Esperion(US:ESPR)2020-05-06 21:26markdown [PART I — FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed financial statements for Q1 2020, including balance sheets, operations, equity, and cash flows, with notes on FDA approvals and new collaborations [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) As of March 31, 2020, total assets decreased to **$179.6 million**, total liabilities increased to **$229.9 million**, resulting in a **$50.2 million** stockholders' deficit from a prior equity position Condensed Balance Sheet Data (in thousands) | Account | March 31, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $149,386 | $166,130 | | Total current assets | $172,629 | $211,714 | | **Total assets** | **$179,642** | **$214,447** | | Total current liabilities | $73,453 | $66,080 | | Revenue interest liability (non-current) | $152,716 | $127,308 | | **Total liabilities** | **$229,888** | **$194,497** | | **Total stockholders' equity (deficit)** | **($50,246)** | **$19,950** | [Condensed Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For Q1 2020, the company reported a **net loss of $78.2 million** (or **($2.84) per share**), a significant shift from **$87.4 million net income** in Q1 2019, driven by decreased collaboration revenue and increased SG&A for commercial launch Q1 2020 vs. Q1 2019 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Product sales, net | $858 | $— | | Collaboration revenue | $982 | $145,419 | | **Total Revenues** | **$1,840** | **$145,419** | | Research and development | $34,702 | $46,308 | | Selling, general and administrative | $41,553 | $12,182 | | **Total operating expenses** | **$76,286** | **$58,490** | | **Net income (loss)** | **($78,249)** | **$87,379** | | **Net income (loss) per share - basic** | **($2.84)** | **$3.26** | [Condensed Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity shifted from a **$19.95 million** equity to a **($50.25) million** deficit by March 31, 2020, primarily due to a **$78.2 million** net loss during the quarter - The primary driver for the decrease in stockholders' equity was the **net loss of $78.2 million** for the three months ended March 31, 2020[14](index=14&type=chunk) [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$69.3 million** in Q1 2020, a reversal from **$91.7 million** provided in Q1 2019, with overall cash decreasing by **$16.7 million** despite **$26.0 million** from financing activities Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($69,347) | $91,691 | | Net cash provided by investing activities | $26,589 | $45,696 | | Net cash provided by financing activities | $26,014 | $1,669 | | **Net (decrease) increase in cash and cash equivalents** | **($16,744)** | **$139,056** | [Notes to Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) The notes detail FDA approvals and U.S. commercial launch of **NEXLETOL** and **NEXLIZET**, a new **$60 million** **Otsuka** collaboration, and an increased **$161.7 million** revenue interest liability, alongside legal proceedings and accounting policies - The FDA approved **NEXLETOL** on February 21, 2020, and **NEXLIZET** on February 26, 2020, as the first oral, once-daily, non-statin LDL-C lowering medicines approved in the U.S. in nearly **20 years**[21](index=21&type=chunk)[22](index=22&type=chunk) - In April 2020, a collaboration with **Otsuka** for Japan was signed, including a **$60 million** upfront cash payment and eligibility for up to **$450 million** in milestones[24](index=24&type=chunk)[130](index=130&type=chunk) - The revenue interest liability with **Oberland** increased to **$161.7 million** as of March 31, 2020, following an additional **$25.0 million** funding upon **NEXLETOL**'s approval[103](index=103&type=chunk)[109](index=109&type=chunk)[112](index=112&type=chunk) - The ongoing global cardiovascular outcomes trial (CVOT) **CLEAR Outcomes**, fully enrolled with **14,032 patients**, expects results in the second half of 2022[25](index=25&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 operational and financial results, focusing on landmark U.S. and European approvals, commercial launch, and the emerging risks from the COVID-19 pandemic [Overview](index=33&type=section&id=Overview) **Esperion** focuses on developing and commercializing non-statin LDL-C medicines, achieving FDA and European approvals for **NEXLETOL**/**NEXLIZET** and launching **NEXLETOL** in the U.S. in Q1 2020 - Received FDA approval for **NEXLETOL** and **NEXLIZET** in February 2020, marking the first oral, once-daily, non-statin LDL-C lowering medicines approved in the U.S. in nearly **20 years** for ASCVD or HeFH patients[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk) - The European Commission approved **NILEMDO**™ (bempedoic acid) and **NUSTENDI**™ (bempedoic acid and ezetimibe) in April 2020 for hypercholesterolemia and mixed dyslipidemia[142](index=142&type=chunk) - The **CLEAR Outcomes** CVOT, a global trial with **14,032 patients**, is ongoing and expected to provide data on cardiovascular risk reduction in the second half of 2022[144](index=144&type=chunk) [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Q1 2020 total revenue drastically fell to **$1.8 million** from **$145.4 million** in Q1 2019, with a **$78.2 million** net loss driven by decreased collaboration revenue and increased SG&A for commercialization Comparison of Operating Results (in thousands) | Item | Q1 2020 | Q1 2019 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,840 | $145,419 | $(143,579) | | Research and development | $34,702 | $46,308 | $(11,606) | | Selling, general and administrative | $41,553 | $12,182 | $29,371 | | **Net income (loss)** | **$(78,249)** | **$87,379** | **$(165,628)** | - The increase in SG&A expenses was primarily due to costs to support the commercialization of **NEXLETOL** and **NEXLIZET**, including the buildout of a **300-member** customer-facing team[190](index=190&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2020, the company held **$157.3 million** in cash and investments, bolstered by a **$25.0 million** payment from **Oberland** and a subsequent **$60.0 million** from **Otsuka**, deemed sufficient for commercialization - As of March 31, 2020, cash, cash equivalents, and available-for-sale investments totaled **$157.3 million**[196](index=196&type=chunk) - Received **$25.0 million** from the **Oberland** RIPA in March 2020 upon regulatory approval of **NEXLETOL**[201](index=201&type=chunk)[206](index=206&type=chunk) - Received a **$60.0 million** upfront cash payment from the **Otsuka** collaboration agreement in April 2020[195](index=195&type=chunk) - Management estimates that current cash and future proceeds from sales and collaborations are sufficient to fund operations through the commercialization of **NEXLETOL** and **NEXLIZET**[204](index=204&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its **$157.3 million** cash and investments, alongside unhedged foreign currency risk and revenue interest liability rate variability - The primary market risk is interest rate fluctuations on cash and investments, which totaled approximately **$157.3 million** at March 31, 2020[212](index=212&type=chunk) - The company is subject to unhedged foreign currency exchange rate risk through its contracts with global CROs and investigational sites[214](index=214&type=chunk) - The interest rate on the revenue interest purchase agreement liability may vary depending on the level of forecasted net sales, creating additional market risk[216](index=216&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2020, having implemented new internal controls for net product sales and inventory processes due to commercial launch - Management concluded that disclosure controls and procedures were effective as of March 31, 2020[219](index=219&type=chunk) - During Q1 2020, new procedures and controls around net product sales and inventory processes were implemented due to the commercial launch of **NEXLETOL** and **NEXLIZET**[220](index=220&type=chunk) [PART II — OTHER INFORMATION](index=54&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company faces ongoing securities class action and stockholder derivative lawsuits, for which it is currently unable to predict the outcome or estimate potential financial loss - A putative class action lawsuit (**Dougherty v. Esperion**) from 2016, alleging securities violations, is ongoing after a dismissal was reversed by the Sixth Circuit Court of Appeals[222](index=222&type=chunk) - A stockholder derivative lawsuit from 2016, alleging breach of fiduciary duties, was dismissed in February 2020, but the plaintiff filed a notice of appeal in March 2020[223](index=223&type=chunk) - The company is unable to predict the outcome or make a meaningful estimate of potential loss for these legal matters[222](index=222&type=chunk)[223](index=223&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, prominently featuring new and significant risks posed by the COVID-19 pandemic, which could materially impact business operations, product launch, and clinical trials - The outbreak of the novel coronavirus (**COVID-19**) is identified as a new, significant risk factor that could materially adversely impact the business, financial condition, and results of operations[228](index=228&type=chunk) - Potential disruptions from **COVID-19** include negative impacts on the commercial launch of **NEXLETOL** and **NEXLIZET**, delays in the ongoing **CLEAR Outcomes** trial, and interruptions to the third-party manufacturing supply chain[230](index=230&type=chunk) - In response to the pandemic, the company's commercial and medical teams have suspended in-person interactions with physicians and are conducting activities virtually[229](index=229&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the reporting period - None reported[233](index=233&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and Inline XBRL financial data files - The exhibits filed with the report include officer certifications pursuant to Sarbanes-Oxley Sections **302** and **906**, and Inline XBRL documents[237](index=237&type=chunk)