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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, 2023
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 November 3, 2023 was 75,145,831.


Table of Contents
TRAVERE THERAPEUTICS, INC.
Form 10-Q
For the Fiscal Quarter Ended September 30, 2023

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, 2022, 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 future prospects are highly dependent upon our ability to successfully develop and execute commercialization strategies for our products, including FILSPARI (sparsentan) to reduce proteinuria in adults with primary Immunoglobulin A nephropathy (IgAN), and to attain market acceptance among physicians, patients and healthcare payers.
In order to operate our business and increase adoption and sales of our products, we need to continue to develop our commercial organization, including maintaining and growing a highly experienced and skilled workforce with qualified sales representatives.
Our clinical trials are expensive and time-consuming and may fail to demonstrate the safety and efficacy of our product candidates. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful.
Communications and/or feedback from regulatory authorities related to our clinical trials does not guarantee any particular outcome from or timeline for regulatory review, and expedited regulatory review pathways may not actually lead to faster development or approval.
Interim, topline and preliminary data from our clinical trials that we announce or publish may change materially as more patient data become available and audit and verification procedures are completed.
We face substantial generic and other competition, and our operating results will suffer if we fail to compete effectively.
Healthcare reform initiatives, unfavorable pricing regulations, and changes in reimbursement practices of third-party payers or patients' access to insurance coverage could affect the pricing of and demand for our products.
We are dependent on third parties to manufacture and distribute our products.
The market opportunities for our products and product candidates may be smaller than we believe they are.
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 certain of our commercial products. If we are unable to obtain and maintain intellectual property relating to our technology and products, their value may 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.
We will likely experience fluctuations in operating results and could incur substantial losses, and the market price for shares of our common stock may be volatile.
2

Table of Contents
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. Our indebtedness could adversely affect our financial condition.
We might not receive some or all of the potential milestone payments from the sale of our bile acid product portfolio for the treatment of rare liver diseases.
We may be unable to successfully integrate new products or businesses we may acquire.
We may become involved in litigation matters, 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.
3

Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
 September 30, 2023December 31, 2022
Assets(unaudited) 
Current assets:  
Cash and cash equivalents$144,244 $61,688 
Marketable debt securities, at fair value490,399 388,557 
Accounts receivable, net14,570 16,646 
Inventory20,773 4,523 
Prepaid expenses and other current assets16,244 12,033 
Current assets of discontinued operations 2,990 
Total current assets686,230 486,437 
Property and equipment, net7,996 9,049 
Operating lease right of use assets18,806 21,000 
Intangible assets, net106,903 97,073 
Other assets12,915 10,684 
Non-current assets of discontinued operations 48,342 
Total assets$832,850 $672,585 
Liabilities and Stockholders' Equity   
Current liabilities:  
Accounts payable$24,736 $17,290 
Accrued expenses95,712 95,742 
Deferred revenue, current portion8,959 11,976 
Operating lease liabilities, current portion4,782 4,433 
Other current liabilities5,244 5,722 
Current liabilities of discontinued operations 7,000 
Total current liabilities139,433 142,163 
Convertible debt376,833 375,545 
Deferred revenue, less current portion4,574 10,931 
Operating lease liabilities, less current portion23,863 27,510 
Other non-current liabilities8,381 9,385 
Non-current liabilities of discontinued operations 64,200 
Total liabilities553,084 629,734 
Commitments and Contingencies (See Note 13)
Stockholders' Equity:  
Preferred stock $0.0001 par value; 20,000,000 shares authorized; no shares issued and outstanding as of September 30, 2023 and December 31, 2022
  
Common stock $0.0001 par value; 200,000,000 shares authorized; 75,111,517, and 64,290,570 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
7 6 
Additional paid-in capital1,318,861 1,059,975 
Accumulated deficit(1,035,449)(1,014,223)
Accumulated other comprehensive loss(3,653)(2,907)
Total stockholders' equity 279,766 42,851 
Total liabilities and stockholders' equity $832,850 $672,585 
The accompanying notes are an integral part of these consolidated financial statements.
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TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share amounts)
(unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Net product sales$33,932 $25,369 $87,621 $72,154 
License and collaboration revenue3,163 2,706 12,558 7,967 
Total revenue37,095 28,075 100,179 80,121 
Operating expenses:  
Cost of goods sold1,289 1,114 6,886 3,552 
Research and development60,590 57,145 185,244 169,246 
Selling, general and administrative67,801 52,420 201,954 140,434 
Total operating expenses129,680 110,679 394,084 313,232 
Operating loss(92,585)(82,604)(293,905)(233,111)
Other income (expenses), net:  
Interest income5,842 2,101 14,616 3,161 
Interest expense(2,821)(2,829)(8,513)(8,156)
Other income (expense), net335 (586)220 102 
Loss on extinguishment of debt   (7,578)
Total other income (expense), net3,356 (1,314)6,323 (12,471)
Loss from continuing operations before income tax provision(89,229)(83,918)(287,582)(245,582)
Income tax provision on continuing operations(12)(145)(155)(250)
Loss from continuing operations, net of tax(89,241)(84,063)(287,737)(245,832)
Income from discontinued operations, net of tax239,976 14,407 266,511 33,173 
Net income (loss)$150,735 $(69,656)$(21,226)$(212,659)
Per share data
Basic and diluted:
Net loss from continuing operations$(1.17)$(1.31)$(3.91)$(3.86)
Net income from discontinued operations3.14 0.22 3.62 0.52 
Net income (loss) per common share$1.97 $(1.09)$(0.29)$(3.34)
Weighted average common shares outstanding76,305,603 64,033,759 73,523,620 63,604,962 
Comprehensive income (loss):  
Net income (loss)$150,735 $(69,656)$(21,226)$(212,659)
Foreign currency translation gain (loss)8 2,596 (728)4,083 
Unrealized gain (loss) on marketable debt securities194 (1,211)(18)(3,218)
Comprehensive income (loss)$150,937 $(68,271)$(21,972)$(211,794)
The accompanying notes are an integral part of these 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, 2023Three Months Ended September 30, 2022
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders'
Equity
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance - June 3074,971,807 $7 $1,306,517 $(3,855)$(1,186,184)$116,485 63,838,050 $6 $1,036,533 $(1,082)$(878,744)$156,713 
Share based compensation— — 11,775 — — 11,775 — — 8,464 — — 8,464 
Issuance of common stock under the equity incentive plan and proceeds from exercise139,710 — 151 — — 151 312,460 — 3,408 — — 3,408 
Employee stock purchase program purchase and expense— — 418 — — 418 — — 362 — — 362 
Foreign currency translation adjustments— — — 8 — 8 — — — 2,596 — 2,596 
Unrealized gain (loss) on marketable debt securities— — — 194 — 194 — — — (1,211)— (1,211)
Net income (loss)— — — — 150,735 150,735 — — — — (69,656)(69,656)
Balance - September 3075,111,517 $7 $1,318,861 $(3,653)$(1,035,449)$279,766 64,150,510 $6 $1,048,767 $303 $(948,400)$100,676 
The accompanying notes are an integral part of these consolidated financial statements.















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TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
(unaudited, in thousands, except share amounts)
Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders'
Equity
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance - December 3164,290,570 $6 $1,059,975 $(2,907)$(1,014,223)$42,851 62,491,498 $6 $1,068,634 $(562)$(765,966)$302,112 
Cumulative-effect adjustment from adoption of ASU 2020-06— — — — — — — (74,945)— 30,225 (44,720)
Share based compensation— — 36,273 — — 36,273 — — 28,751 — — 28,751 
Issuance of common stock under the equity incentive plan and proceeds from exercise960,657 — 3,240 — — 3,240 880,237 — 4,354 — — 4,354 
Employee stock purchase program purchase and expense156,540 — 3,545 — — 3,545 77,175 — 2,428 — — 2,428 
Equity offering, net of issuance costs of $12.6 million
9,703,750 1 191,198 — — 191,199 — — — — — — 
Issuance of pre-funded common stock warrants, net of issuance costs of $1.6 million
— — 24,630 — — 24,630 — — — — — — 
Issuance of common stock under At-The-Market offering, net of issuance costs of $0.6 million
— — — — — — 701,600 — 19,545 — — 19,545 
Foreign currency translation adjustments— — — (728)— (728)— — — 4,083 — 4,083 
Unrealized loss on marketable debt securities— — — (18)— (18)— — — (3,218)— (3,218)
Net loss— — — — (21,226)(21,226)— — — — (212,659)(212,659)
Balance - September 3075,111,517 $7 $1,318,861 $(3,653)$(1,035,449)$279,766 64,150,510 $6 $1,048,767 $303 $(948,400)$100,676 
The accompanying notes are an integral part of these consolidated financial statements.
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TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 For the Nine Months Ended September 30,
 20232022
Cash Flows From Operating Activities:
Net loss$(21,226)$(212,659)
Net income from discontinued operations266,511 33,173 
Net loss from continuing operations(287,737)(245,832)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization29,042 14,407 
Share based compensation36,102 28,846 
Amortization of (discounts) premiums on investments(5,181)323 
Loss on extinguishment of debt 7,578 
Other(634)5,377 
Changes in operating assets and liabilities:
Accounts receivable(3,295)4,944 
Inventory(17,027)(1,247)
Prepaid expenses and other current and non-current assets(4,402)(2,593)
Change in lease assets and liabilities, net(738)(738)
Accounts payable7,468 (198)
Accrued expenses(3,903)16,008 
Deferred revenue, current and non-current(10,200)(8,898)
Other current and non-current liabilities(479)(2,119)
Net cash used in operating activities - continuing operations(260,984)(184,142)
Net cash provided by operating activities - discontinued operations51,436 52,491 
Net cash used in operating activities(209,548)(131,651)
Cash Flows From Investing Activities:  
Proceeds from the sale and maturity of marketable debt securities284,575 329,612 
Purchase of marketable debt securities(381,294)(301,104)
Purchase of fixed assets(643)(161)
Purchase of intangible assets(36,086)(24,199)
Net cash (used in) provided by investing activities - continuing operations(133,448)4,148 
Net cash provided by investing activities - discontinued operations206,174  
Net cash provided by investing activities72,726 4,148 
Cash Flows From Financing Activities:  
Payment of guaranteed minimum royalty(1,575)(1,575)
Proceeds from issuances of 2029 convertible senior notes 316,250 
Payment of debt issuance costs (9,882)
Repurchase of 2025 convertible senior notes including premium (211,324)
Proceeds from the issuance of common stock, net of issuance costs191,198  
Proceeds from the issuance of pre-funded warrants, net of issuance costs24,630  
Proceeds from exercise of stock options3,240 4,354 
Proceeds from issuances under the employee stock purchase plan2,258 1,529 
Proceeds from the issuance of common stock in At-the-Market equity offering, net of issuance costs 19,545 
Net cash provided by financing activities - continuing operations219,751 118,897 
Net cash used in financing activities - discontinued operations(1,123)(1,875)
Net cash provided by financing activities218,628 117,022 
Effect of exchange rate changes on cash750 (3,935)
Net increase in cash and cash equivalents82,556 (14,416)
Cash and cash equivalents, beginning of year61,688 165,753 
Cash and cash equivalents, end of period$144,244 $151,337 
The accompanying notes are an integral part of these consolidated financial statements.

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TRAVERE THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED 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 its subsidiaries. Travere is a fully integrated biopharmaceutical company headquartered in San Diego, California focused on identifying, developing and delivering life-changing therapies to people living with rare kidney and metabolic diseases. The Company regularly evaluates and, where appropriate, acts on opportunities to expand its product pipeline through licenses and acquisitions of products in areas that will serve patients with serious unmet medical need and that the Company believes offer attractive growth characteristics.
Discontinued Operations - Sale of Bile Acid Product Portfolio
On July 16, 2023, Travere entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Mirum Pharmaceuticals, Inc. ("Mirum Pharmaceuticals" or “Mirum”), pursuant to which Mirum agreed to purchase from Travere substantially all of the assets primarily related to Travere’s business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of Chenodal and Cholbam (also known as Kolbam, and together with Chenodal, the “Products”), collectively, the "bile acid business". On August 31, 2023, the Company and Mirum consummated the transactions contemplated by the Purchase Agreement (the “Closing”). In connection with the Closing, Mirum paid Travere an upfront cash payment of $210.0 million. Pursuant to the Purchase Agreement, after the Closing, Travere is eligible to receive up to $235.0 million upon the achievement of certain milestones based on specified amounts of annual net sales (tiered from $125.0 million to $500.0 million) of the Products. The Company has reflected the bile acid business as a discontinued operation in the unaudited Consolidated Financial Statements for all periods presented. See Note 18 for further discussion.
Unless otherwise noted, amounts and disclosures throughout the Notes to the unaudited Consolidated Financial Statements relate to the Company's continuing operations.
Approved Products:
FILSPARI® (sparsentan)
On February 17, 2023, the U.S. Food and Drug Administration (the "FDA") granted accelerated approval of FILSPARI® (sparsentan) to reduce proteinuria in adults with primary IgAN at risk of rapid disease progression, generally at UPCR ≥1.5 gram/gram. FILSPARI, a once-daily, oral medication is designed to selectively target two critical pathways (endothelin 1 and angiotensin-II) in the disease progression of IgAN.
Thiola® and Thiola EC® (tiopronin tablets)
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.
Clinical-Stage Programs:
The continued approval of FILSPARI for IgAN may be contingent upon confirmation of a clinical benefit in the Company's Phase 3 clinical trial of sparsentan for the treatment of IgAN (the "PROTECT Study"). Topline results from the two-year confirmatory endpoints in the PROTECT Study were reported in September 2023 and are intended to support traditional approval of FILSPARI.
Sparsentan remains a novel investigational product candidate which has been granted Orphan Drug Designation for the treatment of focal segmental glomerulosclerosis (FSGS) in the U.S. and Europe. The double-blind portion of the Phase 3 study of sparsentan for FSGS has recently concluded and, following release of the top-line data from the study which showed that the study did not meet its primary endpoint, the Company is conducting further analyses of the data and is engaging with regulators to explore a potential path forward toward a potential regulatory submission in FSGS.
Pegtibatinase (TVT-058) is a novel investigational human enzyme replacement candidate being evaluated for the treatment of classical homocystinuria (HCU). Pegtibatinase has been granted Rare Pediatric Disease, Fast Track and Breakthrough Therapy designations by the FDA, as well as orphan drug designation in the United States and European Union. Pegtibatinase is currently being evaluated in the Phase 1/2 COMPOSE Study to assess its safety, tolerability, pharmacokinetics, pharmacodynamics and clinical effects in patients with classical HCU. In May 2023, the Company announced positive topline results from cohort 6 in the Phase 1/2 COMPOSE Study. The Company is preparing for the potential initiation of a pivotal Phase 3 clinical trial of pegtibatinase in patients with HCU by the end of 2023, subject to communications and feedback from the FDA and associated program assessments. The Company acquired pegtibatinase as part of the November 2020 acquisition of Orphan Technologies Limited.
Preclinical Programs:
The Company is a participant in a Cooperative Research and Development Agreement ("CRADA"), which forms a multi-stakeholder approach to pool resources with leading experts, and incorporate the patient perspective early in the therapeutic identification and development process. The Company is partnering with the National Institutes of Health’s National Center for Advancing Translational Sciences ("NCATS") and a leading patient advocacy organization, Alagille Syndrome Alliance, aimed at the identification of potential small molecule therapeutics for Alagille syndrome ("ALGS"). There are no treatment options currently approved for ALGS.
The Company is party to a collaboration agreement with PharmaKrysto Limited and their early-stage cystinuria discovery program, whereby the Company is responsible for funding all research and development expenses for the pre-clinical activities associated with the cystinuria program.
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NOTE 2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023. The accompanying 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 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, 2022 balance sheet information was derived from the audited financial statements as of that date. Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation.
A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows:
Principles of Consolidation
The unaudited consolidated financial statements represent the consolidation of the accounts of the Company, its subsidiaries and variable interest entities for which the Company has been determined to be the primary beneficiary, in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). All intercompany accounts and transactions have been eliminated in consolidation. See Note 6 for further discussion of variable interest entities (“VIE”) that the Company consolidates.
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 recognizes revenue from 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 considered to be constrained due to a high degree of uncertainty and are not included in the transaction price until such uncertainty is resolved. 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 of which the license is deemed to be the predominant item to which the royalties relate, 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. Revenue from collaboration and licensing agreements may also include sales of inventory, at cost plus a margin, and is recorded in license and collaboration revenue.
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 and have stand-alone functionality, 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.


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Cost of goods sold
Cost of goods sold includes the cost of inventory sold, third party manufacturing and supply chain costs, product shipping and handling costs, and provisions for excess and obsolete inventory. Cost of goods sold also includes the cost of goods sold under the Company's license and collaboration agreements, which currently consists of the sale of active pharmaceutical ingredients to the Company's collaboration partner, at cost plus a margin.
The following table summarizes cost of goods sold for the three and nine months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of goods sold - product sales$1,289 $1,114 $3,842 $3,552 
Cost of goods sold - license and collaboration  3,044  
Total cost of goods sold$1,289 $1,114 $6,886 $3,552 
Capitalization of Inventory Costs
Prior to the regulatory approval of the Company's drug candidates, the Company incurs expenses for the manufacture of drug product supplies to support clinical development that could potentially be available to support the commercial launch of those drugs. The Company capitalizes inventory costs associated with its products after regulatory approval, when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. Until the date at which regulatory approval has been received, costs related to the production of inventory are recorded as research and development expenses as incurred. Any eventual sale of previously expensed ("zero-cost") inventories may impact future margins, for any periods in which those inventories are sold.
Sales of FILSPARI for the three and nine months ended September 30, 2023 primarily consisted of zero-cost inventories, which favorably impacted gross margin for related sales. Prior to the February 2023 FDA accelerated approval of FILSPARI (sparsentan), the Company recognized approximately $7.5 million in research and development expenses related to the production of active pharmaceutical ingredients to support the commercial launch of FILSPARI. The impact to cost of goods sold from product sales had these costs been included in cost of sales was immaterial for the three and nine months ended September 30, 2023, respectively. The Company expects to continue to benefit from the sale of previously expensed inventories through at least 2024.
Research and Development Expenses
Research and development includes expenses related to sparsentan, pegtibatinase, and the Company's other pipeline programs. The Company expenses all research and development costs as they are incurred. The Company's research and development costs are composed of salaries and bonuses, benefits, share-based compensation, license fees, milestones under license agreements, costs paid to third-party contractors to perform research, conduct clinical trials, develop drug materials and delivery devices, manufacture drug product supplies to support clinical development, and associated overhead expenses and facilities costs. The Company charges direct internal and external program costs to the respective development programs. The Company also incurs 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.
Nonrefundable advance payments for goods and services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered.
Clinical Trial Expenses
The Company records expenses in connection with its clinical trials under contracts with contract research organizations ("CROs") that support conducting and managing clinical trials, as well as contract manufacturing organizations ("CMOs") for the manufacture of drug product supplies to support clinical development. 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, and in the case of CMOs, costs associated with the production of drug product supplied and the procurement of raw materials to be consumed in the manufacturing process.
Expenses related to clinical trials are accrued based on our estimates of the progress of services performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials or the delivery of goods. 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), the Company adjusts its estimates accordingly on a prospective basis. Revisions to the Company's contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become reasonably certain.
In addition to ongoing non-clinical support trials, the Company currently has one Phase 1/2 clinical trial, two ongoing Phase 3 clinical trials, and is in the process of study start up activities for a third Phase 3 clinical trial. As such, clinical trial expenses will vary depending on all the factors set forth above and may fluctuate significantly from quarter to quarter.



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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, Business Combinations ("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 ("Thiola Intangible"). The additional cost basis is subsequently amortized over the remaining useful life.
In the second quarter of 2023, the Company reduced the estimated useful life of the Thiola Intangible to better reflect the pattern of projected future cash flows, resulting in incremental expense of $7.4 million for the nine months ended September 30, 2023, recorded in selling, general, and administrative. The change in estimated useful life has been accounted for as a change in accounting estimate and the remaining carrying amounts of the Thiola Intangible will be amortized prospectively over the new useful life.
Consistent with all prior periods since Thiola was acquired, the Company has not accrued any liability for future royalties in excess of the annual contractual minimum at September 30, 2023 as such royalties are not yet probable and estimable.
Variable Interest Entity
The Company reviews each investment and collaboration agreement to determine if it has a variable interest in the entity. In assessing whether the Company has a variable interest in the entity as a whole, the Company considers and makes judgements regarding the purpose and design of the entity, the value of the licensed assets to the entity, the value of the entity’s total assets and the significant activities of the entity. If the Company has a variable interest in the entity as a whole, the Company assesses whether or not the Company is a primary beneficiary of that VIE, based on a number of factors, including: (i) which party has the power to direct the activities that most significantly affect the VIE’s economic performance, (ii) the parties’ contractual rights and responsibilities pursuant to the collaboration agreement, and (iii) which party has the obligation to absorb losses of or the right to receive benefits from the VIE that could be significant to the VIE. If the Company determines that it is the primary beneficiary of a VIE at the onset of the collaboration, the collaboration is treated as a business combination and the Company consolidates the financial statements of the VIE into the Company’s consolidated financial statements. On a quarterly basis, the Company evaluates whether it continues to be the primary beneficiary of the consolidated VIE. If the Company determines that it is no longer the primary beneficiary of a consolidated VIE, it deconsolidates the VIE in the period in which the determination is made.
Assets and liabilities recorded as a result of consolidating the financial results of the VIE into the Company’s consolidated balance sheet do not represent additional assets that could be used to satisfy claims against the Company’s general assets or liabilities for which creditors have recourse to the Company’s general assets.
Discontinued Operations
Discontinued operations is presented when there is a disposal of a component or a group of components that in the Company's judgement represents a strategic shift that will have a major effect on the Company's operations and financial results. Results of operations for discontinued operations is aggregated into a single line item in the unaudited Consolidated Statements of Operations for all periods presented. General corporate overhead is not allocated to discontinued operations.
Recently Adopted Accounting Pronouncements
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 in Subtopic 815-40 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 adoption of the new standard impacted the Company's accounting for its Convertible Senior Notes Due 2025 (2025 Notes), discussed in Note 10, which were previously accounted for using the cash conversion model applied under ASC 470-20, Debt with Conversion and Other Options ("ASC 470-20"). The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. The cumulative effect of the accounting change as of January 1, 2022 increased the carrying amount of the 2025 Notes by $44.7 million, reduced additional paid-in capital by $74.9 million, and reduced accumulated deficit by $30.2 million.
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.

NOTE 3. REVENUE RECOGNITION
Product Sales, Net
Product sales consist of FILSPARI and tiopronin products (Thiola and Thiola EC). The Company sells its products to specialty pharmacies and through direct-to-patient distributors worldwide, with the United States representing over 98% of net product sales.
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The Company sells FILSPARI to three direct-to-patient specialty pharmacies. The Company sells its other products to patients and pharmacies, with distribution facilitated through a single direct-to-patient distributor. Revenues from product sales are recognized in satisfaction of a single performance obligation when the customer obtains control of the Company’s product. For FILSPARI, sales are recognized upon delivery of the product to the specialty pharmacies. The Company receives payments from its FILSPARI sales based on terms that are generally 30 days from shipment of the product to the specialty pharmacy. For the Company's other products, product sales are recognized upon delivery to the patient. The Company receives payments from sales of its other products, primarily through third party payers, based on terms that generally are within 30 days of delivery of product to the patient. Contracts do not contain significant financing components based on the typical period of time between performance of services and collection of consideration.
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, payers and other indirect customers relating to the Company’s sales of its products. These provisions are based on the estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, 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). The Company includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transactions will not occur. 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 estimate, which would affect net product revenue and earnings in the period such variances become known. For the nine months ended September 30, 2023 and 2022, adjustments to net product revenue related to performance obligations satisfied in previous periods, were immaterial.
Government Rebates: The Company calculates the rebates that it will be obligated to provide to government programs and deducts these estimated amounts from its gross product sales at the time the revenues are recognized. Allowances for government rebates and discounts are established based on an estimated allocation of payers and the government-mandated discounts applicable to government-funded programs. Rebate discounts are included in other current liabilities in the accompanying consolidated balance sheets.
Commercial Rebates: The Company calculates the rebates it incurs according to any contracts with certain commercial payers and deducts these amounts from its 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 for applicable products. Rebate discounts are included in other current liabilities in the accompanying consolidated balance sheets.
Prompt Pay Discounts: The Company offers discounts to certain customers for prompt payments. The Company accrues 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, the Company offers its customers a limited right to return product purchased directly from the Company, which is principally based upon the product’s expiration date. Historically, returns have been immaterial.
Co-pay AssistanceThe Company offers a co-pay assistance program, which is intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the estimated 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, 2023 and 2022 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Tiopronin products$25,888 $25,369 $73,112 $72,154 
FILSPARI8,044  14,509  
Total net product sales$33,932 $25,369 $87,621 $72,154 

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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. (“CSL Vifor”), pursuant to which the Company granted an exclusive license to CSL Vifor for the commercialization of sparsentan in Europe, Australia and New Zealand ("Licensed Territories"). CSL Vifor 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, CSL Vifor 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 CSL Vifor 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 CSL Vifor 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 $12.0 million of the transaction price, based on the performance obligations' relative standalone selling prices, to the license, which was recognized in full in 2021. The remaining $43.0 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.
For the three months ended September 30, 2023, the Company recognized $3.2 million in license and collaboration revenue for clinical development activities, based upon the ratio of costs incurred to total estimated costs. For the nine months ended September 30, 2023, the Company recognized $12.6 million in license and collaboration revenue, which consisted of $3.3 million from the sale of active pharmaceutical ingredients to CSL Vifor at cost plus a margin, and $9.3 million for clinical development activities, based upon the ratio of costs incurred to total estimated costs. For the three and nine months ended September 30, 2022, the Company recognized $2.7 million and $8.0 million, respectively, in license and collaboration revenue for clinical development activities, based upon the ratio of costs incurred to total estimated costs.
Deferred revenue related to the clinical development activities as of September 30, 2023 was $13.5 million. Of this amount, $9.0 million was classified as current as of September 30, 2023, based upon amounts expected to be realized within the next year.

NOTE 5. MARKETABLE DEBT SECURITIES
The Company's marketable debt securities as of September 30, 2023 and December 31, 2022 were composed of available-for-sale commercial paper and corporate and government debt securities. 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.
Marketable debt securities consisted of the following (in thousands):
September 30, 2023December 31, 2022
Marketable debt securities:
Commercial paper$49,243 $123,647 
Corporate debt securities334,281 224,055 
Securities of government sponsored entities106,875 40,855 
Total available-for-sale marketable debt securities$490,399 $388,557 



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The following is a summary of short-term marketable debt securities classified as available-for-sale as of September 30, 2023 (in thousands):
Remaining Contractual Maturity
(in years)
Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Marketable debt securities:
Commercial paperLess than 1$49,306 $ $(63)$49,243 
Corporate debt securitiesLess than 1110,582 10 (867)109,725 
Securities of government-sponsored entitiesLess than 154,051  (391)53,660 
Total maturity less than 1 year213,939 10 (1,321)212,628 
Corporate debt securities1 to 2225,773 68 (1,285)224,556 
Securities of government-sponsored entities1 to 253,641  (426)53,215 
Total maturity 1 to 2 years279,414 68 (1,711)277,771 
Total available-for-sale marketable debt securities$493,353 $78 $(3,032)$490,399 
The following is a summary of short-term marketable debt securities classified as available-for-sale as of December 31, 2022 (in thousands):
Remaining Contractual Maturity
(in years)
Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Marketable debt securities:
Commercial paperLess than 1$124,301 $2 $(656)$123,647 
Corporate debt securitiesLess than 1155,841  (1,355)154,486 
Securities of government-sponsored entitiesLess than 17,473  (80)7,393 
Total maturity less than 1 year287,615 2 (2,091)285,526 
Corporate debt securities1 to 270,195 33 (659)69,569 
Securities of government-sponsored entities1 to 233,702 6 (246)33,462 
Total maturity 1 to 2 years103,897 39 (905)103,031 
Total available-for-sale securities$391,512 $41 $(2,996)$388,557 
During the nine months ended September 30, 2023, investment activity for the Company included $284.6 million in maturities and $381.3 million in purchases, all relating to debt-based marketable securities. During the nine months ended September 30, 2022, investment activity for the Company included $329.6 million in maturities and $301.1 million in purchases, all relating to debt-based marketable securities. As of September 30, 2023 and December 31, 2022, the accrued interest receivable related to the Company's marketable debt securities was $4.1 million and $1.9 million, respectively, and was recorded in prepaid expenses and other current assets on the Consolidated Balance Sheets.
The Company reviews the available-for-sale marketable 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).
The following is a summary of available-for-sale marketable debt securities in an unrealized loss position with no credit losses reported as of September 30, 2023 (in thousands):
Less Than 12 Months12 Months or GreaterTotal
Description of SecuritiesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Commercial paper$49,243 $63 $ $ $49,243 $63 
Corporate debt securities257,153 1,740 36,977 412 294,130 2,152 
Securities of government-sponsored entities92,405 654 12,470 163 104,875 817 
Total$398,801 $2,457 $49,447 $575 $448,248 $3,032 
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The following is a summary of available-for-sale marketable debt securities in an unrealized loss position with no credit losses reported as of December 31, 2022 (in thousands):
Less Than 12 Months12 Months or GreaterTotal
Description of SecuritiesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Commercial paper$117,853 $656 $ $ $117,853 $656 
Corporate debt securities99,066 1,041 107,964 973 207,030 2,014 
Securities of government-sponsored entities31,402 263 4,456 63 35,858 326 
Total$248,321 $1,960 $112,420 $1,036 $360,741 $2,996 
As of September 30, 2023 and December 31, 2022, the amortized cost of the available-for-sale marketable debt securities in an unrealized loss position was $451.3 million and $363.7 million, respectively.
As of September 30, 2023 and December 31, 2022, 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 increase in unrealized losses for the nine months ended September 30, 2023 was primarily due to fluctuations in short-term interest rates. The Company does not believe the unrealized losses incurred during the period are due to credit-related factors. The credit ratings of the securities held remain of the highest quality. 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. 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. VARIABLE INTEREST ENTITIES
On March 8, 2022, the Company entered into a Collaboration Agreement with PharmaKrysto Limited (“PharmaKrysto”), a privately held pre-clinical stage company related to PharmaKrysto's early-stage cystinuria discovery program, and concurrently therewith entered into a Stock Purchase Agreement with PharmaKrysto (together, the "Agreements"). Pursuant to the terms of the Agreements, the Company paid PharmaKrysto's shareholders $0.6 million in cash to purchase 5% of the outstanding common shares of PharmaKrysto and $0.4 million to PharmaKrysto as a one-time signing fee. Under the Collaboration Agreement, the Company will fund all research and development expenses for the pre-clinical activities associated with the cystinuria program, which are estimated to be approximately $5.0 million. The Agreements require the Company to purchase an additional 5% of the outstanding common shares for $1.0 million upon the occurrence of a specified pre-clinical milestone, and grant an option to the Company to purchase all of the remaining outstanding shares of PharmaKrysto for $5.0 million upon the occurrence of a subsequent pre-clinical milestone prior to expiration of the option on March 8, 2025. If the Company elects to exercise the option, it would be required to perform commercially reasonable clinical diligence obligations. In addition, it would be required to make cash milestone payments totaling up to an aggregate $16.0 million upon the achievement of certain development and regulatory milestones, plus tiered royalty payments of less than 4% on future net sales of a product, if approved. The Company has the right to terminate the Agreements and return the shares for a nominal price at any time upon 60 days’ notice, subject to survival of contingent obligations, if any.
The Company determined that PharmaKrysto is a VIE because it lacks the resources to conduct the cystinuria clinical program and the limitation on the residual returns through the Company's option to purchase the remaining outstanding shares. The Company further concluded that it is the primary beneficiary of the VIE due to the Company's ultimate control over the research and development program, and its obligation, subject to continuation of the collaboration, to fund 100% of research and development costs of the program pursuant to the terms of the Collaboration Agreement.
The upfront payments were expensed to research and development and other income (expense), net upon initial consolidation. The consolidated assets and liabilities as of September 30, 2023 and December 31, 2022 were immaterial. The results of operations were not significant for the three and nine months ended September 30, 2023 and 2022. The Company is not required to provide additional funding other than the contractually required amounts disclosed above. The creditors and beneficial holders of PharmaKrysto have no recourse to the general credit or assets of the Company.

NOTE 7.  LEASES
As of September 30, 2023, the Company had two operating leases, including 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 the Company's ability to direct the use of the office space, which occurred in phases over 2020, and utilizing a discount rate equal to the Company's estimated incremental 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 lease inception, it was not reasonably certain that the Company 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 Company has one operating lease with Esprit Investments Limited for office space located in Dublin, Ireland, which was entered into in October 2022. The initial term of the office lease ends in September 2027. The lease provides the option to extend the term of the lease by a period of 5 years, although at lease inception, it was not reasonably certain that the Company would elect this option and therefore the renewal period was excluded from the initial lease
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measurement. The aggregate base rent due over the initial term of the lease is approximately $0.5 million. Utilizing a discount rate equal to the Company's estimated incremental borrowing rate, the Company established an ROU asset and corresponding lease liability of $0.4 million.
Following is a schedule of the future minimum rental commitments for the Company's operating leases reconciled to the lease liability and ROU asset as of September 30, 2023 (in thousands):
September 30, 2023
2023 (remaining three months)$1,582 
20246,501 
20256,673 
20266,889 
20277,064 
Thereafter4,781 
Total undiscounted future minimum payments33,490 
Present value discount(4,845)
Total lease liability28,645 
Unamortized lease incentives(4,837)
Cash payments in excess of straight-line lease expense(5,002)
Total ROU asset$18,806 

The weighted-average remaining lease term and weighted-average discount rate of the Company's operating leases are as follows:
September 30, 2023December 31, 2022
Weighted-average remaining lease term in years4.95.7
Weighted-average discount rate6.48 %6.48 %
For the three and nine months ended September 30, 2023, the Company recorded $1.2 million and $3.7 million, respectively, in expense related to operating leases, including amortized tenant improvement allowances. For the three and nine months ended September 30, 2022, the Company recorded $1.2 million and $3.7 million, respectively, in expense related to operating leases, including amortized tenant improvement allowances.

NOTE 8.  FAIR VALUE MEASUREMENTS
The Company utilizes 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 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.
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 marketable debt securities within Level 2.
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, 2023, the fair value of the Company's 2.5% Convertible Senior Notes due 2025 was $65.4 million and the fair value of the Company's 2.25% Convertible Senior Notes due 2029 was $241.6 million. As of December 31, 2022, the fair value of the Company's 2.5% Convertible Senior Notes due 2025 was $62.9 million and the fair value of the Company's 2.25% Convertible Senior Notes due 2029 was $283.0 million. The fair values were estimated utilizing market quotations and are considered Level 2.







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The following table presents the Company’s assets, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of September 30, 2023 (in thousands):
As of September 30, 2023
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$144,244 $78,367 $65,877 $ 
Marketable debt securities, available-for-sale490,399  490,399  
Total$634,643 $78,367 $556,276 $ 
The following table presents the Company’s assets, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of December 31, 2022 (in thousands):
As of December 31, 2022
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$61,688 $61,688 $ $ 
Marketable debt securities, available-for-sale388,557  388,557  
Total$450,245 $61,688 $388,557 $ 

NOTE 9. INTANGIBLE ASSETS
Ligand License Agreement
In 2012, the Company entered into an agreement with Ligand Pharmaceuticals, Inc. ("Ligand") for a worldwide sublicense to develop, manufacture and commercialize sparsentan (the “Ligand License Agreement”). As consideration for the license, the Company is required to make substantial payments upon the achievement of certain milestones, totaling up to $114.1 million. In March 2023, the Company capitalized a $23.0 million milestone payment to Ligand (and Bristol-Myers Squibb Company ("BMS")) that was triggered upon the accelerated approval of FILSPARI in February 2023. Pursuant to the Ligand License Agreement, the Company is obligated to pay to Ligand (and BMS) an escalating royalty between 15% and 17% of net sales of sparsentan, with payments due quarterly. The Company began incurring costs associated with such royalties following the February 2023 approval of FILSPARI (sparsentan). For the three and nine months ended September 30, 2023, the Company capitalized $1.1 million and $2.2 million, respectively, to intangible assets for royalties owed on net sales of FILSPARI. The cost of the $23.0 million milestone payment and royalty payments are being amortized to selling, general and administration on a straight-line basis through April 30, 2033.
The following table sets forth amortizable intangible assets as of September 30, 2023 and December 31, 2022 (in thousands):
September 30, 2023December 31, 2022
Finite-lived intangible assets$195,971 $158,783 
Less: accumulated amortization(89,821)(62,463)
Net carrying value$106,150 $96,320 
As of September 30, 2023 and December 31, 2022, the Company had goodwill of $0.8 million.
The following table summarizes amortization expense for the three and nine months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Research and development$2,447 $1,906 $7,261 $3,817 
Selling, general and administrative8,461 3,173 20,097 9,008 
Total amortization expense$10,908 $5,079 $27,358 $12,825 

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NOTE 10.  CONVERTIBLE NOTES PAYABLE
The composition of the Company’s convertible senior notes are as follows (in thousands):
 September 30, 2023 December 31, 2022
2.25% convertible senior notes due 2029
$316,250 $316,250 
2.50% convertible senior notes due 2025
68,904 68,904 
Unamortized debt issuance costs - 2.25% convertible senior notes due 2029
(7,699)(8,750)
Unamortized debt issuance costs - 2.50% convertible senior notes due 2025
(622)(859)
Total convertible senior notes, net of unamortized debt discount and debt issuance costs$376,833 $375,545 
Convertible Senior Notes Due 2029
On March 11, 2022, the Company completed a registered underwritten public offering of $316.3 million aggregate principal amount of 2.25% Convertible Senior Notes due 2029 (“2029 Notes”), which includes $41.3 million aggregate principal amount of 2029 Notes sold pursuant to the full exercise of the underwriters’ option to purchase additional 2029 Notes. The Company issued the 2029 Notes under an indenture, dated as of September 10, 2018, as supplemented by the second supplemental indenture, dated as of March 11, 2022 (collectively, the “2029 Indenture”). The 2029 Notes will mature on March 1, 2029, unless earlier repurchased, redeemed, or converted. The 2029 Notes are senior unsecured obligations of the Company and bear interest at an annual rate of 2.25%, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2022.
The Company received net proceeds from the issuance of the 2029 Notes of $306.4 million, after deducting commissions and offering expenses of $9.9 million. At September 30, 2023, accrued interest on the 2029 Notes of $0.6 million is included in accrued expenses in the accompanying Consolidated Balance Sheets. The 2029 Notes comprise the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the 2029 Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables.
Holders may convert their 2029 Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2022 (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 (such 10 consecutive trading day period, the “measurement period”) if the trading price per $1,000 principal amount of 2029 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 of the Company’s common stock; (4) if the Company calls the 2029 Notes for redemption; and (5) at any time from, and including, December 1, 2028 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 2029 Notes is 31.3740 shares of the Company’s common stock per $1,000 principal amount of 2029 Notes, which represents an initial conversion price of approximately $31.87 per share. If a “make-whole fundamental change” (as defined in the 2029 Indenture) occurs, then the Company will, in certain circumstances, increase the conversion rate for a specified period of time.
The 2029 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 March 2, 2026 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 2029 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 130% of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (2) the trading day immediately before the date the Company sends such notice. However, the Company may not redeem less than all of the outstanding 2029 Notes unless at least $100.0 million aggregate principal amount of 2029 Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. In addition, calling any 2029 Note for redemption will constitute a make-whole fundamental change with respect to that 2029 Note, in which case the conversion rate applicable to the conversion of that 2029 Note will be increased in certain circumstances if it is converted after it is called for redemption. If a fundamental change (as defined in the 2029 Indenture) occurs, then, except as described in the 2029 Indentures, holders may require the Company to repurchase their 2029 Notes at a cash repurchase price equal to the principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the 2029 Notes will be paid pursuant to the terms of the 2029 Indenture. In the event that all of the 2029 Notes are converted, the Company would be required to repay the principal amount and any conversion premium in any combination of cash and shares of its common stock at the Company’s option. In addition, calling the 2029 Notes for redemption will constitute a “make-whole fundamental change."
The Company incurred approximately $9.9 million of debt issuance costs relating to the issuance of the 2029 Notes, which were recorded as a reduction to the 2029 Notes on the Consolidated Balance Sheets. The debt issuance costs are being amortized and recognized as additional interest expense over the expected life of the 2029 Notes using the effective interest method. We determined the expected life of the debt is equal to the seven-year term of the 2029 Notes. The effective interest rate on the 2029 Notes is 2.74%.

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Convertible Senior Notes Due 2025
On September 10, 2018, the Company completed a 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 (collectively, the "2025 Indenture") with respect to the 2025 Notes. The 2025 Notes will mature on September 15, 2025, 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 net proceeds from the issuance of the 2025 Notes were approximately $267.2 million, after deducting commissions and the offering expenses of $8.8 million payable by the Company. At September 30, 2023, accrued interest of $0.1 million is included in accrued expenses in the accompanying Consolidated Balance Sheets. The 2025 Notes comprise the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the 2025 Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables.
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 130% of the conversion price on each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. If a fundamental change (as defined in the 2025 Indenture) occurs, then, subject to certain exceptions, holders may require the Company to repurchase their 2025 Notes at a cash repurchase price equal to the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the 2025 Notes will be paid pursuant to the terms of the 2025 Indenture. In the event that all of the 2025 Notes are converted, the Company would be required to repay the principal amount and any conversion premium in any combination of cash and shares of its common stock at the Company’s option. In addition, calling the 2025 Notes for redemption will constitute a “make-whole fundamental change."
The Company incurred approximately $8.8 million of debt issuance costs relating to the issuance of the 2025 Notes, which were recorded as a reduction to the 2025 Notes on the Consolidated Balance Sheets. The debt issuance costs are being amortized and recognized as additional interest expense over the expected life of the 2025 Notes using the effective interest method. The Company determined the expected life of the debt is equal to the seven-year term of the 2025 Notes. The effective interest rate on the 2025 Notes is 2.98%.
On March 11, 2022, the Company completed its repurchase of $207.1 million aggregate principal amount of 2025 Notes for cash, including accrued and unpaid interest, for a total of $213.8 million. This transaction involved a contemporaneous exchange of cash between the Company and holders of the 2025 Notes participating in the issuance of the 2029 Notes. Accordingly, we evaluated the transaction for modification or extinguishment accounting in accordance with ASC 470-50, Debt – Modifications and Extinguishments on a creditor-by creditor basis depending on whether the exchange was determined to have substantially different terms. The repurchase of the 2025 Notes and issuance of the 2029 Notes were deemed to have substantially different terms based on the present value of the cash flows or significant difference between the value of the conversion option immediately prior to and after the exchange. Therefore, the repurchase of the 2025 Notes was accounted for as a debt extinguishment. The Company recorded a $7.6 million loss on extinguishment of debt on its Consolidated Statements of Operations for the nine months ended September 30, 2022, which includes the write-off of related deferred financing costs of $3.4 million. After giving effect to the repurchase, the total remaining principal amount outstanding under the 2025 Notes as of September 30, 2023 was $68.9 million.
The 2025 and 2029 Notes are accounted for in accordance with ASC 470-20, Debt with conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”). Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of equity classification guidance. Based upon the Company’s analysis, it was determined that the 2025 Notes and the 2029 Notes do not contain embedded features requiring recognition as derivatives and bifurcation, and therefore are measured at amortized cost and recorded as liabilities on the Consolidated Balance Sheets.
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The 2025 and 2029 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by the Company. There were no events of default for the 2025 Notes or 2029 Notes at September 30, 2023.
The 2025 and 2029 Notes are classified on the Company's Consolidated Balance Sheets at September 30, 2023 as long-tern convertible debt.
The following table sets forth total interest expense recognized related to the 2025 and 2029 Notes (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Contractual interest expense$2,210 $2,170 $6,629 $6,223 
Amortization of debt issuance costs430 428 1,288 1,194 
Total interest expense for the 2025 and 2029 Notes$2,640 $2,598 $7,917 $7,417 
Total interest expense recognized for the three and nine months ended September 30, 2023 was $2.8 million and $8.5 million, respectively. Total interest expense recognized for the three and nine months ended September 30, 2022 was $2.8 million and $8.2 million, respectively.

NOTE 11. ACCRUED EXPENSES
Accrued expenses at September 30, 2023 and December 31, 2022 consisted of the following (in thousands):
September 30, 2023December 31, 2022
Compensation related costs$26,844 $35,267 
Research and development26,249 26,070 
Sales discounts, rebates, and allowances10,385 13,486 
Selling, general and administrative8,707 8,791 
Accrued royalties8,002 7,755 
Miscellaneous accrued expenses15,525 4,373 
Total accrued expenses$95,712 $95,742 

NOTE 12.  NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted net income (loss) per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period. If there is a net loss from continuing operations, diluted net income (loss) per share is computed in the same manner as basic net income (loss) per share, even if the Company reports net income as a result of discontinued operations. 
As discussed in Note 17, as part of its February 2023 underwritten public offering, the Company issued and sold pre-funded warrants to purchase 1.25 million shares of its common stock at a price to the public of $20.9999 per pre-funded warrant. The pre-funded warrants are exercisable immediately and are exercisable for one share of the Company's common stock. The exercise price of each pre-funded warrant is $0.0001 per share of common stock. Since the $0.0001 price per share represents little consideration and is non-substantive in relation to the $20.9999 price per pre-funded warrant and the $21.00 price per share of the common stock offered to the public, and as the warrants are immediately exercisable with no further vesting conditions or contingencies associated with them, the shares underlying the warrants are therefore included in the calculation of basic net loss per common share.
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The Company’s potentially dilutive shares, which include outstanding stock options, restricted stock units, and shares issuable upon conversion of the 2025 Notes and 2029 Notes, are considered to be common stock equivalents and are not included in the calculation of diluted net loss per share because their effect is anti-dilutive.
Basic and diluted net income (loss) per share is calculated as follows (net loss amounts are stated in thousands):
Three Months Ended September 30,
20232022
SharesNet IncomeIncome per common shareSharesNet LossLoss per common share
Basic and diluted loss per share76,305,603 $150,735 $1.97 64,033,759 $(69,656)$(1.09)
Nine Months Ended September 30,
20232022
SharesNet LossLoss per common shareSharesNet LossLoss per common share
Basic and diluted loss per share73,523,620 $(21,226)$(0.29)63,604,962 $(212,659)$(3.34)
The following common stock equivalents have been excluded because they were anti-dilutive:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Convertible debt11,697,952 11,697,952 11,697,952 10,589,646 
Options10,533,703 10,035,309 10,600,069 10,071,741 
Restricted stock3,504,350 2,310,545 3,482,829 2,090,305 
Total anti-dilutive shares25,736,005 24,043,806 25,780,850 22,751,692 

NOTE 13.  COMMITMENTS AND CONTINGENCIES
Commitments
Certain of the Company's contractual arrangements with contract manufacturing organizations ("CMOs") require binding forecasts or commitments to purchase minimum amounts for the manufacture of drug product supply, which may be material to the Company's financial statements. As of September 30, 2023, we have commitments to purchase $22.1 million in active pharmaceutical ingredients, to be delivered in 2023, which is planned to support commercial sales of FILSPARI.
Legal Proceedings
From time to time in the normal course of business, the Company is subject to various legal matters such as threatened or pending claims or litigation. Although the results of claims and litigation cannot be predicted with certainty, the Company does not believe it is a party to any claim or litigation the outcome of which, if determined adversely to it, would individually or in the aggregate be reasonably expected to have a material adverse effect on its results of operations or financial condition.

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NOTE 14.  SHARE-BASED COMPENSATION
Stock Options
The following table summarizes stock option activity during the nine months ended September 30, 2023:
 Shares Underlying OptionsWeighted Average Exercise PriceWeighted Average Remaining Contractual Life (years)Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 20229,932,422 $21.56 5.79$24,658 
Granted1,157,750 21.69— — 
Exercised(226,663)14.30— 1,422 
Forfeited/canceled(410,559)25.52— — 
Outstanding at September 30, 202310,452,950 $21.58 5.44$ 
Vested and expected to vest at September 30, 202310,452,950 $21.58 5.44$ 
At September 30, 2023, unamortized stock compensation for stock options was $29.9 million, with a remaining weighted-average recognition period of 2.5 years.
At September 30, 2023, outstanding options to purchase 7.7 million shares of common stock were exercisable with a weighted-average exercise price per share of $20.80.
In connection with the retirement of the Company's former Chief Financial Officer, the Board of Directors approved a modification to extend the deadline to exercise each stock option held to the earlier of three months following the last vesting date or the original expiration date of the option, and to continue vesting on the original schedule of any underlying unvested stock options and restricted stock units. The modification resulted in incremental compensation cost of $2.6 million for the nine months ended September 30, 2023.
Restricted Stock Units
Service Based Restricted Stock Units
The following table summarizes the Company’s service based restricted stock unit activity during the nine months ended September 30, 2023:
 Number of Restricted Stock UnitsWeighted Average Grant Date Fair Value
Unvested at December 31, 20222,343,709 $24.65 
Granted1,829,792 21.77 
Vested(717,494)23.48 
Forfeited/canceled(250,593)23.61 
Unvested at September 30, 20233,205,414