Esperion(ESPR) - 2020 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the company's unaudited condensed financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed financial statements, including balance sheets, statements of operations and comprehensive income (loss), statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's business, accounting policies, collaboration agreements, and financial instruments for the periods ended June 30, 2020, and December 31, 2019 Condensed Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Balance Sheets (in thousands) | Assets (in thousands) | June 30, 2020 (unaudited) | December 31, 2019 | | :-------------------- | :------------------------ | :---------------- | | Cash and cash equivalents | $298,489 | $166,130 | | Total current assets | $321,371 | $211,714 | | Total assets | $330,352 | $214,447 | | Total current liabilities | $83,881 | $66,080 | | Total liabilities | $244,863 | $194,497 | | Total stockholders' equity | $85,489 | $19,950 | - Cash and cash equivalents increased significantly from $166.1 million at December 31, 2019, to $298.5 million at June 30, 2020[8] - Total stockholders' equity increased from $19.95 million at December 31, 2019, to $85.49 million at June 30, 2020[8] Condensed Statements of Operations and Comprehensive Income (Loss) This section presents the company's revenues, expenses, and net income or loss over specific periods Condensed Statements of Operations and Comprehensive Income (Loss) (in thousands) | (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product sales, net | $609 | $— | $1,467 | $— | | Collaboration revenue | $211,627 | $982 | $212,609 | $146,401 | | Total Revenues | $212,236 | $982 | $214,076 | $146,401 | | Income (loss) from operations | $129,170 | $(55,298) | $54,724 | $31,631 | | Net income (loss) | $124,611 | $(54,221) | $46,362 | $33,158 | | Net income (loss) per common share - basic | $4.50 | $(2.01) | $1.68 | $1.23 | - The company reported significant net income of $124.6 million for the three months ended June 30, 2020, a substantial increase from a net loss of $54.2 million in the prior-year period, primarily driven by collaboration revenue[10] - Product sales, net, commenced in 2020, reaching $0.6 million for the three months and $1.5 million for the six months ended June 30, 2020[10] Condensed Statements of Stockholders' Equity This section details changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Statements of Stockholders' Equity (in thousands) | (in thousands) | Balance December 31, 2019 | Balance June 30, 2020 | | :------------- | :------------------------ | :-------------------- | | Common Shares | 27,497,911 | 27,751,655 | | Common Stock Amount | $27 | $28 | | Additional Paid-In Capital | $715,166 | $734,365 | | Accumulated Deficit | $(695,266) | $(648,904) | | Total Stockholders' Equity | $19,950 | $85,489 | - Total stockholders' equity increased from $19.95 million at December 31, 2019, to $85.49 million at June 30, 2020, primarily due to net income and stock-based compensation[13] Condensed Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Statements of Cash Flows (in thousands) | (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------- | :----------------------------- | :----------------------------- | | Operating activities | $70,044 | $37,682 | | Investing activities | $31,699 | $72,412 | | Financing activities | $29,688 | $128,205 | | Net increase in cash and cash equivalents | $131,431 | $238,299 | | Cash, cash equivalents and restricted cash at end of period | $298,489 | $275,272 | - Net cash provided by operating activities significantly increased to $70.0 million for the six months ended June 30, 2020, from $37.7 million in the prior-year period, driven by collaboration milestones[18] - Cash, cash equivalents, and restricted cash at the end of the period increased to $298.5 million as of June 30, 2020[18] Notes to Condensed Financial Statements This section provides detailed explanations and disclosures supporting the condensed financial statements 1. The Company and Basis of Presentation This note describes the company's business, recent regulatory approvals, and significant collaboration agreements - FDA approved NEXLETOL on February 21, 2020, and NEXLIZET on February 26, 2020, for LDL-C lowering in specific adult patient populations[21][22] - European Commission approved NILEMDO and NUSTENDI on April 6, 2020, for hypercholesterolemia and mixed dyslipidemia[23] - Entered into a license and collaboration agreement with Otsuka Pharmaceutical Co., Ltd. on April 17, 2020, granting exclusive rights in Japan for NEXLETOL and NEXLIZET, with an upfront payment of $60 million and potential milestones up to $450 million[24] - Amended agreement with Daiichi Sankyo Europe GmbH on June 18, 2020, resulting in a $150 million milestone payment upon NUSTENDI MAA transfer and expanding DSE's commercialization territory to include Turkey[25] 2. Summary of Significant Accounting Policies This note outlines the company's key accounting principles, including revenue recognition and inventory valuation - Inventories are stated at the lower of cost or net realizable value using FIFO and began to be capitalized upon FDA approval of NEXLETOL and NEXLIZET in February 2020[33] - Revenue is derived from collaboration agreements (development, manufacturing, commercialization) and product sales (NEXLETOL and NEXLIZET in the U.S.)[36] - Product sales are recorded at net selling price, with reserves established for variable consideration including rebates, co-pay assistance, distribution fees, and product returns[46] - Adoption of ASU 2016-13 (credit losses) and ASU 2018-15 (cloud computing arrangements) on January 1, 2020, did not have a material impact on the financial statements[55][56] 3. Collaborations with Third Parties This note details the terms and revenue recognition for the company's strategic collaboration agreements - DSE agreement: Received $150.0 million upfront payment (Jan 2019) and an additional $150.0 million milestone in June 2020 upon NUSTENDI MAA transfer. Eligible for further regulatory/sales milestones and tiered royalties (15%-25%)[59][62][64] - Otsuka agreement: Received $60.0 million upfront cash payment in April 2020. Eligible for up to $450.0 million in regulatory and commercial milestones, plus tiered royalties (15%-30%) on net sales in Japan[67][70] - Collaboration revenue recognized for the three months ended June 30, 2020, included $150.0 million from DSE and $60.0 million from Otsuka[64][70] 4. Inventories This note provides a breakdown of the company's inventory components and related commitments Inventories (in thousands) | (in thousands) | June 30, 2020 | | :------------- | :------------ | | Raw materials | $4,961 | | Work in process | $2,869 | | Finished goods | $418 | | Total | $8,248 | - Inventories were capitalized after FDA approval of NEXLETOL and NEXLIZET, with no inventory reported at December 31, 2019[76] - The company has a three-year contract manufacturing agreement with minimum order commitments for NEXLETOL and NEXLIZET supplies[74] 5. Commitments and Contingencies This note discloses the company's legal proceedings and other contractual obligations - A putative class action lawsuit (Kevin L. Dougherty v. Esperion Therapeutics, Inc., et al.) alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, currently remanded for further proceedings after an appeal[75] - A derivative lawsuit alleges breaches of fiduciary duties by company directors, currently on appeal to the Supreme Court of Delaware after the district court granted dismissal[78] - The company is unable to predict the outcome or estimate the amount or range of loss for these legal matters[75][78] 6. Investments This note describes the company's cash equivalents and short-term investments, and related interest income Investments (in thousands) | (in thousands) | June 30, 2020 Amortized Cost | June 30, 2020 Estimated Fair Value | | :------------- | :--------------------------- | :--------------------------------- | | Money market funds | $287,632 | $287,632 | | Commercial paper | $2,247 | $2,247 | | Total | $289,879 | $289,879 | - Interest income on investments decreased to $0.1 million for the three months and $0.5 million for the six months ended June 30, 2020, from $1.0 million and $1.4 million, respectively, in the prior year, due to lower interest rates[83] 7. Fair Value Measurements This note explains the valuation methods used for financial assets and liabilities, categorized by fair value hierarchy Fair Value Measurements (in thousands) | (in thousands) | Total Fair Value | Level 1 | Level 2 | Level 3 | | :------------- | :--------------- | :------ | :------ | :------ | | Money market funds | $287,632 | $287,632 | $— | $— | | Commercial paper | $2,247 | $— | $2,247 | $— | | Total assets at fair value | $289,879 | $287,632 | $2,247 | $— | - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (unobservable inputs)[89] 8. Liability Related to the Revenue Interest Purchase Agreement This note details the terms and financial impact of the company's Revenue Interest Purchase Agreement - Received $125.0 million at RIPA closing (June 2019) and $25.0 million in March 2020 upon NEXLETOL regulatory approval[87][91][97] - Purchasers receive tiered revenue interests (initially 2.5% to 7.5%) from net sales in the Covered Territory (U.S., potentially worldwide)[92] Revenue Interest Liability (in thousands) | (in thousands) | Amount | | :------------- | :----- | | Revenue interest liability at December 31, 2019 | $132,544 | | Oberland funding for regulatory approval of NEXLETOL | $25,000 | | Interest expense recognized | $8,811 | | Revenue Interests payments | $(64) | | Revenue interest liability at June 30, 2020 | $166,291 | - Interest expense related to RIPA was $4.6 million for the three months and $8.8 million for the six months ended June 30, 2020, with an effective annual imputed interest rate of 10.1%[96][97] 9. Other Accrued Liabilities This note provides a breakdown of the company's accrued liabilities, including compensation and professional fees Other Accrued Liabilities (in thousands) | (in thousands) | June 30, 2020 | December 31, 2019 | | :------------- | :------------ | :---------------- | | Accrued compensation | $10,868 | $7,818 | | Accrued professional fees | $5,864 | $3,842 | | Accrued inventory | $1,771 | $— | | Other accrued liabilities | $3,405 | $211 | | Total other accrued liabilities | $21,908 | $11,871 | 10. Stock Compensation This note describes the company's stock-based compensation plans and related expenses - The 2020 Employee Stock Purchase Plan (ESPP) was approved, allowing eligible employees to purchase common stock at a discount[101] Stock Options (in thousands) | Stock Options (in thousands) | Outstanding at Dec 31, 2019 | Outstanding at Jun 30, 2020 | | :--------------------------- | :-------------------------- | :-------------------------- | | Number of Options | 4,677,929 | 4,577,767 | | Weighted-Average Exercise Price | $39.31 | $40.61 | - Stock-based compensation expense for stock options was $5.5 million and $11.1 million for the three and six months ended June 30, 2020, respectively[104] - Stock-based compensation expense for RSUs was $1.8 million and $3.3 million for the three and six months ended June 30, 2020, respectively[105] 11. Leases This note outlines the company's operating lease arrangements and associated assets and liabilities - Right-of-use operating lease assets and operating lease liabilities increased by $4.6 million from December 31, 2019, to June 30, 2020, primarily due to new automobile and IT equipment leases for the commercial salesforce[106] - Operating lease costs were $0.6 million for the three months and $0.8 million for the six months ended June 30, 2020[106] Future Maturities of Operating Lease Liabilities (in thousands) | Future Maturities of Operating Lease Liabilities (in thousands) | Amount | | :------------------------------------------------ | :----- | | 2020 (remaining) | $1,209 | | 2021 | $2,380 | | 2022 | $2,333 | | 2023 | $584 | | Total lease payments | $6,506 | 12. Income Taxes This note discusses the company's income tax provisions, deferred tax assets, and valuation allowances - No income tax provision was recorded for the periods presented due to sustained annual operating losses since inception[109] - A full valuation allowance is maintained against net deferred tax assets, as realization of benefits is not considered more likely than not[109] 13. Net Income (Loss) Per Common Share This note details the calculation of basic and diluted net income or loss per common share Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | $4.50 | $(2.01) | $1.68 | $1.23 | | Diluted | $4.32 | $(2.01) | $1.60 | $1.16 | - Weighted-average common shares outstanding (basic) were 27,665,728 for the three months and 27,592,479 for the six months ended June 30, 2020[111] - Dilutive shares, including common shares under option and unvested RSUs, were 1,188,717 for the three months and 1,355,579 for the six months ended June 30, 2020[111] 14. Statements of Cash Flows This note reconciles cash, cash equivalents, and restricted cash, summarizing cash flow activities Cash, Cash Equivalents and Restricted Cash (in thousands) | (in thousands) | June 30, 2020 | June 30, 2019 | December 31, 2019 | December 31, 2018 | | :------------- | :------------ | :------------ | :---------------- | :---------------- | | Cash and cash equivalents | $298,489 | $274,344 | $166,130 | $36,973 | | Restricted cash | $— | $928 | $928 | $— | | Total cash and cash equivalents and restricted cash | $298,489 | $275,272 | $167,058 | $36,973 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting key events such as product approvals and collaboration agreements. It discusses the financial performance for the three and six months ended June 30, 2020, compared to 2019, and addresses liquidity, capital resources, and the potential impact of the COVID-19 pandemic Forward-Looking Statements This section outlines statements about future expectations and events that involve risks and uncertainties - The report contains forward-looking statements based on management's beliefs and assumptions, which involve known and unknown risks and uncertainties that could cause actual results to differ materially[117][118] - Factors affecting actual results include clinical development, commercialization plans, approval of expanded indications for bempedoic acid and combination tablets, and the impact of COVID-19[117] Overview Esperion Therapeutics, Inc. is a pharmaceutical company focused on non-statin LDL-C lowering medicines. It achieved FDA approval for NEXLETOL and NEXLIZET in February 2020, with commercial launches in March and June 2020. European approvals for NILEMDO and NUSTENDI followed in April 2020. Significant collaboration agreements with Otsuka (Japan) and an amendment with DSE (Europe, including Turkey) were executed, contributing to net income of $124.6 million and $46.4 million for the three and six months ended June 30, 2020, respectively - NEXLETOL and NEXLIZET received FDA approval in February 2020 and became commercially available in the U.S. in March and June 2020, respectively[122][124] - NILEMDO and NUSTENDI received European Commission approval in April 2020 for hypercholesterolemia and mixed dyslipidemia[125] - Collaboration agreements with Otsuka (Japan) and DSE (Europe, expanded to Turkey) generated significant revenue, leading to net income of $124.6 million (Q2 2020) and $46.4 million (H1 2020)[126][127][129] Product Overview The company's key products, NEXLETOL (bempedoic acid) and NEXLIZET (bempedoic acid and ezetimibe), are first-in-class non-statin LDL-C lowering medicines approved in the U.S. and Europe (as NILEMDO and NUSTENDI). NEXLETOL is an ACL inhibitor, while NEXLIZET combines bempedoic acid with ezetimibe for complementary action, demonstrating significant LDL-C reduction in clinical trials - NEXLETOL (bempedoic acid) is a first-in-class ATP Citrate Lyase (ACL) inhibitor, approved by the FDA in February 2020, demonstrating an average 18% placebo-corrected LDL-C lowering[132] - NEXLIZET (bempedoic acid and ezetimibe) combines two mechanisms of action, approved by the FDA in February 2020, and lowered LDL-C by a mean of 38% compared to placebo[133] - NILEMDO and NUSTENDI are the European branded names for bempedoic acid and its combination with ezetimibe, approved by the EC in March 2020 for hypercholesterolemia and mixed dyslipidemia[134][135] Ongoing Clinical Studies The company is conducting the CLEAR Outcomes CVOT, a Phase 3 study evaluating bempedoic acid's effect on cardiovascular events in statin-intolerant patients. Enrollment was completed in August 2019 with 14,032 patients, and the study is expected to meet its target number of events in the second half of 2022, supporting future CV risk reduction indications - The Global Cardiovascular Outcomes Trial (CLEAR Outcomes) is a Phase 3 study evaluating bempedoic acid's ability to reduce major adverse cardiovascular events (MACE) in statin-intolerant patients[137] - The study completed enrollment in August 2019 with 14,032 patients across 32 countries[139] - The target number of MACE events is expected to be met in the second half of 2022, with results intended to support CV risk reduction indications[140] The COVID-19 Pandemic The COVID-19 pandemic has led the company to modify business practices, including remote work and travel restrictions. While the full impact is uncertain, the company is monitoring developments and has not yet experienced interruptions in drug product supply for clinical studies or product sales. It remains focused on maintaining a strong balance sheet and liquidity - The company implemented a work-from-home policy and restricted nonessential travel due to COVID-19[141] - The ultimate impact of COVID-19 on business operations, product sales, and R&D expenses is highly uncertain and cannot be reliably estimated[141] - To date, no interruption of drug product supply for ongoing clinical studies and product sales has been experienced[141] Financial Operations Overview The company's revenue streams include product sales (NEXLETOL and NEXLIZET, launched in 2020) and collaboration revenue from DSE and Otsuka agreements, which significantly increased in Q2 2020 due to milestone payments. Operating expenses include cost of goods sold (commenced with product sales), research and development (decreasing due to CLEAR CVOT enrollment completion), and selling, general and administrative expenses (increasing due to commercialization efforts). Interest expense is tied to the Revenue Interest Purchase Agreement - Product sales, net, began in March 2020 with NEXLETOL and June 2020 with NEXLIZET[142] - Collaboration revenue for Q2 2020 was primarily from a $150.0 million DSE milestone and a $60.0 million Otsuka upfront payment[142] - Research and development expenses are expensed as incurred and are expected to continue for the CLEAR Outcomes CVOT and other development programs[148][149] - Selling, general and administrative expenses are anticipated to increase due to commercialization of NEXLETOL and NEXLIZET, headcount expansion, and public company compliance costs[151] Critical Accounting Policies and Significant Judgments and Estimates The company's financial statements rely on estimates and judgments, particularly concerning collaboration agreements and the revenue interest liability. Management continuously evaluates these estimates, and net product sales are expected to become a critical accounting estimate in fiscal year 2020 - Preparation of financial statements requires management to make estimates and assumptions, particularly for collaboration agreements and revenue interest liability[156] - Net product sales are expected to become a critical accounting estimate as commercial operations mature[157] Results of Operations The company experienced a significant increase in total revenues and a shift from net loss to net income for the three and six months ended June 30, 2020, primarily driven by collaboration milestone payments. Product sales commenced in 2020, while R&D expenses decreased due to clinical trial completion, and SG&A expenses rose due to commercialization efforts Comparison of the Three Months Ended June 30, 2020 and 2019 This section compares the company's financial performance for the three months ended June 30, 2020, and 2019 Financial Performance (Three Months) (in thousands) | (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change | | :------------- | :------------------------------- | :------------------------------- | :----- | | Product sales, net | $609 | $— | $609 | | Collaboration revenue | $211,627 | $982 | $210,645 | | Total Revenues | $212,236 | $982 | $211,254 | | Research and development | $34,987 | $42,788 | $(7,801) | | Selling, general and administrative | $47,681 | $13,492 | $34,189 | | Net income (loss) | $124,611 | $(54,221) | $178,832 | - Collaboration revenue increased by $210.6 million, driven by a $60.0 million upfront payment from Otsuka and a $150.0 million milestone from DSE[164] - R&D expenses decreased by $7.8 million due to the completion of CLEAR CVOT enrollment[166] - SG&A expenses increased by $34.2 million to support the commercialization of NEXLETOL and NEXLIZET and headcount expansion[167] Comparison of the Six Months Ended June 30, 2020 and 2019 This section compares the company's financial performance for the six months ended June 30, 2020, and 2019 Financial Performance (Six Months) (in thousands) | (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change | | :------------- | :----------------------------- | :----------------------------- | :----- | | Product sales, net | $1,467 | $— | $1,467 | | Collaboration revenue | $212,609 | $146,401 | $66,208 | | Total Revenues | $214,076 | $146,401 | $67,675 | | Research and development | $69,689 | $89,096 | $(19,407) | | Selling, general and administrative | $89,234 | $25,674 | $63,560 | | Net income | $46,362 | $33,158 | $13,204 | - Collaboration revenue increased by $66.2 million, mainly from the $150.0 million DSE milestone and $60.0 million Otsuka upfront payment[173] - R&D expenses decreased by $19.4 million due to the completion of CLEAR CVOT enrollment and regulatory submission activities[175] - SG&A expenses increased by $63.5 million to support U.S. commercialization of NEXLETOL and NEXLIZET and the expansion of the customer-facing team[176] Liquidity and Capital Resources The company's liquidity is strong, with $298.5 million in cash and cash equivalents as of June 30, 2020, primarily funded by collaboration agreements and the Revenue Interest Purchase Agreement (RIPA). Operating activities provided $70.0 million in cash for the six months ended June 30, 2020. The company anticipates continued operating losses and will require additional financing to fund commercialization and development activities, potentially through collaborations, debt, or equity offerings - Primary liquidity sources as of June 30, 2020, were cash and cash equivalents ($298.5 million) and available-for-sale investments ($2.2 million)[181] Cash Flow Summary (in thousands) | (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $70,044 | $37,682 | | Cash provided by investing activities | $31,699 | $72,412 | | Cash provided by financing activities | $29,688 | $128,205 | | Net increase in cash and cash equivalents | $131,431 | $238,299 | - Net cash provided by operating activities for the six months ended June 30, 2020, was $70.0 million, driven by DSE and Otsuka collaboration payments[184] - Future funding requirements depend on successful commercialization, clinical study costs, regulatory approvals, and ability to secure additional financing through collaborations, debt, or equity[189][191] Operating Activities This section details cash flows generated or used by the company's primary business operations - Net cash provided by operating activities was $70.0 million for the six months ended June 30, 2020, compared to $37.7 million for the same period in 2019[184] - Key drivers for 2020 operating cash flow included the $150.0 million DSE milestone and $60.0 million Otsuka upfront payment, offset by commercialization and R&D expenses[184] Investing Activities This section outlines cash flows related to the purchase and sale of long-term assets and investments - Net cash provided by investing activities was $31.7 million for the six months ended June 30, 2020, down from $72.4 million in the prior year[187] - This cash flow primarily resulted from proceeds from the sale and maturities of highly liquid, interest-bearing investment-grade and government securities[187] Financing Activities This section describes cash flows from debt, equity, and other financing transactions - Net cash provided by financing activities was $29.7 million for the six months ended June 30, 2020[188] - This was primarily due to cash received from the RIPA with Oberland upon regulatory approval of NEXLETOL[188] Plan of Operations and Funding Requirements This section discusses future operational plans and the company's anticipated funding needs and sources - Significant expenses are anticipated for the CLEAR Outcomes CVOT and commercial launch of NEXLETOL and NEXLIZET[189] - Current cash and future proceeds from product sales, DSE, Otsuka, and RIPA are estimated to fund operations through commercialization[189] - Future funding requirements are contingent on factors such as successful commercialization, costs and timing of clinical studies, regulatory approvals, and intellectual property protection[189] Contractual Obligations and Commitments This section details the company's significant contractual obligations and financial commitments - The RIPA with Oberland involves tiered revenue interest payments (initially 2.5% to 7.5%) based on net product sales, with the repayment obligation and timing subject to net sales thresholds[192] - A contract manufacturing agreement for NEXLETOL and NEXLIZET production includes minimum order commitments over a rolling twelve-month period[193] Off-Balance Sheet Arrangements This section discloses any off-balance sheet arrangements as defined by SEC rules - The company has no off-balance sheet arrangements[195] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses the company's exposure to market risks, including interest rate and foreign currency fluctuations - No material changes to market risk disclosures since the December 31, 2019, Annual Report on Form 10-K[196] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2020, concluding they were effective. New procedures and controls were implemented for net product sales and inventory processes in connection with the commercialization of NEXLETOL and NEXLIZET Evaluation of Disclosure Controls and Procedures This section reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2020[199] Changes in Internal Control over Financial Reporting This section describes any material changes in the company's internal control over financial reporting - New procedures and controls were implemented during the three months ended June 30, 2020, related to net product sales and inventory processes, following the approval and commercial availability of NEXLETOL and NEXLIZET[200] PART II — OTHER INFORMATION This section presents other information relevant to the company's operations and financial reporting Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 5 to the condensed financial statements. The company may become party to future legal matters in the ordinary course of business, but does not anticipate a material adverse impact - Legal proceedings information is incorporated by reference from Note 5, 'Commitments and Contingencies,' in the condensed financial statements[204] - The company does not anticipate that the resolution of future legal matters arising in the ordinary course of business would have a material adverse impact on its financial position, results of operations, or cash flows[205] Item 1A. Risk Factors This section highlights new or materially changed risk factors, particularly those related to the COVID-19 pandemic. The pandemic could adversely affect the company's business, including commercialization plans for its products, ongoing clinical trials, and supply chain, potentially impacting net product sales, profitability, and cash flow - The COVID-19 pandemic poses new and significant risks, potentially causing disruptions to clinical development, commercialization plans, and overall business operations[208][209] - Potential impacts include inability to meet net product sales expectations, attain profitability, or maintain positive cash flow, as well as delays in clinical trials and disruptions to third-party manufacturing and supply chains[208] - The extent of the pandemic's impact is uncertain and depends on future developments, including its geographic spread, duration, and containment measures[212] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on any unregistered sales of equity securities and the use of proceeds - No unregistered sales of equity securities or use of proceeds occurred[213] Item 6. Exhibits This section lists all exhibits filed or furnished as part of this Quarterly Report on Form 10-Q, including the 2020 Employee Stock Purchase Plan, collaboration agreements, certifications, and XBRL taxonomy documents - The exhibit index includes the 2020 Employee Stock Purchase Plan, license and collaboration agreements with Otsuka and Daiichi Sankyo Europe, and certifications from principal executive and financial officers[219][220][221][222][223] - XBRL taxonomy extension documents (Schema, Calculation, Label, Presentation, Definition) and the Cover Page Interactive Data File are also filed[225][226][227][228][229][230] Signatures This section contains the official signatures of the company's principal executive and financial officers - The report was signed on August 10, 2020, by Tim M. Mayleben (President and CEO) and Richard B. Bartram (CFO)[236]