

 

Weighted-

Remaining

 

Average

Contractual

 

Number of

Exercise

Term

Aggregate

 

Shares

Price

(Years)

Intrinsic Value

 

(in thousands)

 

Outstanding—January 1, 2021

8,989,306

$

4.81

6.58

$

350

Granted

91,300

$

3.20

Exercised

(48,157)

Forfeited, cancelled and expired

(346,375)

$

3.96

Outstanding—March 31, 2021

 

8,686,074

$

4.83

7.10

$

577

Vested and exercisable—March 31, 2021

 

5,602,713

$

5.49

6.56

$

191

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2021 and 2020 was $2.46 and $2.01, respectively.

Restricted stock units

We grant RSUs to employees and to members of our board of directors. RSUs that are granted to employees vest two years from the date of issuance, provided that the employee is employed by us on such vesting date. RSUs that are granted to directors, vest on the one-year anniversary of the grant date, provided that the director continues to serve as a member of the board of directors continuously from the grant date through such one-year anniversary. All RSUs will fully vest upon a change of control of our company. If and when the RSUs vest, we will issue one ordinary share for each whole RSU that has vested, subject to satisfaction of the employee’s or director’s tax withholding obligations. The RSUs will cease to be outstanding upon the issuance of ordinary shares upon vesting. We recorded expense related to RSUs, which is included in the stock-based compensation table below, of $1.2 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the total unrecognized compensation expense related to unvested RSUs is $6.5 million, which we expect to recognize over an estimated weighted-average period of 1.41 years.

A summary of our unvested RSUs as of March 31, 2021 is as follows:

Number of

Shares

Outstanding—January 1, 2021

 

1,350,300

Granted

 

2,204,525

Forfeited

 

(156,500)

Vested

 

(355,150)

Unvested—March 31, 2021

 

3,043,175

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Stock-based compensation expense

We recognized stock-based compensation expense for employees and directors for stock options and RSUs as follows (in thousands):

Three Months Ended

    

March 31, 

    

2021

    

2020

Selling, general and administrative

$

1,719

$

1,270

Research and development

558

481

Total stock-based compensation

$

2,277

$

1,751

As of March 31, 2021, the total unrecognized compensation expense related to unvested stock options is $5.6 million, which we expect to recognize over an estimated weighted-average period of 2.04 years.

In determining the estimated fair value of our service-based awards, we use the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment. The fair value of our service-based awards that were granted during the three months period ending March 31, 2021 and 2020 was estimated with the following assumptions:

Three Months Ended

March 31, 

     

2021

     

2020

Expected term (in years)

6.25

6.07

Risk-free interest rate

.61%-.80%

1.47%-1.48%

Expected volatility

82.21%

78.15%-78.21%

Dividend rate

—%

—%

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

The following discussion and analysis should be read in conjunction with our interim unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on 10-Q (this “Quarterly Report”) and the audited financial statements and related notes for the year ended December 31, 2020 and related Management’s Discussion and Analysis of Financial Condition and Results of Operations that are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 3, 2021. As used in this Quarterly Report, unless the context suggests otherwise, “we,” “us,” “our,” or “Strongbridge” refer to Strongbridge Biopharma plc.

Special Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, prospective products, size of market or patient population, plans, objectives of management, expected market growth and the anticipated effects of the coronavirus (COVID-19) pandemic on our business, operating results and financial condition are forward-looking statements. The words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

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By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and healthcare, regulatory and scientific developments and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our 2020 Annual Report and Part II, Item 1A of this Quarterly Report, in each case under the heading “Risk Factors.” In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.

Any forward-looking statement that we make in this Quarterly Report speaks only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report except as required by law. You should read carefully the factors described in the “Risk Factors” section of our 2020 Annual Report and this Quarterly Report to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements.

Overview

We are a global, commercial-stage biopharmaceutical company focused on the development and commercialization of therapies for rare diseases with significant unmet needs.

Our first commercial product is Keveyis (dichlorphenamide), the first and only treatment approved by the U.S. Food and Drug Administration (the “FDA”) for hyperkalemic, hypokalemic, and related variants of primary periodic paralysis (“PPP”), a group of rare hereditary disorders that cause episodes of muscle weakness or paralysis.

We have two clinical-stage product candidates for rare endocrine diseases, Recorlev and veldoreotide. Recorlev (levoketoconazole), the pure 2S,4R enantiomer of the enantiomeric pair comprising ketoconazole, is a next-generation steroidogenesis inhibitor being investigated as a chronic therapy for adults with endogenous Cushing’s syndrome. Veldoreotide is a next-generation somatostatin analog being investigated for potential applications in conditions amenable to somatostatin receptor activation. Both levoketoconazole and veldoreotide have received orphan designation from the FDA and the European Medicines Agency (“EMA”).

Recent Developments

We have received a notice of allowance, dated April 22, 2021, from the United States Patent and Trademark Office relating to patent application 17/010,387 (entitled “Methods of Treating Disease with Levoketoconazole”).  The patent application covers a method of treating Cushing’s syndrome patients with Recorlev who also have Type 2 diabetes.  We expect the notice of allowance to result in the issuance of a U.S. patent after administrative processes are completed.

We have submitted our NDA for Recorlev with the FDA.

COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption in the financial markets.

While the COVID-19 pandemic did not have a material impact on our business, financial condition or results of operations for the three months ended March 31, 2021, we have experienced operational business disruptions as a result

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of the outbreak. For example, most of our corporate employees are currently working remotely from home, we have suspended all commercial air and train travel for business, and any other employee travel is done in accordance with state and local guidelines. In addition, our field teams have had limited access to physicians.

We continue to monitor the impacts of COVID-19 on the global economy and on our business operations. However, at this time, it is difficult to predict how long the potential operational impacts of COVID-19 will last or to what degree further disruption might impact our operations and financial results. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition, as well as our ability to execute our business strategies and initiatives in their respective expected time frames.

Financial Operations Overview

The following discussion sets forth certain components of our statements of operations as well as factors that impact those items.

Product Sales, net

We sell Keveyis to one specialty pharmacy provider (the “Customer”), who is the exclusive specialty pharmacy for Keveyis in the United States. The Customer subsequently dispenses Keveyis to patients, most of whom are covered by payors that may provide for government-mandated or privately negotiated rebates with respect to the purchase of Keveyis. Revenues from sales of Keveyis are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and that result from rebates, co-pay assistance and other allowances that are offered by us and the patients’ payors.

Cost of Sales

Cost of sales includes third-party acquisition costs, third-party warehousing and product distribution charges.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include personnel costs, costs for outside professional services and other allocated expenses. Personnel costs consist of salaries, bonuses, benefits, travel and stock-based compensation. Outside professional services consist of legal, accounting and audit services, commercial evaluation and strategy services, sales, market access, marketing, investor relations, public relations, recruiting and other consulting services.

Research and Development Expenses

We expense all research and development costs as incurred. Our research and development expenses consist primarily of costs incurred in connection with the development of our product candidates, including:

personnel-related costs, such as salaries, bonuses, benefits, travel and other related expenses, including stock-based compensation;
expenses incurred under our agreements with contract research organizations (CROs), clinical sites, contract laboratories, medical institutions and consultants that plan and conduct our preclinical studies and clinical trials. We recognize costs for each grant project, preclinical study or clinical trial that we conduct based on our evaluation of the progress to completion, including the use of information and data provided to us by our external research and development vendors and clinical sites;
costs associated with regulatory filings; and
costs of acquiring preclinical study and clinical trial materials, and costs associated with formulation, process development and statistical analysis.

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We do not allocate personnel-related research and development costs, including stock-based compensation or other indirect costs, to specific programs, as they are deployed across multiple projects under development.

Amortization of Intangible Asset

Amortization of intangible asset relates to the amortization of our product rights to Keveyis. This intangible asset is being amortized over an eight-year period using the straight-line method.

Interest Expense

Interest expense represents interest paid to our lender, amortization of our debt discount, and issuance costs associated with loan and security agreements.

Other (Expense) Income, Net

Other (expense) income, net, consists of unrealized loss or gain on the remeasurement of the fair value of the warrant liability, interest income generated from our cash, cash equivalents and marketable securities, foreign exchange gains and losses and gains and losses on investments.

Critical Accounting Policies and Significant Judgments and Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.  

We believe there have been no significant changes in our critical accounting policies and significant judgments and estimates as discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Annual Report.

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Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020.

The following table sets forth our results of operations for the three months ended March 30, 2021 and 2020.

Three Months Ended

 

March 31, 

Change

 

    

2021

    

2020

    

$

 

(in thousands)

 

Revenues:

Net product sales

$

8,382

$

6,674

$

1,708

Cost and operating expenses:

 

    

 

    

 

 

Cost of sales (excluding amortization of intangible asset)

$

411

$

969

$

(558)

Selling, general and administrative

 

10,946

 

10,403

 

543

Research and development

5,839

7,552

(1,713)

Amortization of intangible asset

1,256

1,256

Total cost and expenses

 

18,452

 

20,180

 

(1,728)

Operating loss

 

(10,070)

 

(13,506)

 

3,436

Other (expense) income, net

 

(1,744)

 

808

 

(2,552)

Loss before income taxes

 

(11,814)

 

(12,698)

 

884

Income tax benefit (expense)

 

 

 

Net loss

$

(11,814)

$

(12,698)

$

884

Revenues and cost of sales

Net product sales were $8.4 million for the three months ended March 31, 2021, an increase of $1.7 million compared to the three months ended March 31, 2020. Product sales from Keveyis increased primarily due to an increase in the number of patients on Keveyis and an increase in price. Cost of sales decreased due to changes in the assumptions underlying the allocation between the purchase price of our inventory and the supply agreement.

Selling, General and Administrative Expenses

The following table summarizes our selling, general and administrative expenses during the three months ended March 31, 2021 and 2020:

Three Months Ended

 

March 31, 

Change

 

2021

2020