SEC Filing - Intercept Pharmaceuticals, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 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: 001-35668

INTERCEPT PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		22-3868459
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

305 Madison Avenue,

Morristown, NJ 07960

(Address of Principal Executive Offices and Zip Code)

(646) 747-1000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	ICPT	Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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 the registrant’s common stock outstanding as of March 31, 2023 was 41,687,084.

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Intercept Pharmaceuticals, Inc.

INDEX

PART I FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets at March 31, 2023 and December 31, 2022 (Unaudited)	6

	Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2023 and 2022 (Unaudited)	7

	Condensed Consolidated Statements of Comprehensive Loss for the three-month periods ended March 31, 2023 and 2022 (Unaudited)	8

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three-month periods ended March 31, 2023 and 2022 (Unaudited)	9

	Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2023 and 2022 (Unaudited)	10

	Notes to Condensed Consolidated Financial Statements (Unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

PART II
OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 6.	Exhibits	35

Exhibit Index		36

Signatures		37

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “we,” “our,” “us” and the “Company” refer, collectively, to Intercept Pharmaceuticals, Inc., a Delaware corporation, and its consolidated subsidiaries.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, including, but not limited to, statements regarding the progress, timing and results of our clinical trials, including our clinical trials for the treatment of nonalcoholic steatohepatitis (“NASH”), the safety and efficacy of our approved product, Ocaliva (obeticholic acid or “OCA”) for primary biliary cholangitis (“PBC”), and our product candidates, including OCA for liver fibrosis due to NASH, the timing and acceptance of our regulatory filings and the potential approval of OCA for liver fibrosis due to NASH, the review of our New Drug Application (“NDA”) for OCA for the treatment of liver fibrosis due to NASH by the U.S. Food and Drug Administration (the “FDA”), our intent to work with the FDA to address the issues raised in a complete response letter (“CRL”), the potential commercial success of OCA, as well as our strategy, future operations, future financial position, future revenue, projected costs, financial guidance, prospects, plans and objectives.

These statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “possible,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and we undertake no obligation to update any forward-looking statement except as required by law. These forward-looking statements are based on estimates and assumptions by our management that, although believed to be reasonable, are inherently uncertain and subject to a number of risks.

The following represent some, but not necessarily all, of the factors that could cause actual results to differ materially from historical results or those anticipated or predicted by our forward-looking statements:

●	the success of our existing business and operations, including Ocaliva for PBC;

●	our ability to successfully commercialize Ocaliva for PBC and, if approved, OCA for NASH;

●	our ability to maintain our regulatory approval of Ocaliva for PBC;

●	our ability to timely and cost-effectively file for and obtain regulatory approval of our product candidates on an accelerated basis or at all, including OCA for liver fibrosis due to NASH;

●	our ability to address the issues raised in the CRL received in June 2020 with respect to OCA for NASH;

●	any advisory committee recommendation or dispute resolution determination that any of our product candidates should not be approved or approved only under certain conditions, including, for example, the advisory committee meeting scheduled on May 19, 2023 for OCA for liver fibrosis due to NASH;

●	any future determination that the regulatory applications and subsequent information we submit for our product candidates, including OCA for liver fibrosis due to NASH, do not contain adequate clinical or other data or meet applicable regulatory requirements for approval;

●	the progress, timing, and results of our REGENERATE clinical trial, including the safety and efficacy of OCA for liver fibrosis due to NASH, and the use of a consensus panel approach to histology reads;

●	our pre-submission meeting with the FDA in July 2022 in which we reviewed with the FDA the planned content and the timing of the submission of our NDA for OCA for liver fibrosis due to NASH;

●	our resubmission of an NDA to the FDA for OCA for liver fibrosis due to NASH, and the potential timing, review, acceptance, and approval of the NDA;

●

conditions that may be imposed by regulatory authorities on our marketing approvals for our products and product candidates, including OCA for liver fibrosis due to NASH, such as the need for clinical outcomes data (and not just results based on achievement of a surrogate endpoint), any risk mitigation programs such as a Risk Evaluation and Mitigation Strategies (“REMS”) program, and any related restrictions, limitations and/or warnings contained in the label of any of our products or product candidates;

●

any potential side effects associated with Ocaliva for PBC, OCA for liver fibrosis due to NASH or our other product candidates that could delay or prevent approval, require that an approved product be taken off the market, require the inclusion of safety warnings or precautions, or otherwise limit the sale of such product or product candidate, including in connection with our update to the Ocaliva prescribing information in May 2021 contraindicating Ocaliva for

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patients with PBC and decompensated cirrhosis, a prior decompensation event, or compensated cirrhosis with evidence of portal hypertension;

●

the initiation, timing, cost, conduct, progress and results of our research and development activities, preclinical studies and clinical trials, including any issues, delays or failures in identifying patients, enrolling patients, treating patients, retaining patients, meeting specific endpoints, or completing and timely reporting the results of our NASH or PBC clinical trials;

●	the outcomes of interactions with regulators, including the FDA, regarding our clinical trials;

●

our ability to establish and maintain relationships with, and the performance of, third-party manufacturers, contract research organizations and other vendors upon whom we are substantially dependent for, among other things, the manufacture and supply of our products, including Ocaliva for PBC and, if approved, OCA for liver fibrosis due to NASH, and our clinical trial activities;

●	our ability to identify, develop and successfully commercialize our products and product candidates, including our ability to successfully launch OCA for liver fibrosis due to NASH, if approved;

●	our ability to obtain and maintain intellectual property protection for our products and product candidates, including our ability to cost-effectively file, prosecute, defend and enforce any patent claims or other intellectual property rights;

●	the size and growth of the markets for our products and product candidates and our ability to serve those markets;

●	the degree of market acceptance of Ocaliva for PBC and, if approved, OCA for liver fibrosis due to NASH or our other product candidates among physicians, patients and healthcare payors;

●	the availability of adequate coverage and reimbursement from governmental and private healthcare payors for our products, including Ocaliva for PBC and, if approved, OCA for liver fibrosis due to NASH, and our ability to obtain adequate pricing for such products;

●	our ability to establish and maintain effective sales, marketing and distribution capabilities, either directly or through collaborations with third parties;

●	competition from existing drugs or new drugs that become available;

●	our ability to attract and retain key personnel to manage our business effectively;

●	our ability to prevent or defend against system failures or security or data breaches due to cyber-attacks, or cyber intrusions, including ransomware, phishing attacks and other malicious intrusions;

●	our ability to comply with data protection laws;

●	costs and outcomes relating to any disputes, governmental inquiries or investigations, regulatory proceedings, legal proceedings or litigation, including any securities, intellectual property, employment, product liability or other litigation;

●	our collaborators’ election to pursue research, development and commercialization activities;

●	our ability to establish and maintain relationships with collaborators with development, regulatory and commercialization expertise;

●	our need for and ability to generate or obtain additional financing;

●	our estimates regarding future expenses, revenues and capital requirements and the accuracy thereof;

●	our use of cash, cash equivalents and short-term investments;

●	our ability to acquire, license and invest in businesses, technologies, product candidates and products;

●	our ability to manage the growth of our operations, infrastructure, personnel, systems and controls;

●	our ability to obtain and maintain adequate insurance coverage;

●

continuing threats from COVID-19, including additional waves of infections, and their impacts including quarantines and other government actions; delays relating to our regulatory applications; disruptions relating to our ongoing clinical trials or involving our contract research organizations, study sites or other clinical partners; disruptions relating to our supply chain or involving our third-party manufacturers, distributors or other distribution partners; and facility closures or other restrictions; and the impact of the foregoing on our results of operations and financial position;

●	the impact of general economic, industry, market, regulatory or political conditions;

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●	how we use the funds received from the sale of our ex-U.S. business to Advanz Pharma and its affiliates (collectively, “Advanz”);

●

disagreements or legal, operational, or other business problems arising from our ongoing relationship with Advanz, including the licensing of the ex-U.S. rights to Ocaliva for PBC and, if approved, OCA for NASH, our operational separation from our former ex-U.S. commercial operations, and our agreement to supply Advanz with OCA;

●	unexpected tax, regulatory, litigation, or other liabilities;

●	whether we receive any future earn-outs or royalties under the transaction documents with Advanz; and

●

the other risks and uncertainties identified under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q and in our other periodic filings filed with the U.S. Securities and Exchange Commission (the “SEC”).

NOTE REGARDING TRADEMARKS

The Intercept Pharmaceuticals® name and logo and the Ocaliva® name and logo are either registered or unregistered trademarks or trade names of the Company in the United States and/or other countries. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q may appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights to these trademarks and trade names.

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PART I

Item 1. Financial Statements.

INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share data)


	March 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	61,404	$	50,517
Restricted cash		1,620		5,343
Investment debt securities, available-for-sale		372,191		435,049
Accounts receivable, net of allowance for credit losses of $58 and $54, respectively		28,745		26,862
Prepaid expenses and other current assets		26,497		22,356
Total current assets		490,457		540,127
Fixed assets, net		899		987
Inventory		6,461		6,462
Security deposits		1,025		1,013
Other assets		5,243		5,122
Total assets	$	504,085	$	553,711
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable, accrued expenses and other liabilities	$	95,185	$	116,977
Short-term interest payable		2,244		3,531
Current portion of long-term debt		109,688		109,569
Total current liabilities		207,117		230,077
Long-term liabilities:
Long-term debt		223,352		223,104
Long-term other liabilities		6,431		7,453
Total liabilities	$	436,900	$	460,634
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock par value $0.001 per share; 90,000,000 shares authorized; 41,687,084 and 41,523,337 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		42		42
Additional paid-in capital		2,243,789		2,238,179
Accumulated other comprehensive loss, net		(7,623)		(8,256)
Accumulated deficit		(2,169,023)		(2,136,888)
Total stockholders’ equity		67,185		93,077
Total liabilities and stockholders’ equity	$	504,085	$	553,711

See accompanying notes to the condensed consolidated financial statements.

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INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)


	Three Months Ended
	March 31,
	2023		2022

Revenue:
Product revenue, net	$	67,958	$	59,146
Total revenue		67,958		59,146
Operating expenses:
Cost of sales		222		223
Selling, general and administrative		57,657		37,768
Research and development		41,711		47,583
Total operating expenses		99,590		85,574
Operating loss		(31,632)		(26,428)
Other (expense) income:
Interest expense		(2,809)		(6,673)
Other income (expense), net		2,560		(334)
Total other expense, net		(249)		(7,007)
Loss from continuing operations	$	(31,881)	$	(33,435)
(Loss) income from discontinued operations	$	(254)	$	16,151
Net loss	$	(32,135)	$	(17,284)

Net income (loss) per common and potential common share (basic and diluted):
Net loss from continuing operations	$	(0.77)	$	(1.13)
Net (loss) income from discontinued operations	$	(0.01)	$	0.54
Net loss	$	(0.77)	$	(0.58)
Weighted average common and potential common shares outstanding:
Basic and diluted		41,670		29,696

See accompanying notes to the condensed consolidated financial statements.

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INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)


	Three Months Ended
	March 31,
	2023		2022

Net loss	$	(32,135)	$	(17,284)
Other comprehensive income (loss):
Unrealized gains (losses) on investment debt securities		729		(1,020)
Foreign currency translation (losses) gains		(96)		406
Other comprehensive income (loss)	$	633	$	(614)
Comprehensive loss	$	(31,502)	$	(17,898)

See accompanying notes to the condensed consolidated financial statements.

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INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(Unaudited)

(In thousands)


	Three months ended March 31, 2023

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss, Net		Deficit		Equity
Balance - December 31, 2022	41,523	$	42	$	2,238,179	$	(8,256)	$	(2,136,888)	$	93,077
Stock-based compensation	—		—		5,864		—		—		5,864
Issuance of common stock under equity plan	180		—		—		—		—		—
Employee withholding taxes related to stock-based awards	(17)		—		(269)		—		—		(269)
Net proceeds from exercise of stock options	1		—		15		—		—		15
Other comprehensive income	—		—		—		633		—		633
Net loss	—		—		—		—		(32,135)		(32,135)
Balance - March 31, 2023	41,687	$	42	$	2,243,789	$	(7,623)	$	(2,169,023)	$	67,185


	Three months ended March 31, 2022

						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss, Net		Deficit		(Deficit)
Balance - December 31, 2021	29,573		30		2,308,653		(2,873)		(2,489,772)		(183,962)
Stock-based compensation	—		—		6,720		—		—		6,720
Issuance of common stock under equity plan	156		—		—		—		—		—
Employee withholding taxes related to stock-based awards	(20)		—		(318)		—		—		(318)
Reclassification of the equity components of the Convertible Notes to liability upon adoption of ASU 2020-06	—		—		(307,371)		—		131,068		(176,303)
Other comprehensive loss	—		—		—		(614)		—		(614)
Net loss	—		—		—		—		(17,284)		(17,284)
Balance - March 31, 2022	29,709	$	30	$	2,007,684	$	(3,487)	$	(2,375,988)	$	(371,761)

See accompanying notes to the condensed consolidated financial statements.

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INTERCEPT PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(32,135)	$	(17,284)
Less: (Loss) income from operations of discontinued operations		(254)		16,151
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		5,864		5,381
(Accretion) amortization of (discount) premium on investment debt securities		(1,965)		791
Amortization of deferred financing costs		368		797
Depreciation		89		341
Non-cash operating lease cost		258		1,035
Provision for allowance on credit losses		4		(5)
Changes in operating assets:
Accounts receivable		(1,883)		2,937
Prepaid expenses and other current assets		(3,505)		1,253
Inventory		95		61
Security deposits		(12)		(357)
Changes in operating liabilities:
Accounts payable, accrued expenses and other current liabilities		(17,232)		(9,782)
Operating lease liabilities		(256)		(1,427)
Interest payable		(1,287)		(4,625)
Net cash used in operating activities - continuing operations		(51,343)		(37,035)
Net cash (used in) provided by operating activities - discontinued operations		(254)		16,911
Net cash used in operating activities		(51,597)		(20,124)
Cash flows from investing activities:
Purchases of investment debt securities		(55,629)		(142,789)
Sales and maturities of investment debt securities		121,181		128,576
Purchases of equipment, leasehold improvements, and furniture and fixtures		—		(7)
Net cash provided by (used in) investing activities - continuing operations		65,552		(14,220)
Net cash used in investing activities - discontinued operations		(6,229)		—
Net cash provided by (used in) investing activities		59,323		(14,220)
Cash flows from financing activities:
Proceeds from exercise of options, net		15		—
Payments of employee withholding taxes related to stock-based awards		(269)		(318)
Net cash used in financing activities - continuing operations		(254)		(318)
Net cash (used in) provided by financing activities - discontinued operations		—		—
Net cash used in financing activities		(254)		(318)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(308)		(274)
Net increase (decrease) in cash, cash equivalents and restricted cash		7,164		(34,936)
Cash, cash equivalents and restricted cash at beginning of period		55,860		94,409
Cash, cash equivalents and restricted cash at end of period		63,024		59,473
Less: Cash, cash equivalents and restricted cash of discontinued operations		—		1,549
Cash, cash equivalents and restricted cash of continuing operations	$	63,024	$	57,924
Supplemental disclosure of non-cash transactions:
Right-of-use asset obtained in exchange for new operating lease obligations	$	(374)	$	(3,173)
Non-cash investing and financing activities
Net increase in accrued fixed assets	$	—	$	(52)
Reconciliation of cash, cash equivalents and restricted cash included in the condensed consolidated balance sheets:
Cash and cash equivalents	$	61,404	$	48,320
Restricted cash		1,620		9,604
Total cash, cash equivalents and restricted cash	$	63,024	$	57,924

See accompanying notes to the condensed consolidated financial statements.

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INTERCEPT PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Overview of Business

Intercept Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company founded in 2002 and focused on the development and commercialization of novel therapeutics to treat progressive non-viral liver diseases, including primary biliary cholangitis (“PBC”), nonalcoholic steatohepatitis (“NASH”) and severe alcohol-associated hepatitis (“sAH”). The Company currently has one marketed product, Ocaliva (obeticholic acid or “OCA”).

2. Basis of Presentation

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated in consolidation. Certain information that is normally required by U.S. GAAP has been condensed or omitted in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2023. In the opinion of management, these unaudited condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of these interim unaudited condensed consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC.

Reclassifications

Certain amounts in prior periods have been reclassified to reflect the impact of the discontinued operations treatment in order to conform to the current period presentation.

Use of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.

3. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements

included in its Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Annual Report.

4. Discontinued Operations

On May 5, 2022, the Company entered into a series of agreements to sell the Company’s ex-U.S. commercial operations and sublicense the right to commercialize Ocaliva for PBC and, if approved, OCA for NASH outside of the United States (the “Disposition Transaction”) to Advanz Pharma and its affiliates (collectively, “Advanz”). Consideration under the agreements totaled $405 million up front, subject to adjustments including for cash, working capital, and assumed liabilities. The Company is entitled to receive an additional cumulative $45 million from Advanz contingent upon receipt of extensions of orphan drug exclusivity for Ocaliva from the European Medicines Agency (“EMA”) and

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Medicines and Healthcare products Regulatory Agency (“MHRA”). The Company will also receive royalties on any future net sales of OCA in NASH outside of the U.S., should Advanz obtain marketing authorization for this indication in ex-U.S. regions. The Company continues to be responsible for the manufacturing and supply of OCA globally while Advanz is responsible for packaging, distribution and commercialization of the therapy in all markets outside of the U.S. In addition, the Company will be responsible for any difference between the cumulative rebate estimated for France for periods prior to July 1, 2022 and the amount agreed through final negotiations with the French government. Under the Sublicense Agreement, the Company agreed to continue to conduct certain post-marketing work and other activities with respect to Ocaliva for PBC, including continuing to conduct certain PBC studies (the “PBC Post-Marketing Work”). The Company will be reimbursed by Advanz for a portion of the total R&D costs related to the PBC Post-Marketing Work.

On July 1, 2022, the Company completed the previously announced Disposition Transaction. As a result of this transaction, the Company’s international business has been divested and its international commercial and medical infrastructure have transitioned to Advanz. Total cash consideration received upon closing was $366.5 million. Additional consideration of $38.5 million under the Share Purchase Agreement (the “SPA”) was settled in connection with the completion statements (the post-closing statements completing and adjusting the flow of funds from the closing of the Disposition Transaction), which included adjustments for cash, working capital, and assumed liabilities, resulting in a $6.2 million cash payment to Advanz during the quarter ended March 31, 2023.

The total amount recognized as a reduction to Research & development expenses for a portion of the total R&D costs to be reimbursed by Advanz in relation to the PBC Post-Marketing Work was $1.6 million for the three months ended March 31, 2023. Cash inflows were $1.1 million for the three months ended March 31, 2023 under the TSA and Sublicense Agreement.

Amounts applicable to prior years have been recast to conform to the discontinued operations presentation. All amounts included in the notes to the unaudited condensed consolidated financial statements relate to continuing operations unless otherwise noted.

As of March 31, 2023 and December 31, 2022, respectively, there were no assets or liabilities classified as discontinued operations.

The following table presents the results of operations related to the discontinued operations for the three months ended March 31, 2023 and 2022 respectively:


	Three Months Ended
	March 31,
	2023		2022

Product revenue, net	$	—	$	29,436
Cost of sales		—		535
Selling, general and administrative		—		12,239
Research and development		—		506
Other expense, net		—		(5)
Income from discontinued operations	$	—	$	16,151
Loss on the sale of the ex-U.S. commercial operations and sublicense		(254)		—
Net (loss) income from discontinued operations	$	(254)	$	16,151

Stock-based compensation expense recognized under discontinued operations, included in net income from discontinued operations, was $1.3 million for the three months ended March 31, 2022.

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The following table presents the net cash provided by operating activities for the assets and liabilities classified as discontinued operations for the three months ended March 31, 2023 and 2022 respectively:


	Three Months Ended March 31,
	2023		2022
Net (loss) income from discontinued operations	$	(254)	$	16,151

Adjustment of non-cash activities		—		1,606
Increase in accounts receivable		—		(1,813)
Increase in prepaid expenses and other current assets		—		(621)
Decrease in inventory		—		81
Decrease in other assets		—		176
Decrease in operating lease liabilities		—		(263)
Increase in accounts payable, accrued expenses and other current liabilities		—		1,594
Net cash (used in) provided by operating activities	$	(254)	$	16,911

Payment of purchase price adjustment for Disposition Transaction		(6,229)		—
Net cash used in investing activities	$	(6,229)	$	—

5. Cash, Cash Equivalents and Investment Debt Securities

The following table summarizes the Company’s cash, cash equivalents and investment debt securities as of March 31, 2023 and December 31, 2022:


	As of March 31, 2023
			Allowance		Gross		Gross
			for Credit		Unrealized		Unrealized
	Amortized Cost		Losses		Gains		Losses		Fair Value

	(in thousands)
Cash and cash equivalents:
Cash and money market funds	$	56,455	$	—	$	—	$	—	$	56,455
Commercial paper		4,950		—		—		(1)		4,949
Total cash and cash equivalents		61,405		—		—		(1)		61,404
Investment debt securities:
Commercial paper		126,242		—		—		(150)		126,092
Corporate debt securities		222,776		—		63		(779)		222,060
U.S. government agency bonds		24,100		—		1		(62)		24,039
Total investment debt securities		373,118		—		64		(991)		372,191
Total cash, cash equivalents and investment debt securities	$	434,523	$	—	$	64	$	(992)	$	433,595

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	As of December 31, 2022
			Allowance		Gross		Gross
			for Credit		Unrealized		Unrealized
	Amortized Cost		Losses		Gains		Losses		Fair Value

	(in thousands)
Cash and cash equivalents:
Cash and money market funds	$	50,517	$	—	$	—	$	—	$	50,517
Total cash and cash equivalents		50,517		—		—		—		50,517
Investment debt securities:
Commercial paper		102,379		—		7		(183)		102,203
Corporate debt securities		304,234		—		33		(1,390)		302,877
U.S. government agency bonds		24,100		—		4		(109)		23,995
U.S. Treasury securities		5,993		—		—		(19)		5,974
Total investment debt securities		436,706		—		44		(1,701)		435,049
Total cash, cash equivalents and investment debt securities	$	487,223	$	—	$	44	$	(1,701)	$	485,566

The aggregate fair value of the Company’s available-for-sale investment debt securities that have been in a continuous unrealized loss position for less than twelve months or twelve months or longer is as follows:


	As of March 31, 2023
	Less than 12 months				12 months or longer				Total

	(in thousands)
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Commercial paper	$	122,621	$	(150)	$	—	$	—	$	122,621	$	(150)
Corporate debt securities		181,596		(737)		18,062		(42)		199,658		(779)
U.S. government agency bonds		18,548		(51)		3,489		(11)		22,037		(62)
Total	$	322,765	$	(938)	$	21,551	$	(53)	$	344,316	$	(991)


	As of December 31, 2022
	Less than 12 months				12 months or longer				Total

	(in thousands)
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Commercial paper	$	93,659	$	(183)	$	—	$	—	$	93,659	$	(183)
Corporate debt securities		256,918		(1,174)		27,494		(216)		284,412		(1,390)
U.S. government agency bonds		17,866		(109)		—		—		17,866		(109)
U.S. Treasury securities		5,974		(19)		—		—		5,974		(19)
Total	$	374,417	$	(1,485)	$	27,494	$	(216)	$	401,911	$	(1,701)

At March 31, 2023 and December 31, 2022, respectively the Company had 99 and 122 available-for-sale investment debt securities in an unrealized loss position without an allowance for credit losses. Unrealized losses on corporate debt securities have not been recognized into income because the issuers’ bonds are of high credit quality (rated A3/A- or higher) and the decline in fair value is largely due to market conditions and/or changes in interest rates. Management does not intend to sell and it is likely that management will not be required to sell the securities prior to the anticipated recovery of their amortized cost basis. The issuers continue to make timely interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

Accrued interest receivable on available-for-sale investment debt securities totaling $2.0 million and $2.4 million at March 31, 2023 and December 31, 2022, respectively, is excluded from the estimate of credit losses and is included in Prepaid expenses and other current assets.

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6. Fair Value Measurements

The carrying amounts of the Company’s receivables and payables approximate their fair value due to their short maturities.

Accounting principles provide guidance for using fair value to measure assets and liabilities. The guidance includes a three-level hierarchy of valuation techniques used to measure fair value, defined as follows:

●

Unadjusted Quoted Prices — The fair value of an asset or liability is based on unadjusted quoted prices in active markets for identical assets or liabilities (Level 1).

●

Pricing Models with Significant Observable Inputs — The fair value of an asset or liability is based on information derived from either an active market quoted price, which may require further adjustment based on the attributes of the financial asset or liability being measured, or an inactive market transaction (Level 2).

●

Pricing Models with Significant Unobservable Inputs — The fair value of an asset or liability is primarily based on internally derived assumptions surrounding the timing and amount of expected cash flows for the financial instrument. Therefore, these assumptions are unobservable in either an active or inactive market (Level 3).

The Company considers an active market as one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Conversely, the Company views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, non-performance risk, or that of a counterparty, is considered in determining the fair values of liabilities and assets, respectively.

The Company’s cash deposits, money market funds and U.S. Treasury securities are classified within Level 1 of the fair value hierarchy because they are valued using bank balances or quoted prices from active markets. Commercial paper, corporate debt securities, and U.S. government agency bonds are classified as Level 2 instruments based on market pricing and other observable inputs.

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Financial assets carried at fair value are classified in the tables below in one of the three categories described above:


			Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3

	(in thousands)
March 31, 2023
Assets
Cash and cash equivalents:
Money market funds	$	42,701	$	42,701	$	—	$	—
Commercial paper		4,949		—		4,949		—
Available-for-sale investment debt securities:
Commercial paper		126,092		—		126,092		—
Corporate debt securities		222,060		—		222,060		—
U.S. government agency bonds		24,039		—		24,039		—
Total financial assets	$