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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 10-Q
_________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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: 001-36257
 TRAVERE THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware27-4842691
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3611 Valley Centre Drive, Suite 300
San Diego, CA 92130
(Address of Principal Executive Offices)
(888) 969-7879
(Registrant's Telephone number including area code)
N/A
Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareTVTXThe Nasdaq Global 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 (§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
 The number of shares of outstanding common stock, par value $0.0001 per share, of the Registrant as of October 26, 2021 was 61,226,392.


Table of Contents
TRAVERE THERAPEUTICS, INC.
Form 10-Q
For the Fiscal Quarter Ended September 30, 2021

TABLE OF CONTENTS
  Page No.
 
 
 
 
 
1

Table of Contents
FORWARD-LOOKING STATEMENTS 
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020 10-K"), and in this Quarterly Report on Form 10-Q. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. 
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned to not unduly rely upon these statements.
We file reports with the Securities and Exchange Commission ("SEC"). The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Risk Factor Summary
Below is a summary of material factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found under the heading “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making investment decisions regarding our common stock.
Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates, including sparsentan and pegtibatinase (TVT-058), which could prevent or significantly delay their regulatory approval.
The planned eGFR data cut from the DUPLEX Study may not support accelerated approval submissions in the U.S. and/or Europe.
Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful.
An extended delay in the rate of enrollment in our ongoing Phase 1/2 Study of pegtibatinase (TVT-058), as a result of the COVID-19 pandemic or otherwise, may delay our timelines for analyzing preliminary data from the study.
Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
The commercial success of Chenodal, Cholbam and Thiola depends on them being considered to be effective drugs with advantages over other therapies.
We are subject to generic competition, and recent developments relating to generic competition for pharmaceutical products could cause our product sales and business to be negatively impacted.
Changes in reimbursement practices of third-party payers, or patients' access to insurance coverage, could affect the demand for our products and/or the prices at which they are sold.
We are dependent on third parties to manufacture and distribute our pharmaceutical products who may not fulfill their obligations.
If we are unable to maintain an effective and specialized sales force, we will not be able to commercialize our products in the United States successfully.
Our products may not achieve or maintain expected levels of market acceptance or commercial success.
If the market opportunities for our products and product candidates are smaller than we believe they are, our revenues may be adversely affected and our business may suffer.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval or commercialization.
We do not currently have patent protection for our commercial products. If we are unable to obtain and maintain protection for the intellectual property relating to our technology and products, the value of our technology and products will be adversely affected.
We expect to rely on orphan drug status to develop and commercialize certain of our product candidates, but our orphan drug designations may not confer marketing exclusivity or other expected commercial benefits.
Any drugs we develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, thereby harming our business.
2

Table of Contents
We face potential product liability exposure far in excess of our limited insurance coverage.
We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do. Our operating results will suffer if we fail to compete effectively.
The COVID-19 pandemic could materially adversely affect our business, results of operations and financial condition.
Our limited operating history makes it difficult to evaluate our future prospects, and our profitability in the future is uncertain.
We depend on a highly experienced and skilled workforce to grow and operate our business. If we are unable to attract, retain and engage our employees, we may not be able to grow effectively.
We will likely experience fluctuations in operating results and could incur substantial losses.
Negative publicity regarding any of our products could impair our ability to market any such product and may require us to spend time and money to address these issues.
We may need substantial funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts.
The market price for shares of our common stock may be volatile and purchasers of our common stock could incur substantial losses.
We may be unable to successfully integrate new products or businesses we may acquire.
We may become involved in certain litigation matters, any of which could result in substantial costs, divert management's attention and otherwise have a material adverse effect on our business, operating results or financial condition.
We are subject to significant ongoing regulatory obligations and oversight, which may result in significant additional expense and may limit our commercial success.
Our ability to use net operating loss carryforwards and certain other tax attributes to offset future taxable income and taxes may be subject to limitations.
We are dependent on information technology systems, infrastructure and data, which exposes us to data security risks.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our indebtedness could adversely affect our financial condition.
We may be unable to raise the funds necessary to repurchase the $276.0 million aggregate principal amount of 2.50% Convertible Senior Notes due 2025 ("2025 Notes") for cash following a fundamental change, or to pay any cash amounts due upon conversion, and our future indebtedness may limit our ability to repurchase the 2025 Notes or pay cash upon their conversion.
3

Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
 September 30, 2021December 31, 2020
Assets(unaudited) 
Current assets:  
Cash and cash equivalents$150,327 $84,772 
Available-for-sale debt securities, at fair value (amortized cost $400,866, allowance for credit losses of $0 as of September 30, 2021; amortized cost $276,111, allowance for credit losses of $0 as of December 31, 2020)
400,857 276,817 
Accounts receivable, net13,370 15,925 
Inventory, net6,616 7,608 
Prepaid expenses and other current assets7,504 8,143 
Tax receivable405 17,142 
Total current assets579,079 410,407 
Property and equipment, net11,513 9,418 
Other non-current assets34,871 33,489 
Intangible assets, net148,676 153,189 
Goodwill936 936 
Total assets$775,075 $607,439 
Liabilities and Stockholders' Equity   
Current liabilities:  
Accounts payable$5,830 $12,133 
Accrued expenses63,308 56,793 
Other current liabilities10,056 6,334 
Deferred revenue, current portion16,069  
Business combination-related contingent consideration, current portion17,900 17,400 
Total current liabilities113,163 92,660 
Convertible debt223,696 215,339 
Other non-current liabilities43,262 40,527 
Deferred revenue, less current portion24,084  
Business combination-related contingent consideration, less current portion63,500 47,700 
Total liabilities467,705 396,226 
Stockholders' Equity:  
Preferred stock $0.0001 par value; 20,000,000 shares authorized; 0 issued and outstanding as of September 30, 2021 and December 31, 2020
  
Common stock $0.0001 par value; 200,000,000 and 100,000,000 shares authorized; 61,018,229 and 52,248,431 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
6 5 
Additional paid-in capital1,022,282 797,985 
Accumulated deficit(714,393)(585,875)
Accumulated other comprehensive loss(525)(902)
Total stockholders' equity 307,370 211,213 
Total liabilities and stockholders' equity $775,075 $607,439 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Table of Contents
TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
(unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Net product sales$54,174 $51,139 $156,198 $147,338 
License revenue14,043  14,043  
Total revenue68,217 51,139 170,241 147,338 
Operating expenses:  
Cost of goods sold1,592 1,189 4,888 4,054 
Research and development48,407 32,349 148,160 93,387 
Selling, general and administrative36,065 31,951 107,808 100,061 
Change in fair value of contingent consideration13,864 5,085 23,960 7,448 
Total operating expenses99,928 70,574 284,816 204,950 
Operating loss(31,711)(19,435)(114,575)(57,612)
Other income (expenses), net:  
Other income (expense), net654 553 (223)788 
Interest income360 1,123 1,757 4,414 
Interest expense(4,899)(4,767)(15,072)(14,287)
Total other expense, net(3,885)(3,091)(13,538)(9,085)
Loss before income taxes(35,596)(22,526)(128,113)(66,697)
Income tax (expense) benefit(43)(23)(405)18,888 
Net loss$(35,639)$(22,549)$(128,518)$(47,809)
Basic and diluted net loss per common share$(0.59)$(0.44)$(2.17)$(1.03)
Basic and diluted weighted average common shares outstanding60,803,045 50,929,575 59,230,881 46,289,103 
Comprehensive loss:  
Net loss$(35,639)$(22,549)$(128,518)$(47,809)
Foreign currency translation216 (564)1,091 (620)
Unrealized gain (loss) on debt securities(100)(480)(714)250 
Comprehensive loss$(35,523)$(23,593)$(128,141)$(48,179)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Table of Contents
TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 For the Nine Months Ended September 30,
 20212020
Cash Flows From Operating Activities:
Net loss$(128,518)$(47,809)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:  
Depreciation and amortization20,567 17,946 
Non-cash interest expense1,097 1,285 
Amortization of discounts/premiums on investments, net1,311 530 
Amortization of debt discount and issuance costs8,356 7,789 
Provision for inventory1,372 1,317 
Share-based compensation21,524 16,613 
ESPP expense666 649 
Change in fair value of contingent consideration23,960 7,448 
Payments related to change in fair value of contingent consideration(5,675)(10,268)
Other2,620 563 
Changes in operating assets and liabilities:  
Accounts receivable2,577 3,195 
Inventory(380)(3,813)
Tax receivable 17,006 (12,220)
Other current and non-current operating assets(2,045)(20,181)
Change in lease assets and liabilities, net5,823  
Accounts payable and accrued expenses1,908 (10,213)
Deferred revenue, current and non-current40,153  
Other current and non-current operating liabilities(237)18,296 
Net cash provided by (used in) operating activities12,085 (28,873)
Cash Flows From Investing Activities:  
Purchase of fixed assets(4,947)(2,926)
Cash paid for intangible assets(14,004)(13,039)
Proceeds from the sale/maturity of debt securities376,099 223,152 
Purchase of debt securities(502,141)(143,003)
Net cash provided by (used in) investing activities(144,993)64,184 
Cash Flows From Financing Activities:  
Payment of acquisition-related contingent consideration(2,065)(6,886)
Payment of guaranteed minimum royalty(1,575)(1,575)
Proceeds from exercise of stock options6,679 1,345 
Proceeds from the issuance of common stock in At-the-Market equity offering4,878  
Proceeds from the issuance of common stock, net of issuance costs189,278 108,692 
Proceeds from issuances under employee stock purchase plan1,275 1,098 
Net cash provided by financing activities198,470 102,674 
Effect of exchange rate changes on cash(7)60 
Net change in cash and cash equivalents65,555 138,045 
Cash and cash equivalents, beginning of year84,772 62,436 
Cash and cash equivalents, end of period$150,327 $200,481 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited, in thousands, except share amounts)
Three Months Ended September 30, 2021Three Months Ended September 30, 2020
 Common StockAdditional Paid in CapitalAccumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders'
Equity
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive IncomeAccumulated
Deficit
Total
Stockholders'
Equity
 SharesAmountSharesAmount
Balance - June 3060,710,876 $6 $1,011,692 $(641)$(678,754)$332,303 50,902,874 $5 $758,945 $1,399 $(441,704)$318,645 
Share based compensation6,757 6,757 5,139 5,139 
Issuance of common stock under the equity incentive plan and proceeds from exercise307,353 3,605 3,605 120,313 914 914 
Equity offering, net of issuance costs 4848 
Unrealized gain (loss) on debt securities(100)(100)(479)(479)
Foreign currency translation adjustments216 216 (566)(566)
ESPP stock purchase and expense228 228 261 261 
Net loss(35,639)(35,639)(22,549)(22,549)
Balance - September 3061,018,229 $6 $1,022,282 $(525)$(714,393)$307,370 51,023,187 $5 $765,307 $354 $(464,253)$301,413 
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders'
Equity
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive IncomeAccumulated
Deficit
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance - December 3152,248,431 $5 $797,985 $(902)$(585,875)$211,213 43,088,921 $4 $636,910 $726 $(416,444)$221,196 
Share based compensation21,524 21,524 16,613 16,613 
Issuance of common stock under the equity incentive plan and proceeds from exercise954,225 6,679 6,679 361,722 1,345 1,345 
Equity offering, net of issuance costs7,716,686 1194,156 194,157 7,475,000 1108,691 108,692 
Unrealized gain (loss) on debt securities(714)(714)250 250 
Foreign currency translation adjustments1,091 1,091 (622)(622)
ESPP stock purchase and expense98,887 1,938 1,938 97,544 1,748 1,748 
Net loss(128,518)(128,518)(47,809)(47,809)
Balance - September 3061,018,229 $6 $1,022,282 $(525)$(714,393)$307,370 51,023,187 $5 $765,307 $354 $(464,253)$301,413 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.  DESCRIPTION OF BUSINESS
Organization and Description of Business
Travere Therapeutics, Inc. (“we”, “our”, “us”, “Travere” and the “Company”) refers to Travere Therapeutics, Inc., a Delaware corporation, as well as our direct and indirect subsidiaries. Travere is a fully integrated biopharmaceutical company headquartered in San Diego, California focused on identifying, developing and delivering life-changing therapies to people with rare diseases. We regularly evaluate and, where appropriate, act on opportunities to expand our product pipeline through licenses and acquisitions of products in areas that will serve patients with serious or rare diseases and that we believe offer attractive growth characteristics.
The ongoing novel coronavirus (COVID-19) pandemic has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders and extended shutdown of certain businesses around the world. While the impact of the COVID-19 pandemic did not have a material adverse effect on our financial position or results of operations for the nine months ended September 30, 2021, these governmental actions and similar actions that may be enacted in the future, and the widespread economic disruption arising from the pandemic, have the potential to materially impact our business and influence our business decisions. The extent and duration of the pandemic is unknown, and the future effects on our business are uncertain and difficult to predict. The Company is continuing to monitor the events and circumstances surrounding the COVID-19 pandemic, which may require adjustments to the Company’s estimates and assumptions in the future.
Clinical Programs:
Sparsentan, also known as RE-021, is an investigational product candidate with a dual mechanism of action, selective endothelin receptor antagonist (“ERA”), with in vitro selectivity toward endothelin receptor type A, and a potent angiotensin receptor blocker (“ARB”). Sparsentan is currently being evaluated in two pivotal Phase 3 clinical studies in the following indications:
Focal segmental glomerulosclerosis ("FSGS") is a rare kidney disease characterized by proteinuria where the glomeruli become progressively scarred. FSGS is a leading cause of end-stage renal disease.
Immunoglobulin A nephropathy ("IgAN") is an immune-complex-mediated glomerulonephritis characterized by hematuria, proteinuria, and variable rates of progressive renal failure. IgAN is the most common primary glomerular disease.
Pegtibatinase (TVT-058) is a novel investigational human enzyme replacement candidate being evaluated for the treatment of classical homocystinuria (HCU). Classical HCU is a rare metabolic disorder characterized by elevated levels of plasma homocysteine that can lead to vision, skeletal, circulatory and central nervous system issues. Pegtibatinase (TVT-058) is currently being tested in a Phase 1/2 double blind, randomized, placebo-controlled dose escalation study to assess its safety, tolerability, pharmacokinetics, pharmacodynamics and clinical effects in patients with classical HCU. Pegtibatinase (TVT-058) has been granted Rare Pediatric Disease and Fast Track designations by the U.S. Food and Drug Administration ("FDA"), as well as orphan drug designation in the United States and Europe. We acquired pegtibatinase (TVT-058) as part of the November 2020 acquisition of Orphan Technologies Limited.
Chenodal (chenodeoxycholic acid or CDCA) is a naturally occurring bile acid that is approved for the treatment of people with radiolucent stones in the gallbladder. CTX is a rare, progressive and underdiagnosed bile acid synthesis disorder affecting many parts of the body. In January 2020, we randomized the first patients in our Phase 3 RESTORE Study to evaluate the effects of Chenodal in adult and pediatric patients with CTX, and the study enrollment remains open. The pivotal study is intended to support an NDA submission for marketing authorization of Chenodal for CTX in the United States.
Preclinical Programs:
The Company is a participant in two Cooperative Research and Development Agreements ("CRADAs"), which form a multi-stakeholder approach to pool resources with leading experts, and incorporate the patient perspective early in the therapeutic identification and development process. We have partnered with the National Institutes of Health’s National Center for Advancing Translational Sciences ("NCATS") and leading patient advocacy organizations, CDG Care and Alagille Syndrome Alliance, aimed at the identification of potential small molecule therapeutics for NGLY1 deficiency and Alagille syndrome, respectively. There are no treatment options currently approved for these diseases.
Approved products:
Chenodal (chenodiol tablets) is approved in the United States for the treatment of patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age.
Cholbam® (cholic acid capsules) is approved in the United States for the treatment of bile acid synthesis disorders due to single enzyme defects and is further indicated for adjunctive treatment of patients with peroxisomal disorders.
Thiola® and Thiola EC® (tiopronin tablets) are approved in the United States for the prevention of cystine (kidney) stone formation in patients with severe homozygous cystinuria.

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NOTE 2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2020 10-K filed with the SEC on March 1, 2021. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods. The December 31, 2020 balance sheet information was derived from the audited financial statements as of that date. 
A summary of the significant accounting policies applied in the preparation of the accompanying condensed consolidated financial statements follows:
Principles of Consolidation
The unaudited condensed consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiaries in conformity with GAAP. All intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer. See Note 3 and Note 4 for further discussion.
Payments received under collaboration and licensing agreements may include non-refundable fees at the inception of the arrangements, milestone payments for specific achievements and royalties on the sale of products. At the inception of arrangements that include milestone payments, the Company uses judgement to evaluate whether the milestones are probable of being achieved and estimates the amount to include in the transaction price utilizing the most likely amount method. If it is probable that a significant revenue reversal will not occur, the estimated amount is included in the transaction price. Milestone payments that are not within the Company or the licensee’s control, such as regulatory approvals are not included in the transaction price until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of development milestones and any related constraint and adjusts the estimate of the overall transaction price, if necessary. The Company recognizes aggregate sales-based milestones and royalty payments from product sales at the later of when the related sales occur or when the performance obligation to which the sales-based milestone or royalty has been allocated has been satisfied. If it is probable that a significant revenue reversal will not occur, the Company estimates the sales-based milestone and royalty payments using the most likely amount method.
The Company utilizes significant judgement to develop estimates of the stand-alone selling price for each distinct performance obligation based upon the relative stand-alone selling price. Variable consideration that relates specifically to the Company’s efforts to satisfy specific performance obligations is allocated entirely to those performance obligations. The stand-alone selling price for license-related performance obligations requires judgement in developing assumptions to project probability-weighted cash flows based upon estimates of forecasted revenues, clinical and regulatory timelines and discount rates. The stand-alone selling price for clinical development performance obligations is based on forecasted expected costs of satisfying a performance obligation plus an appropriate margin.
If the licenses to intellectual property are determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to benefit from the license. For licenses that are not distinct from other promises, the Company applies judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the related revenue recognition accordingly.
The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. Revenue is recorded proportionally as costs are incurred. The Company generally utilizes the cost-to-cost method of progress because it best measures the transfer of control to the customer which occurs as the Company incurs costs. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. The Company uses judgment to estimate the total costs expected to complete the clinical development performance obligations, which include subcontractor costs, labor, materials, other direct costs and an allocation of indirect costs. The Company evaluates these cost estimates and the progress each reporting period and adjusts the measure of progress, if necessary.
Research and Development Expenses
Research and development expenses are comprised of salaries and bonuses, benefits, non-cash share-based compensation, license fees, costs paid to third-party contractors to perform research, conduct clinical trials and pre/non-clinical trials, develop drug materials, and associated overhead expenses and facilities. We also incur indirect costs that are not allocated to specific programs because such costs benefit multiple development programs and allow us to increase our pharmaceutical development capabilities. These consist of internal shared resources related to the development and maintenance of systems and processes applicable to all of our programs.
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Clinical Trial Expenses
Our clinical trials are conducted pursuant to contracts with contract research organizations ("CROs") that support conducting and managing clinical trials. The financial terms and activities of these agreements vary from contract to contract and may result in uneven expense levels. Generally, these agreements set forth activities that drive the recording of expenses such as start-up, initiation activities, enrollment, treatment of patients, or the completion of other clinical trial activities.
Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the amounts we are obligated to pay under our clinical trial agreements are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we adjust our accruals accordingly on a prospective basis. Revisions to our contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become reasonably certain.
We currently have three Phase 3 clinical trials in process that are in varying stages of activity, with ongoing non-clinical support trials. As such, clinical trial expenses will vary depending on all the factors set forth above and may fluctuate significantly from quarter to quarter.
Intangible Assets with Cost Accumulation Model
In 2014, the Company entered into a license agreement with Mission Pharmacal in which the Company obtained the exclusive right to license the trademark of Thiola. The acquisition of the Thiola license qualified as an asset acquisition under the principles of ASC 805 in effect at the time of acquisition. The license agreement requires the Company to make royalty payments based on net sales of Thiola. The liability for royalties in excess of the annual contractual minimum is recognized in the period in which the royalties become probable and estimable, which is typically in the period corresponding with the respective sales. The Company records an offsetting increase to the cost basis of the asset under the cost accumulation model. The additional cost basis is subsequently amortized over the remaining life of the license agreement.
Consistent with all prior periods since Thiola was acquired, the Company has not accrued any liability for royalties in excess of the annual contractual minimum at September 30, 2021, as such royalties are not yet probable and estimable.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The ASU includes amendments to the guidance on convertible instruments and the derivative scope exception for contracts in an entity's own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. Additionally, the ASU will require entities to use the "if-converted" method when calculating diluted earnings per share for convertible instruments. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company's assessment of the impact of the new standard on the Company's financial statements is ongoing.

NOTE 3. REVENUE RECOGNITION
Product Sales, Net
Product sales consist of Bile Acid products (Chenodal and Cholbam) and Tiopronin products (Thiola and Thiola EC). The Company sells its products through direct-to-patient distributors worldwide, with more than 99% of the revenue generated in North America.
Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs upon delivery to the customer. The Company receives payments from its product sales based on terms that generally are within 30 days of delivery of product to the patient.
Deductions from Revenue
Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and co-pay assistance that are offered to customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products. These provisions are based on the amounts earned or to be claimed on the related sales and are classified as a reduction of accounts receivable (if the amount is payable to a customer) or as a current liability (if the amount is payable to a party other than a customer). Where appropriate, these reserves take into consideration the Company’s historical experience, current contractual and statutory requirements and specific known market events and trends. 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 contract. If actual results in the future vary from the Company’s provisions, the Company will adjust the provision, which would affect net product revenue and earnings in the period such variances become known. Our historical experience is that such adjustments have been immaterial.
Government Rebates: We calculate the rebates that we will be obligated to provide to government programs and deduct these estimated amounts from our gross product sales at the time the revenues are recognized. Allowances for government rebates and discounts are established based on actual payer information, which is reasonably estimated at the time of delivery, and the government-mandated discounts applicable to government-funded programs. Rebate discounts are included in other current liabilities in the accompanying consolidated balance sheets.
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Commercial Rebates: We calculate the rebates that we incur due to contracts with certain commercial payors and deduct these amounts from our gross product sales at the time the revenues are recognized. Allowances for commercial rebates are established based on actual payer information, which is reasonably estimated at the time of delivery. Rebate discounts are included in other current liabilities in the accompanying consolidated balance sheets.
Prompt Pay Discounts: We offer discounts to certain customers for prompt payments. We accrue for the calculated prompt pay discount based on the gross amount of each invoice for those customers at the time of sale.
Product Returns: Consistent with industry practice, we offer our customers a limited right to return product purchased directly from the Company, which is principally based upon the product’s expiration date. Generally, shipments are only made upon a patient prescription thus returns are minimal.
Co-pay AssistanceWe offer a co-pay assistance program, which is intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an identification of claims and the cost per claim associated with product that has been recognized as revenue.
The following table summarizes net product sales for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Bile acid products$24,353 $22,912 $71,291 $66,766 
Tiopronin products29,821 28,227 84,907 80,572 
Total net product sales$54,174 $51,139 $156,198 $147,338 
NOTE 4. COLLABORATION AND LICENSE AGREEMENTS
On September 15, 2021, the Company entered into a license and collaboration agreement (“License Agreement”) with Vifor (International) Ltd. (“Vifor Pharma”), pursuant to which the Company granted an exclusive license to Vifor Pharma for the commercialization of sparsentan in Europe, Australia and New Zealand ("Licensed Territories"). Vifor Pharma also has first right of negotiation to expand the licensed territories into Canada, China, Brazil and/ or Mexico. Under the terms of the License Agreement, the Company received an upfront payment of $55.0 million and will be eligible for up to $135.0 million in aggregate regulatory and market access related milestone payments and up to $655.0 million in aggregate sales-based milestone payments for a total potential value of up to $845.0 million. The Company is also entitled to receive tiered double-digit royalties of up to 40 percent of annual net sales of sparsentan in the Licensed Territories.
Under the License Agreement, Vifor Pharma will be responsible for all commercialization activities in the Licensed Territories. The Company remains responsible for the worldwide clinical development of sparsentan through regulatory approval as defined and will retain all rights to sparsentan in the United States and rest of world outside of the Licensed Territories. Development costs for any post regulatory approval development activities, subject to approval by both parties, will be borne by the Company and Vifor Pharma as defined, respectively. The License Agreement will remain in effect, unless terminated earlier, until the expiration of all royalty terms for sparsentan in the licensed territories. Each party has the right to terminate the License Agreement for the other party’s uncured material breach, insolvency or if the time required for performance under the License Agreement by the other party is extended due to a force majeure event that continues for six months or more.
The Company assessed the License Agreement and determined that it meets both criteria to be considered a collaborative agreement within the Scope of ASC 808, Collaborative Arrangements of active participation by both parties and exposures to significant risks and rewards dependent on the commercial success of the activities. Both parties participate on joint steering and other committees overseeing the collaboration activities. Also, both parties are exposed to significant risks and rewards based on the economic outcomes of regulatory approvals and commercialization of sparsentan.
The Company determined the transaction price under the License Agreement totaled $55.0 million, consisting of the fixed non-refundable upfront payment. The variable regulatory and access related milestones were excluded from the transaction price given the substantial uncertainty related to their achievement. Sales-based milestone payments and royalties on net sales were excluded from the transaction price and will be recognized at the later of when the related sales occur or when the performance obligation to which the sales-based milestone or royalty has been allocated have been satisfied.
The Company concluded that Vifor Pharma represented a customer and applied relevant guidance from ASC 606 to evaluate the accounting under the License Agreement. In accordance with this guidance, the Company concluded that the promise to grant the license is distinct from the promise to provide clinical development services resulting in two performance obligations. As a result, the Company allocated $13.0 million of the transaction price, based on the performance obligations' relative standalone selling prices, to the license, which was recorded as License Revenue for the three and nine months ended September 30, 2021. The remaining $42.0 million of the transaction price was allocated to the clinical development activities and recorded as deferred revenue, which will be recognized over the development period based upon the ratio of costs incurred to date to the total estimated costs. The Company recognized $1.0 million in License Revenue based upon the ratio of costs incurred to total estimated costs for the three and nine months ended September 30, 2021.
Deferred revenue related to the clinical development activities as of September 30, 2021 was $40.2 million. Of this amount, $16.1 million was classified as current as of September 30, 2021, based upon amounts expected to be realized within the next year.
NOTE 5. DEBT SECURITIES
The Company's debt securities as of September 30, 2021 and December 31, 2020 were comprised of available-for-sale corporate and government debt securities. These securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss), unless an impairment is determined to be the result of credit-related factors or the Company intends to sell the security or it is more likely than not that the Company
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will be required to sell the security before recovery. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in interest income. Realized gains and losses and declines in value that are determined to be the result of credit losses, if any, on available-for-sale securities are included in other income or expense. Unrealized losses that are determined to be credit-related are also recorded as an allowance against the amortized cost basis. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. All available-for-sale securities are classified as current assets, even if the maturity when acquired by the Company is greater than one year due to the ability to liquidate within the next 12 months.
During the nine months ended September 30, 2021, investment activity for the Company included $376.1 million in maturities and $502.1 million in purchases, all relating to debt based marketable securities.
Debt securities consisted of the following (in thousands):
September 30, 2021December 31, 2020
Commercial paper$148,874 $135,145 
Corporate debt securities227,530 98,646 
Securities of government sponsored entities24,453 43,026 
Total debt securities$400,857 $276,817 

The following is a summary of short-term debt securities classified as available-for-sale as of September 30, 2021 (in thousands):
Remaining Contractual Maturity
(in years)
Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Commercial paperLess than 1$148,886 $10 $(22)$148,874 
Corporate debt securitiesLess than 1131,598 62 (25)131,635 
Securities of government-sponsored entitiesLess than 121,966 1 (11)21,956 
Total maturity less than 1 year302,450 73 (58)302,465 
Corporate debt securities1 to 295,916 35 (56)95,895 
Securities of government-sponsored entities1 to 22,500  (3)2,497 
Total maturity 1 to 2 years98,416 35 (59)98,392 
Total available-for-sale securities$400,866 $108 $(117)$400,857 

The following is a summary of short-term debt securities classified as available-for-sale as of December 31, 2020 (in thousands):
Remaining Contractual Maturity
(in years)
Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Commercial paperLess than 1$135,161 $1 $(17)$135,145 
Corporate debt securitiesLess than 192,906 723  93,629 
Securities of government-sponsored entitiesLess than 143,031  (5)43,026 
Total maturity less than 1 year271,098 724 (22)271,800 
Corporate debt securities1 to 25,013 4  5,017 
Total available-for-sale securities$276,111 $728 $(22)$276,817 

The primary objective of the Company’s investment portfolio is to preserve capital and liquidity while enhancing overall returns. The Company’s investment policy limits interest-bearing security investments to certain types of instruments issued by institutions with primarily investment grade credit ratings and places restrictions on maturities and concentration by asset class and issuer.
The Company reviews the available-for-sale debt securities for declines in fair value below the cost basis each quarter. For any security whose fair value is below its amortized cost basis, the Company first evaluates whether it intends to sell the impaired security, or will otherwise be more likely than not required to sell the security before recovery. If either are true, the amortized cost basis of the security is written down to its fair value at the reporting date. If neither circumstance holds true, the Company assesses whether any portion of the unrealized loss is a result of a credit loss. Any amount deemed to be attributable to credit loss is recognized in the income statement, with the amount of the loss limited to the difference between fair value and amortized cost and recorded as an allowance for credit losses. The portion of the unrealized loss related to factors other than credit losses is recognized in other comprehensive income (loss).
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The following is a summary of available-for-sale debt securities in an unrealized loss position with no credit losses reported as of September 30, 2021 (in thousands):
Less Than 12 Months12 Months or GreaterTotal
Description of SecuritiesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Commercial paper$62,421 $22 $ $ $62,421 $22 
Corporate debt securities116,042 81   116,042 81 
Securities of government-sponsored entities19,377 14   19,377 14 
   Total$197,840 $117 $ $ $197,840 $117 

The following is a summary of available-for-sale debt securities in an unrealized loss position with no credit losses reported as of December 31, 2020 (in thousands):
Less Than 12 Months12 Months or GreaterTotal
Description of SecuritiesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Commercial paper$112,148 $17 $ $ $112,148 $17 
Corporate debt securities      
Securities of government-sponsored entities43,026 5   43,026 5 
   Total$155,174 $22 $ $ $155,174 $22 

As of September 30, 2021 and December 31, 2020, the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. The Company does not believe the unrealized losses incurred during the period are due to credit-related factors. Liquidity issues that arose from economic circumstances surrounding the COVID-19 pandemic have continued to ease and the credit ratings of the securities held remain of the highest quality. While certain securities in the portfolio may be downgraded momentarily, the Federal Reserve has allowed institutions to continue to issue debt where there is need, with the government itself purchasing such securities. Moreover, the Company continues to receive payments of interest and principal as they become due, and our expectation is that those payments will continue to be received timely. Uncertainty surrounding the COVID-19 pandemic, as well as other factors unknown to us at this time, may cause actual results to differ and require adjustments to the Company’s estimates and assumptions in the future.

NOTE 6. ACQUISITIONS
Acquisition of Orphan Technologies Limited
In November 2020, the Company completed the acquisition of Orphan Technologies Limited (“Orphan”), including Orphan’s rare metabolic disorder drug OT-58, renamed pegtibatinase (TVT-058). The Company acquired Orphan by purchasing all of its outstanding shares. In exchange for the shares, the Company made an upfront cash payment at closing of $90.0 million plus closing adjustments, net liabilities assumed, and transaction expenses of $1.2 million, $1.8 million, and $4.2 million, respectively. Under the Agreement, the Company also agreed to make contingent cash payments up to an aggregate of $427.0 million based on the achievement of certain development, regulatory and commercialization events as set forth in the Agreement, as well as additional tiered mid-single digit royalty payments based upon future net sales of any pegtibatinase (TVT-058) products in the US and Europe, subject to certain reductions as set forth in the Agreement, and a contingent payment in the event a pediatric rare disease voucher for any pegtibatinase (TVT-058) product is granted.
The Company applied the principles of ASC 805 in determining the proper accounting treatment for the acquisition. Substantially all of the value of the assets acquired was concentrated within pegtibatinase (TVT-058), and as of the acquisition date, the Company did not anticipate any economic benefit to be derived from pegtibatinase (TVT-058) other than the primary indication. Accordingly, the transaction was treated as an asset acquisition with amounts charged to expense for the acquired in-process research and development on the date of acquisition.
In accordance with ASC 450, contingent cash payments will be accrued for when it is probable that a liability has been incurred and the amount can be reasonably estimated. As of September 30, 2021, no contingent cash payments have been accrued.

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NOTE 7.  LEASES
As of September 30, 2021, the Company had one operating lease with Kilroy Realty, L.P. (the "Landlord") for office space located in San Diego, California, which was entered into in April 2019 and subsequently amended in May 2020. Coinciding with our ability to direct the use of the office space, which occurred in phases over 2020, and utilizing a discount rate equal to our borrowing rate, the Company established ROU assets totaling $34.6 million and lease liabilities totaling $34.5 million. The total ROU asset and lease liability at measurement were each offset by lease incentives associated with tenant improvement allowances totaling $7.9 million.
The initial term of the office lease ends in August 2028, and the Landlord has granted the Company an option to extend the term of the lease by a period of 5 years. At this time, it is not reasonably certain that we will extend the term of the lease and therefore the renewal period has been excluded from the aforementioned ROU asset and lease liability measurements. The measurement of the lease term occurs from the February 2021 occupancy date of the office space delivered in September 2020. The aggregate base rent due over the initial term of the lease is approximately $49.5 million.
Following is a schedule of the future minimum rental commitments for our operating leases reconciled to the lease liability and ROU asset as of September 30, 2021 (in thousands):
September 30, 2021
2021$1,469 
20226,020 
20236,200 
20246,386 
20256,578 
Thereafter18,535 
Total undiscounted future minimum payments45,188 
Present value discount(8,884)
Total lease liability36,304 
Unamortized lease incentives(6,805)
Cash payments in excess of straight-line lease expense(5,692)
Total ROU asset$23,807 

As of September 30, 2021, the ROU asset of $23.8 million was recorded to the Condensed Consolidated Balance Sheets as non-current Other Assets.

As of September 30, 2021, the current and non-current portions of the lease liability were recorded to the Condensed Consolidated Balance Sheets as follows (in thousands):
September 30, 2021
Other current liabilities$3,803 
Other non-current liabilities32,501 
Total lease liabilities$36,304 

For the three and nine months ended September 30, 2021, the Company recorded $1.2 million and $3.6 million in expense related to operating leases, including amortized tenant improvement allowances. For the three and nine months ended September 30, 2020, the Company recorded $0.7 million and $0.7 million in expense related to operating leases, including amortized tenant improvement allowances.

NOTE 8.  FAIR VALUE MEASUREMENTS
Financial Instruments and Fair Value
The Company accounts for financial instruments in accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under ASC 820 are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
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The valuation techniques used to measure the fair value of the Company’s debt securities and all other financial instruments, all of which have counter-parties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data. Based on the fair value hierarchy, the Company classified debt securities within Level 2.
The Company acquired two businesses, related to the Cholbam and Chenodal products, whose purchase price included potential future payments that are contingent on the achievement of certain milestones and percentages of future net sales derived from the products acquired. The Company recorded contingent consideration liabilities at their fair value on the acquisition date and revalues them at the end of each reporting period. In estimating the fair value of the Company’s contingent consideration, the Company uses a Monte Carlo Simulation. The determination of the contingent consideration liabilities requires significant judgements including the appropriateness of the valuation model and reasonableness of estimates and assumptions included in the forecasts of future net sales and the discount rates applied to such forecasts. Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities.
Discount rates used to determine the fair value at September 30, 2021 and December 31, 2020 are as follows:
Revenue DiscountPayment Discount
Cholbam Chenodal
September 30, 20216.0%7.0%5.80%
December 31, 20206.5%8.5%7.45%

Based on the fair value hierarchy, the Company classified the fair value measurement of contingent consideration within Level 3 because valuation inputs are based on projected revenues discounted to a present value.
Financial instruments with carrying values approximating fair value include cash and cash equivalents, accounts receivable, and accounts payable, due to their short-term nature. As of September 30, 2021, the fair value of the Company's 2.5% Convertible Senior Notes due 2025 was $280.1 million, which was estimated utilizing market quotations, and are considered Level 2.
The following table presents the Company’s assets and liabilities, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of September 30, 2021 (in thousands):
As of September 30, 2021
Total carrying and estimated fair valueQuoted prices in active markets
(Level 1)
Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)
Assets:
Cash and Cash Equivalents$150,327 $150,327 $ $ 
Debt securities, available-for-sale400,857  400,857  
Total$551,184 $150,327 $400,857 $ 
Liabilities:
Business combination-related contingent consideration$81,400 $ $ $81,400 
Total$81,400 $ $ $81,400 

The following table presents the Company’s assets and liabilities, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of December 31, 2020 (in thousands):
As of December 31, 2020
Total carrying and estimated fair valueQuoted prices in active markets
(Level 1)
Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)
Assets:
Cash and Cash Equivalents$84,772 $84,772 $ $ 
Debt securities, available-for-sale276,817  276,817  
Total$361,589 $84,772 $276,817 $ 
Liabilities:
Business combination-related contingent consideration65,100   65,100 
Total$65,100 $ $ $65,100 

The following table sets forth a summary of changes in the estimated fair value of the Company's Level 3 business combination-related contingent consideration for the nine months ended September 30, 2021 (in thousands):
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Fair Value Measurements of Acquisition-Related Contingent Consideration
(Level 3)
Balance at January 1, 2021$65,100 
Changes in the fair value of contingent consideration23,960 
Contractual payments(4,883)
Contractual payments included in accrued liabilities at September 30, 2021(2,662)
Foreign currency impact(115)
Balance at September 30, 2021$81,400 

For the three and nine months ended September 30, 2021, the Company incurred charges of $13.9 million and $24.0 million in operating expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss for the change in fair value of the contingent consideration liabilities. The value changed due to the timing of future payments and changes in market driven discount rates.
For the three and nine months ended September 30, 2020, the Company incurred charges of $5.1 million and $7.4 million in operating expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss for the change in fair value of the contingent consideration liabilities. The value changed due to the timing of future payments and changes in market driven discount rates.

NOTE 9. INTANGIBLE ASSETS
As of September 30, 2021, the net book value of amortizable intangible assets was approximately $148.7 million.
The following table sets forth amortizable intangible assets as of September 30, 2021 and December 31, 2020 (in thousands):
September 30, 2021December 31, 2020
Finite-lived intangible assets$278,395 $264,676 
Less: accumulated amortization(129,719)(111,487)
Net carrying value$148,676 $153,189 

The following table summarizes amortization expense for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Research and development$292 $292 $866 $870 
Selling, general and administrative6,052 5,731 17,566 15,612 
Total amortization expense$6,344 $6,023 $18,432 $16,482 

NOTE 10.  CONVERTIBLE NOTES PAYABLE
Convertible Senior Notes Due 2025
On September 10, 2018, the Company completed its registered underwritten public offering of $276.0 million aggregate principal amount of 2.50% Convertible Senior Notes due 2025 ("2025 Notes"), and entered into a base indenture and supplemental indenture agreement ("2025 Indenture") with respect to the 2025 Notes. The 2025 Notes will mature on September 15, 2025 ("Maturity Date”), unless earlier repurchased, redeemed, or converted. The 2025 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 2.50%, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2019.
The composition of the Company’s 2025 Notes are as follows (in thousands):
 September 30, 2021 December 31, 2020
2.50% convertible senior notes due 2025
$276,000 $276,000 
Unamortized debt discount(48,704)(56,384)
Unamortized debt issuance costs(3,600)(4,277)
Total 2025 Notes, net of unamortized debt discount and debt issuance costs$223,696 $215,339 
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The net proceeds from the issuance of the 2025 Notes were approximately $267.2 million, after deducting commissions and the offering expenses payable by the Company. A portion of the net proceeds from the 2025 Notes was used by the Company to repurchase $23.4 million aggregate principal amount of its then-outstanding 4.5% senior convertible notes due 2019 in privately-negotiated transactions.
Holders may convert their 2025 Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2018 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock for each of at least 20 trading days, whether or not consecutive, during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price on the applicable trading day; (2) during the five consecutive business days immediately after any 10 consecutive trading day period (“measurement period”) if the trading price per $1,000 principal amount of 2025 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Company’s common stock; (4) if the Company calls the 2025 Notes for redemption; and (5) at any time from, and including, May 15, 2025 until the close of business on the scheduled trading day immediately before the Maturity Date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, based on the applicable conversion rate.
The initial conversion rate for the 2025 Notes is 25.7739 shares of the Company’s common stock per $1,000 principal amount of 2025 Notes, which represents an initial conversion price of approximately $38.80 per share. If a “make-whole fundamental change” (as defined in the 2025 Indenture) occurs, then the Company will, in certain circumstances, increase the conversion rate for a specified period of time.
The 2025 Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after September 15, 2022 and, in the case of any partial redemption, on or before the 40th scheduled trading day before the Maturity Date, at a cash redemption price equal to the principal amount of the 2025 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds