ALBIREO PHARMA, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and the related notes included elsewhere in this quarterly report and
our audited financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in our Annual Report on
Form 10-K for the year ended December 31, 2021, filed with the SEC. In addition
to historical information, the following discussion contains forward-looking
statements that involve risks, uncertainties and assumptions. Our actual
results, performance or experience could differ materially from what is
indicated by any forward-looking statement due to various important factors,
risks and uncertainties, including, but not limited to, those set forth under
"Cautionary Note Regarding Forward-Looking Statements" included elsewhere in
this quarterly report or under "Risk Factors" in Item 1A of Part I of our Annual
Report on Form 10-K for the year ended December 31, 2021, in Item 1A of Part II
of this Quarterly Report on Form 10-Q, or in other filings that we make with the
SEC.

Overview

We are a commercial-stage biopharmaceutical company focused on the development
and commercialization of novel bile acid modulators to treat orphan pediatric
liver diseases and other liver or gastrointestinal diseases and disorders. Our
product Bylvay has been approved in the United States for the treatment of
pruritus in patients with progressive familial intrahepatic cholestasis (PFIC)
ages 3 months or older, and authorized in Europe for the treatment of PFIC in
patients ages 6 months or older. In October 2021, the U.S. Food and Drug
Administration, or FDA, granted the Company orphan drug exclusivity for Bylvay
for the treatment of pruritus in patients ages 3 months or older with PFIC. In
July 2021, the European Medicines Agency, or EMA, granted the Company orphan
drug exclusivity for Bylvay for the treatment of patients 6 months or older with
PFIC. In September 2021, Bylvay was also granted marketing authorization by the
UK Medicines and Healthcare Products Regulatory Agency, or MHRA, for the
treatment of PFIC in patients 6 months or older. Bylvay is available by
prescription to patients in the U.S. and became available by prescription to
patients in Germany in September 2021 and in the United Kingdom in the second
quarter of 2022. PFIC is a rare, life-threatening genetic disorder affecting
young children and Bylvay is the first approved drug treatment in the disease.

We are also pursuing the development of Bylvay in biliary atresia and in
Alagille syndrome, or ALGS, each of which is a rare, life threatening disease
that affects the liver and for which there is no approved pharmacologic
treatment option. We initiated a pivotal clinical trial of Bylvay in biliary
atresia, the BOLD trial, in the first half of 2020. In November 2022, we
announced completion of enrollment in the BOLD trial. We expect topline results
from the BOLD trial in 2024. In October 2022, we announced topline results from
our pivotal trial of Bylvay in ALGS, the ASSERT trial, and we intend to complete
regulatory submissions for Bylvay in patients with ALGS in the United States and
Europe no later than the first quarter of 2023, in anticipation of potential
regulatory approval and commercial launch in the second half of 2023.

We are expanding development to compounds that are intended for adult liver and
viral diseases. Our lead candidate for adult liver diseases, A3907, is a
selective inhibitor of the apical sodium-dependent bile acid transporter (ASBT)
that has, based on animal studies, high predicted oral bioavailability and
systemic exposures in man. As a result, A3907 has the potential to not only
affect the bile acid pool by increased bile acid excretion in the stools but
also through other pathways, including increased urinary bile acid excretion.
This unique approach may yield greater dosing flexibility, greater efficacy and
lower rates of adverse events, such as diarrhea, associated with the
non-systemic IBAT inhibitors acting locally in the intestine. In December 2021,
we announced topline results from our Phase 1 clinical trial in healthy adult
subjects to investigate the safety, tolerability, pharmacokinetics of orally
administered A3907. In the top-line results the trial achieved both primary and
secondary objectives. A3907 demonstrated a positive safety profile and was well
tolerated in the Phase 1 clinical trial at systemic exposures that demonstrated
therapeutic benefits in preclinical models. With the potential to inhibit ileal,
renal and hepatic ASBT, we hope A3907 will provide the optimal balance of
efficacy and tolerability in patients in multiple liver diseases. A composition
of matter patent for A3907 has been granted, with expiration in 2040 without
patent term extension. We expect to initiate a Phase 2 trial for A3907 in adult
liver disease by the end of 2022.

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We also have a preclinical program in adult liver and viral diseases. Our lead
preclinical candidate for adult viral and liver diseases is A2342, a potent
small molecule inhibitor of the sodium-taurocholate co-transporting peptide
(NTCP). NTCP is a key transporter of bile acids into the liver cells and also
serves as the entry mechanism for the hepatitis B (HBV) and hepatitis D (HDV)
viruses. A2342 protects primary human hepatocytes from HBV infection in vitro.
In addition, A2342 reduces markers of infection in HBV-infected humanized mice.
A2342 has demonstrated target engagement in non-human primates with biomarker
increases comparable to increases achieved in humans by a now commercial
subcutaneous peptide NTCP inhibitor. A composition of matter patent for A2342
has been granted, with expiration in 2040 without patent term extensions, and
IND enabling studies are being completed. We expect to initiate a Phase 1 trial
for A2342 in healthy volunteers by the end of 2022. Preclinical efforts with
other bile acid modulator approaches continue. The first IBAT inhibitor
developed by Albireo is elobixibat, which was approved in Japan and Thailand for
the treatment of chronic constipation and is marketed by our partner EA Pharma
in Japan and its sublicensee in Thailand.

Bylvay – Our main product for PFIC.

Bylvay (odevixibat) was approved by the FDA on July 20, 2021 for the treatment
of pruritus in patients ages 3 months or older with PFIC, and authorized by the
EMA on July 16, 2021 for the treatment of patients 6 months or older with PFIC.
Bylvay was also granted marketing authorization by the MHRA on September 7, 2021
for the treatment of patients 6 months or older with PFIC. We also received a
rare pediatric disease priority review voucher (PRV) from the FDA in connection
with the U.S. approval of Bylvay. In September 2021, we sold the PRV for $105.0
million. Bylvay is available for reimbursement by prescription to patients in
the U.S., Germany and the United Kingdom. In July 2021, the EMA granted the
Company orphan drug exclusivity for Bylvay for the treatment of patients 6
months or older with PFIC. In October 2021, the FDA granted the Company orphan
drug exclusivity for Bylvay for the treatment of pruritus in PFIC patients ages
3 months or older.

The precise prevalence of PFIC is unknown, and we are not aware of any patient
registries or other method of establishing with precision the actual number of
patients with PFIC in any geography. PFIC has been estimated to affect between
one in every 75,000 children born worldwide. Based on the published incidence,
published regional populations, and estimated median life expectancies, we
estimate the prevalence of PFIC across the spectrum of the disease to be
approximately 15,000 patients worldwide, not including China and India, but we
are not able to estimate the prevalence of PFIC with precision. Apart from
rights we granted to third parties in the below agreements and our royalty
obligation under our agreement with Sagard, we hold global rights to Bylvay
unencumbered. Our current plan is to commercialize Bylvay ourselves in the
United States and Europe. We entered into a co-promotion agreement with Travere
Therapeutics, Inc. to promote Bylvay in the United States. The initial term of
the co-promotion was two years from the July 2021 launch of Bylvay, terminable
at will by either party after one year following launch. In June 2022, the
parties mutually agreed to terminate the agreement upon the one year anniversary
of the launch, with such termination effective July 20, 2022. We are continuing
to commercialize Bylvay ourselves in the United States. We have also entered
into license agreements with third parties to commercialize Bylvay in certain
other jurisdictions, subject to regulatory approval in those jurisdictions
including Medison Pharma Canada Inc. for Canada, Medison Pharma Ltd. for Israel,
Gen ?laç ve Sa?lIk Ürünleri Sanayi ve Ticaret A.?. for Turkey, Genpharm Services
for Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and the UAE, Jadeite Medicines
Inc. for Japan, and Swixx Biopharma AG for Central and Eastern European
Countries, and we are identifying potential partners for other regions. Bylvay
is currently the only approved drug for the treatment of patients with PFIC.
Ursodeoxycholic acid, or UDCA, is approved in France only for PFIC type 3, and
in the United States and elsewhere for the treatment of primary biliary
cholangitis, or PBC. However, many PFIC patients do not respond well to UDCA,
undergo partial external bile diversion, or PEBD, surgery and often require
liver transplantation. PEBD surgery is a life-altering and undesirable procedure
in which bile is drained outside the body to a stoma bag that must be worn by
the patient 24 hours a day.

Other Indications under development for Bylvay.

We are also pursuing the development of Bylvay in patients with biliary atresia, another rare, life-threatening condition that affects the liver and for which there are no approved pharmacological treatment options. In December 2018,

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the European Commission granted orphan designation to odevixibat for the
treatment of biliary atresia, and in January 2019, the FDA granted orphan drug
designation to odevixibat for the treatment of biliary atresia. We initiated the
BOLD clinical trial, a global pivotal trial and the largest prospective
intervention trial ever conducted in biliary atresia, in the first half of 2020.
In October 2022 we announced completion of enrollment in the trial and we expect
topline results in 2024. We believe biliary atresia is one of the most common
rare pediatric liver diseases, and is the leading cause of liver transplants in
children. Our double-blind, placebo controlled pivotal trial in biliary atresia
is designed to enroll approximately 200 patients at 70 sites globally. Patients
will receive either placebo or odevixibat once daily at 120µg/kg. The primary
endpoint is survival with native liver after two years of treatment.

Biliary atresia is a partial or total blocking or absence of large bile ducts
that causes cholestasis and resulting accumulation of bile that damages the
liver. The estimated worldwide incidence of biliary atresia is between 6 and 10
for every 100,000 live births. We estimate the prevalence of biliary atresia to
be approximately 18,000 patients across the U.S. and Europe, and approximately
27,000 combined in other jurisdictions worldwide, but we are not able to
estimate the prevalence of biliary atresia with precision. There are currently
no drugs approved for the treatment of biliary atresia. The current standard of
care is a surgery known as the Kasai procedure, or hepatoportoenterostomy, in
which the obstructed bile ducts are removed and a section of the small intestine
is connected to the liver directly. However, only an estimated 25% of those
initially undergoing the Kasai procedure will survive to their twenties without
need for liver transplantation.

In addition, we initiated a pivotal trial of Bylvay in ALGS, the ASSERT trial,
in the fourth quarter of 2020. The double-blind, randomized, placebo-controlled
trial was designed to evaluate the safety and efficacy of 120 µg /kg/day Bylvay
(odevixibat) for 24 weeks in relieving pruritus in patients with ALGS. Key
secondary endpoints measure serum bile acid levels and safety and tolerability.
The trial enrolled 52 patients aged 0 to 17 years of age with a genetically
confirmed diagnosis of ALGS across 21 sites in North America, Europe, Middle
East and Asia Pacific. The primary efficacy endpoint was a change from baseline
to month 6 (weeks 21 to 24) in pruritus measured by scratching with the
PRUCISION Observer-Reported Outcome (ObsRO) scratching score caregiver
instrument (0-4 point scale). The key secondary efficacy endpoint was a change
in serum bile acid responses from baseline to the average of weeks 20 and 24.

In October 2022, we announced topline results from the ASSERT trial. In the
primary analysis, the study met the primary endpoint showing statistically
significant reduction in pruritus as measured by the ObsRO scratching score (0-4
point scale), from baseline at month 6 (weeks 21 to 24), compared to the placebo
arm (p=0.002). The study also met the key secondary endpoint showing a
statistically significant reduction in serum bile acid concentration from
baseline to the average of weeks 20 and 24 (compared to the placebo arm
p=0.001). Statistically significant improvements in multiple sleep parameters
were observed as early as week 1-4 compared to patients on placebo with
continued improvement through week 24. In the study, there were no patient
discontinuations. Bylvay was well tolerated, with an overall adverse event
incidence similar to placebo and a low incidence of drug-related diarrhea (11.4%
vs. 5.9% placebo).

ALGS is a genetic condition associated with liver, heart, eye, kidney and
skeletal abnormalities. In particular, ALGS patients have fewer than normal bile
ducts inside the liver, which leads to cholestasis and the accumulation of bile
and causes scarring in the liver. ALGS is estimated to affect between one in
every 50,000 children born worldwide. We estimate the prevalence of ALGS to be
approximately 12,000 patients across the U.S. and Europe, and approximately
13,000 combined in other jurisdictions worldwide, but we are not able to
estimate the prevalence of ALGS with precision. Current treatment for ALGS is
generally in line with current treatments for PFIC as described above. In August
2012, the European Commission granted orphan designation to odevixibat for the
treatment of ALGS. In October 2018, the FDA granted orphan drug designation to
odevixibat for the treatment of ALGS. With the results from the ASSERT trial, we
intend to complete regulatory submissions in the United States and Europe no
later than the first quarter of 2023, in anticipation of potential regulatory
approval and commercial launch in the second half of 2023.

We continue to evaluate potential clinical development in other indications,
including primary sclerosing cholangitis, which refers to swelling
(inflammation), scarring, and destruction of bile ducts inside and outside
of
the

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liver. The first symptoms are typically fatigue, itching and jaundice, and many
patients with sclerosing cholangitis also suffer from inflammatory bowel
disease. The estimated incidence of primary sclerosing cholangitis is 9 cases
per 100,000 people. There are currently no drugs approved for the treatment of
sclerosing cholangitis. First-line treatment is typically off-label UDCA,
although UDCA has not been established to be safe and effective in patients with
sclerosing cholangitis in well controlled clinical trials.

Since inception, we have incurred significant operating losses. As of September
30, 2022, we had an accumulated deficit of $421.0 million. To date, we have
financed our operations primarily through issuances of equity or convertible
debt, upfront fees paid upon entering into license agreements, payments received
upon the achievement of specified milestone events under license agreements,
grants and venture debt borrowings, the HealthCare Royalty Partners III, L.P.
(HCR) royalty monetization transactions, and the Sagard Healthcare Partners
(Delaware) LP ("Sagard") royalty monetization transactions.

As previously disclosed, on September 22, 2022, we entered into a purchase and
sale agreement with Sagard for the sale of a royalty on revenues generated from
Bylvay (odevixibat), or the Purchase Agreement, for an aggregate purchase price
of $115.0 million payable upon the closing of the transaction, which occurred on
September 22, 2022. In consideration for the payment of such purchase price,
Sagard is entitled to receive tiered, sales-based royalty payments on the
worldwide annual consolidated net revenues of Bylvay. These royalty obligations
payable to Sagard are capped at $184.0 million which will be increased to $230.0
million if Sagard has not received aggregate royalty payments of $184.0 million
by December 31, 2028. In addition, if the aggregate amount of royalty payments
received by Sagard as of December 31, 2036 is less than $230.0 million, we have
agreed to pay Sagard the difference between the royalty cap and the aggregate
amount of all royalty payments received by Sagard as of December 31, 2036. See
Note 1 to the condensed consolidated financial statements in Part I, Item 1 of
this report for additional information about our obligations under the Purchase
Agreement.

We expect to continue to incur significant expenses and increasing operating
losses as we continue our development of, and seek marketing approvals for, our
product candidates, commercialize Bylvay, prepare for and begin the
commercialization of any other approved products in the future, and add
infrastructure and personnel to support our product development and
commercialization efforts and operations as a public company in the United
States. To date, inflation has not had a material impact on our business, but if
the global inflationary trends continue, we expect appreciable increases in
clinical trial, selling, labor, and other operating costs. If our costs were to
become subject to significant inflationary pressures, we may not be able to
fully offset such higher costs through price increases of our product. Our
inability or failure to do so could adversely affect our business, financial
condition and results of operations.

As a commercial-stage company, our revenues, expenses and results of operations
are likely to fluctuate significantly from quarter to quarter and year to year.
We believe that period-to-period comparisons of our results of operations should
not be relied upon as indicative of our future performance.

From September 30, 2022we had about $272.5 million in cash, cash equivalents and restricted cash.

Overview of financial operations

The following discussion discusses certain items in our Consolidated Statements of Income and the factors affecting those items.

Revenue

We generate revenue primarily from the receipt of royalty revenue, upfront or
license fees and milestone payments as well as product revenue following our
commercial launch of Bylvay. License agreements with commercial partners
generally include nonrefundable upfront fees and milestone payments. We
recognize revenue on sales of Bylvay when a customer obtains control of the
product, which occurs at a point in time and upon delivery, the receipt of which
is dependent upon the achievement of specified development, regulatory or
commercial milestone events, as well as royalties on product sales of licensed
products, if and when such product sales occur, and payments for pharmaceutical

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ingredient or related procurement services. For these agreements, management
applies judgment in the allocation of total agreement consideration to the
performance obligations on a reliable basis that reasonably reflects the selling
prices that might be expected to be achieved in stand-alone transactions. For
additional information about our revenue recognition, refer to Note 1 to our
condensed consolidated financial statements included in this quarterly report.

We began our commercial launch of Bylvay for the treatment of pruritus in patients with PFIC aged 3 months or older in United States in July 2021
after receiving FDA approval for Bylvay on July 20, 2021.

We sell Bylvay to a limited number of specialty pharmacies and a specialty
distributor which dispense the product directly to patients. The specialty
pharmacies and specialty distributor are referred to as our customers. We also
sell Bylvay to our customers in the European Union, which includes a limited
number of pharmacies. Bylvay was authorized by the European Medicines Agency on
July 16, 2021 for the treatment of PFIC in patients 6 months or older. Bylvay
was also granted marketing authorization by the UK Medicines and Healthcare
Products Regulatory Agency (MHRA) in September 2021 for the treatment of PFIC in
patients 6 months or older.

Product Revenue, Net
We recognize revenue on sales of Bylvay when a customer obtains control of the
product, which occurs at a point in time and upon delivery. We provide the right
of return to our customers for unopened product for a limited time before and
after its expiration date.

However, a portion of our royalty and royalty income generated by Bylvay will be paid to Sagard in accordance with the purchase agreement.

Under Accounting Standards Codification ("ASC") Topic 606, Revenue from
Contracts with Customers ("ASC 606"), we have written contracts with each of our
customers that have a single performance obligation - to deliver products upon
receipt of a customer order - and these obligations are satisfied when delivery
occurs and the customer receives Bylvay. We evaluate the creditworthiness of
each of our customers to determine whether collection is reasonably assured. The
wholesale acquisition cost that we charge our customers for Bylvay is adjusted
to arrive at our estimated net product revenues by deducting (i) estimated
government rebates and discounts related to Medicaid and other government
programs, (ii) estimated costs of incentives offered to certain indirect
customers including patients, (iii) trade allowances, such as invoice discounts
for prompt payment and customer fees, and (iv) allowance for sales returns.

For the three and nine months ended September 30, 2022, we recognized net sales
of Bylvay totaling approximately $7.5 million and $18.1 million, respectively.
For the three and nine months ended September 30, 2021, we recognized net sales
of Bylvay totaling approximately $1.1 million and $1.1 million, respectively.

Royalty revenue

For agreements that include sales-based royalties, including milestone payments based on a sales level, and the license is deemed to be the predominant element to which the royalties relate, we recognize revenue no later than ( i) when the tied selling occurs, or (ii) when the performance obligation to which all or part of the royalty has been allocated has been satisfied (or partially satisfied).

For the three months ended September 30, 2022 and 2021, we recognized revenue of
$2.3 million and $2.6 million, respectively, related to our agreement with EA
Pharma. For the nine months ended September 30, 2022 and 2021, we recognized
revenue of $6.8 million and $7.0 million, respectively, related to our agreement
with EA Pharma. We expect that any future revenue recognized under our license
agreement with EA Pharma will fluctuate from quarter to quarter and year to year
as a result of royalties for the period from EA Pharma, as well as the uncertain
timing of future milestone payments, if any.

In October 2021, Albireo entered into an agreement with Jadeite Medicines Inc.
to license, develop and commercialize Bylvay within Japan. For the three and
nine months ended September 30, 2022 and 2021, no revenue was

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recognized under the agreement. Currently, Jadeite is commencing bridging and
other clinical studies to pursue New Drug Application (NDA) filings and obtain
approval in Japan for PFIC, ALGS, and biliary atresia indications. Future
royalty revenue recognized under our license agreement with Jadeite will not
commence until after NDA approval in Japan. The next anticipated milestone
payment will be received upon NDA filings in Japan for Bylvay and the timing of
future milestone payments, if any, is uncertain.

Operating costs and expenses

Product revenue cost

Cost of product revenue consists of manufacturing and quality headcount costs
for sales of Bylvay. All manufacturing costs incurred prior to FDA approval
totaled approximately $1.6 million and were not capitalized, and instead were
expensed as research and development expenses from 2020 to July 2021. As a
result, these costs were excluded from cost of product revenue for sales during
the three and nine months ended September 30, 2022.

Research and development costs

Research and development expenses consist primarily of personnel costs
(including salaries, benefits and stock-based compensation) for employees in
research and development functions, costs associated with nonclinical and
clinical development services, including clinical trials and related
manufacturing costs, third-party contract research organizations, or CROs, and
related services and other outside costs, including fees for third-party
professional services such as consultants. Our nonclinical studies and clinical
studies are performed by CROs. We expect to continue to focus our research and
development efforts on nonclinical studies and clinical trials of our product
candidates. As a result, we expect our research and development expenses to
continue to increase for the foreseeable future.

Our direct research and development expenses are tracked on a program-by-program
basis and consist primarily of external costs such as fees paid to CROs and
others in connection with our nonclinical and clinical development activities
and related manufacturing. We do not allocate employee costs or facility
expenses, including depreciation or other indirect costs, to specific product
development programs because these costs are deployed across multiple product
development programs and, as such, are not separately classified.

Successful development of our current and potential future product candidates is
highly uncertain. Completion dates and costs for our programs can vary
significantly by product candidate and are difficult to predict. As a result, we
cannot estimate with any degree of certainty the costs we will incur in
connection with development of any of our product candidates. We anticipate we
will make determinations as to which programs and product candidates to pursue
and how much funding to direct to each program and product candidate on an
ongoing basis in response to the results of ongoing and future clinical trials,
our ability to enter into licensing, collaboration and similar arrangements with
respect to current or potential future product candidates, the success of
research and development programs and our assessments of commercial potential.

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of personnel
costs (including salaries, benefits and stock-based compensation) for our
executive, finance and other administrative employees. In addition, selling,
general and administrative expenses include fees for third-party professional
services, including consulting, information technology, legal and accounting
services. Other selling, general and administrative expenses include marketing
expenses related to the commercial launch of Bylvay, as well as corporate
expenses.

Other operating expenses, net

Other operating expenses, net, primarily include foreign exchange gains or losses associated with the revaluation of intercompany loans.

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Gain from sale of Priority Review Voucher, net of transaction costs

Gain from sale of priority review voucher, net of transaction costs consists of
cash proceeds recorded in connection with the sale of the rare pediatric disease
priority review voucher received from the FDA in connection with the approval of
the Company's product Bylvay (odevixibat).

Loss on extinction of a note payable, net of discount

The loss on extinguishment of the note payable, net of discount, primarily includes the repayment of our loan and guarantee agreement with Hercules.

Interest expense, net

Interest expense, net consists primarily of non-cash interest expense recorded
in connection with the sale of future royalties, related to sales of elobixibat
in Japan, the purchase and sale agreement with Sagard, and both cash and
non-cash interest expense associated with our note payable, which we paid off on
July 27, 2022. In addition, interest expense, net includes interest income
associated with our interest-bearing cash and cash equivalents.

Provision for income taxes

Provision for income taxes consists of taxes related to the sale of the PRV,
offset by a tax benefit from our ordinary losses. We expect to maintain a full
valuation allowance against our net deferred tax assets for the year.

Significant Accounting Policies and Estimates

Our management's discussion and analysis of financial condition and results of
operations is based on our unaudited condensed consolidated financial
statements, which have been prepared in accordance with United States generally
accepted accounting principles for interim financial information. The
preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. We base our estimates and assumptions on historical experience and
on various assumptions that we believe are reasonable under the circumstances,
and we evaluate them on an ongoing basis. These estimates and assumptions form
the basis for making judgments about the carrying values of assets and
liabilities and the recording of revenues and expenses that are not readily
apparent from other sources. Actual results and experiences may differ
materially from these estimates and judgments. In addition, our reported
financial condition and results of operations could vary if new accounting
standards are enacted that are applicable to our business. Our critical
accounting policies and the methodologies and assumptions we apply under them
have not materially changed since March 1, 2022, the date we filed our Annual
Report on Form 10-K for the year ended December 31, 2021. Due to the
commercialization of Bylvay (odevixibat) the Company implemented accounting
policies related to revenue recognition and inventory. See Note 1, "Summary of
significant accounting policies and basis of presentation" for more information
on revenue recognition and inventory accounting policies. For more information
on other critical accounting policies, refer to our Annual Report on Form 10-K
for the year ended December 31, 2021.

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Results of operations for the three months ended September 30, 2022 and 2021

The following tables summarize our operating results for the three months ended
September 30, 2022 and September 30, 2021

                                                                        Three Months Ended September 30,           Change
                                                                           2022                   2021                $

                                                                                         (in thousands)
Revenue
Product revenue, net                                                 $           7,543      $           1,060    $     6,483
Royalty revenue                                                                  2,289                  2,604          (315)
Total revenue                                                                    9,832                  3,664          6,168
Cost and operating expenses:
Cost of product revenue                                                            612                    431            181
Research and development                                                        23,312                 21,083          2,229
Selling, general and administrative                                             20,564                 17,612          2,952
Other operating expense, net                                                         1                  3,719        (3,718)
Total cost and operating expenses                                               44,489                 42,845          1,644
Operating loss                                                                (34,657)               (39,181)          4,524
Other (loss) income
Gain from sale of priority review voucher, net of transaction costs                  -                103,387      (103,387)
Loss on extinguishment of note payable, net of discount                          (613)                      -          (613)
Interest expense, net                                                          (2,530)                (3,331)            801
Net (loss) income before income taxes                                         (37,800)                 60,875       (98,675)
Provision for income taxes                                                 
         -                  3,789        (3,789)
Net loss                                                             $        (37,800)      $          57,086    $  (94,886)


Revenue

                           Three Months Ended September 30,        Change
                              2022                   2021             $

                                          (in thousands)
Product revenue, net    $          7,543       $          1,060    $ 6,483
Royalty revenue                    2,289                  2,604      (315)
Total revenue           $          9,832       $          3,664    $ 6,168

Product revenue, net was $7.5 million for the three months ended September 30,
2022 compared with $1.1 million for the three months ended September 30, 2021
due to higher Bylvay unit product sales. Product revenue, net for the three
months ended September 30, 2022 was $4.1 million in the United States and $3.4
million in international markets. Product revenue, net for the three months
ended September 30, 2021 was $0.8 million in the United States and $0.3 million
in International markets.

Royalty revenue was $2.3 million for the three months ended September 30, 2022
compared with $2.6 million for the three months ended September 30, 2021, a
decrease of $0.3 million. The decrease relates to estimated royalty revenue to
be received from EA Pharma for elobixibat for the treatment of chronic
constipation.

Cost of product revenue

                              Three Months Ended September 30,         Change
                                2022                    2021             $

                                             (in thousands)
Cost of product revenue    $           612         $           431    $    181


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Cost of product revenue was $0.6 million for the three months ended September
30, 2022 compared with $0.4 million for the three months ended September 30,
2021. Following Bylvay approval, certain manufacturing and quality headcount
costs are now included in cost of product revenue. There were no material costs,
as materials related to current product sold were expensed prior to approval.
Bylvay was not approved until July 2021.

Research and development costs

                                                  Three Months Ended September 30,         Change
                                                    2022                    2021              $

                                                                 (in thousands)
Research and development expenses             $          23,312       $    

21,083 $2,229


Research and development expenses were $23.3 million for the three months ended
September 30, 2022 compared with $21.1 million for the three months ended
September 30, 2021, an increase of $2.2 million. The increase in research and
development expenses for the 2022 period was principally due to clinical program
activities and other costs as we continue to increase our headcount and program
activities. The increase in program activities related to Bylvay - PFIC
primarily related to clinical costs, regulatory costs and medical affairs and
were partially offset by ongoing Phase 3 clinical trials for biliary atresia and
Alagille syndrome. The other project costs decreased by $0.5 million primarily
due to a decrease in personnel costs primarily related to share-based
compensation.

The following table summarizes our major product development programs and third-party disbursements for each clinical-stage product candidate and pre-clinical programs for the three months ended September 30, 2022 and 2021.

                                                         Three Months Ended September 30,          Change
                                                           2022                    2021               $

                                                                         (in thousands)
Direct third-party project costs:
Bylvay - PFIC                                        $           6,847       $           3,697    $   3,150
Bylvay - biliary atresia and ALGS                                6,789     
             7,254        (465)
A3907                                                            1,407                   1,423         (16)
Preclinical                                                        949                     915           34
Total                                                $          15,992       $          13,289    $   2,703
Other project costs(1):
Personnel costs                                      $           6,420       $           7,741    $ (1,321)
Other costs(2)                                                     900                      53          847
Total                                                $           7,320       $           7,794    $   (474)
Total research and development costs                 $          23,312     

$21,083 $2,229

(1) The other project costs are split between several programs.

(2) Other costs include installation, procurement, consulting and overhead costs that

support multiple programs.

Selling, general and administrative expenses

                                                  Three Months Ended September 30,         Change
                                                    2022                    2021              $

                                                                 (in thousands)
Selling, general and administrative           $          20,564       $    

17,612 $2,952


Selling, general and administrative expenses were $20.6 million for the three
months ended September 30, 2022 compared with $17.6 million for the three months
ended September 30, 2021, an increase of $3.0 million. The increase is
attributable to personnel and related expenses as we continue to increase our
headcount, and commercialization activities related to Bylvay including our
sales force and support for global expansion efforts.

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  Table of Contents

Other operating expense, net

                                   Three Months Ended September 30,          Change
                                  2022                     2021                 $

                                                   (in thousands)
Other operating expense, net    $       1         $                3,719    $ (3,718)

Other operating expenses, net totaled $0.0 million for the three months ended
September 30, 2022 compared to $3.7 million for the three months ended
September 30, 2021. The difference is mainly related to changes in exchange rates during the two periods.

Gain from sale of Priority Review Voucher, net of transaction costs

                                                         Three Months Ended September 30,             Change
                                                       2022                       2021                   $

                                                                          (in thousands)
Gain from sale of priority review voucher, net
of transaction costs                               $           -        $                103,387    $ (103,387)


Gain from sale of Priority Review Voucher, net of aggregated transaction costs
$103.4 million for the three months ended September 30, 2021. There was no gain from the sale of the Priority Review Voucher, net for the three months ended
September 30, 2022.

Loss on extinguishment of note payable, net of discount

                                                                Three Months Ended September 30,          Change
                                                                    2022                      2021          $

                                                                                 (in thousands)
Loss on extinguishment of note payable, net of discount    $               

(613) $- (613) $


Loss on extinguishment of note payable, net of discount totaled $0.6 million for
the three months ended September 30, 2022 primarily related to the payoff of our
Loan and Security Agreement with Hercules. There was no loss on extinguishment
of note payable, net of discount for the three months ended September 30, 2021.

Interest expense, net

                           Three Months Ended September 30,         Change
                               2022                  2021             $

                                           (in thousands)
Interest expense, net    $        (2,530)      $        (3,331)    $    801


Interest expense, net totaled $2.5 million for the three months ended September
30, 2022 compared with $3.3 million for the three months ended September 30,
2021. The difference was principally attributable to interest expense associated
with the purchase and sale agreement with Sagard, partially offset by lower
non-cash interest expense recorded in connection with the sale of future
royalties related to sales of elobixibat in Japan, and interest income
associated with our interest bearing cash accounts.

Provision for income taxes

                                Three Months Ended
                                  September 30,           Change
                              2022           2021            $

                                          In thousands

Provision for income taxes – $ $3,789 ($3,789)

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  Table of Contents

We recorded a tax provision of $3.8 million for the three months ended September
30, 2021, primarily related to the sale of the PRV, offset by a tax benefit from
our ordinary losses. We expect to maintain a full valuation allowance against
the net deferred tax assets for the year. There was no provision for incomes
taxes for the three months ended September 30, 2022.

Results of Operations for the Nine Months Ended September 30, 2022 and 2021

The following table summarizes our operating results for the nine months ended September 30, 2022 and 2021

                                                                        Nine Months Ended September 30,           Change
                                                                           2022                  2021                $

                                                                                         (in thousands)
Revenue
Product revenue, net                                                 $          18,090     $           1,060    $    17,030
Royalty revenue                                                                  6,780                 6,998          (218)
Total revenue                                                                   24,870                 8,058         16,812
Cost and operating expenses:
Cost of product revenue                                                          1,622                   431          1,191
Research and development                                                        68,103                61,920          6,183
Selling, general and administrative                                             59,019                49,825          9,194
Other operating expense, net                                                     7,544                 7,873          (329)
Total cost and operating expenses                                              136,288               120,049         16,239
Operating loss                                                               (111,418)             (111,991)            573
Other (loss) income
Gain from sale of priority review voucher, net of transaction costs                  -               103,387      (103,387)
Loss on extinguishment of note payable, net of discount                          (613)                     -          (613)
Interest expense, net                                                          (8,152)              (10,675)          2,523
Net loss before income taxes                                                 (120,183)              (19,279)      (100,904)
Provision for income taxes                                                 
         -                 3,789        (3,789)
Net loss                                                             $       (120,183)     $        (23,068)    $  (97,115)


Revenue

                           Nine Months Ended September 30,          Change
                              2022                   2021             $

                                          (in thousands)

Product revenue, net    $          18,090       $         1,060    $ 17,030
Royalty revenue                     6,780                 6,998       (218)
Total revenue           $          24,870       $         8,058    $ 16,812

Product revenue, net was $18.1 million for the nine months ended September 30,
2022 compared with $1.1 million for the nine months ended September 30, 2021 due
to higher Bylvay unit product sales. Product revenue, net for the nine months
ended September 30, 2022 was $10.4 million in the United States and $7.7 million
in international markets. Product revenue, net for the nine months ended
September 30, 2021 was $0.8 million in the United States and $0.3 million in
International markets.

Royalty revenue was $6.8 million for the nine months ended September 30, 2022
compared with $7.0 million for the nine months ended September 30, 2021, a
decrease of $0.2 million. The decrease relates to estimated royalty revenue to
be received from EA Pharma for elobixibat for the treatment of chronic
constipation.

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  Table of Contents

Cost of product revenue

                              Nine Months Ended September 30,        Change
                                  2022                   2021           $

                                            (in thousands)
Cost of product revenue    $            1,622        $        431    $ 1,191


Cost of product revenue was $1.6 million for the nine months ended September 30,
2022 compared with $0.4 million for the nine months ended September 30, 2021.
Following Bylvay approval, certain manufacturing and quality headcount costs are
now included in cost of product revenue. There were no material costs, as
materials related to current product sold, were expensed prior to approval.
Bylvay was not approved until July 2021.

Research and development costs

                                       Nine Months Ended September 30,       Change
                                          2022                 2021             $

                                                     (in thousands)

Research and development costs $68,103 $61,920

$6,183


Research and development expenses were $68.1 million for the nine months ended
September 30, 2022 compared with $61.9 million for the nine months ended
September 30, 2021, an increase of $6.2 million. The increase in research and
development expenses for the 2022 period was principally due to clinical and
preclinical program activities and other costs as we continue to increase our
headcount and program activities. The increase in program activities related to
Bylvay - PFIC primarily related to clinical costs, regulatory costs and medical
affairs, ongoing Phase 3 clinical trials for biliary atresia and Alagille
syndrome and ongoing preclinical trials. The other project costs increased by
$1.1 million primarily due other costs offset by a decrease in personnel costs
primarily related to share-based compensation.

The following table summarizes our major product development programs and third-party disbursements for each clinical-stage product candidate and our pre-clinical programs for the nine months ended September 30, 2022 and 2021.

                                            Nine Months Ended September 30,    Change
                                             2022                2021             $

                                                        (in thousands)
Direct third-party project costs:
Bylvay - PFIC                           $       17,693      $        15,181    $ 2,512
Bylvay - biliary atresia and ALGS               19,168               18,008
     1,160
A3907                                            5,335                5,241         94
Preclinical                                      4,203                2,873      1,330
Total                                   $       46,399      $        41,303    $ 5,096
Other project costs(1):
Personnel costs                         $       19,239      $        19,668    $ (429)
Other costs(2)                                   2,465                  949      1,516
Total                                   $       21,704      $        20,617    $ 1,087
Total research and development costs    $       68,103      $        61,920

$6,183

(1) The other project costs are split between several programs.

(2) Other costs include installation, procurement, consulting and overhead costs that

     support multiple programs.


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  Table of Contents

Selling, general and administrative expenses

                                         Nine Months Ended September 30,       Change
                                            2022                 2021             $

                                                       (in thousands)

Selling, general and administrative expenses $59,019 $49,825

$9,194


Selling, general and administrative expenses were $59.0 million for the nine
months ended September 30, 2022 compared with $49.8 million for the nine months
ended September 30, 2021, an increase of $9.2 million. The increase is
attributable to personnel and related expenses as we continue to increase our
headcount, and commercialization activities related to Bylvay including our
sales force and support for global expansion efforts.

Other operating expense, net

                                   Nine Months Ended September 30,         Change
                                      2022                   2021             $

                                                  (in thousands)
Other operating expense, net    $          7,544       $          7,873    $ (329)

Other operating expenses, net totaled $7.5 million for the nine months ended
September 30, 2022 compared to $7.9 million for the nine months ended
September 30, 2021. The difference is mainly related to changes in exchange rates during the two periods.

Gain from sale of Priority Review Voucher, net of transaction costs

                                                          Nine Months Ended September 30,             Change
                                                        2022                      2021                   $

                                                                          (in thousands)
Gain from sale of priority review voucher, net
of transaction costs                                $           -        $               103,387    $ (103,387)


Gain from sale of Priority Review Voucher, net of aggregated transaction costs
$103.4 million for the nine months ended September 30, 2021. There was no gain from the sale of the Priority Review Voucher, net for the nine months ended
September 30, 2022.

Loss on extinguishment of note payable, net of discount

                                                                Nine Months Ended September 30,          Change
                                                                   2022                      2021           $

                                                                              (in thousands)
Loss on extinguishment of note payable, net of discount    $              

(613) $- (613) $


Loss on extinguishment of note payable, net of discount totaled $0.6 million for
the nine months ended September 30, 2022 primarily related to the payoff of our
Loan and Security Agreement with Hercules. There was no loss on extinguishment
of note payable, net of discount for the nine months ended September 30, 2021.

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  Table of Contents

Interest expense, net

                            Nine Months Ended September 30,        Change
                              2022                  2021              $

                                          (in thousands)
Interest expense, net    $       (8,152)      $        (10,675)    $ 2,523


Interest expense, net totaled $8.2 million for the nine months ended September
30, 2022 compared with $10.7 million for the nine months ended September 30,
2021. The difference was principally attributable to interest expense associated
with the purchase and sale agreement with Sagard, partially offset by lower
non-cash interest expense recorded in connection with the sale of future
royalties related to sales of elobixibat in Japan, and interest income
associated with our interest bearing cash accounts.

Provision for income taxes

                                 Nine Months Ended
                                  September 30,           Change
                              2022           2021            $

                                          In thousands

Provision for income taxes – $ $3,789 ($3,789)


We recorded a tax provision of $3.8 million for the nine months ended September
30, 2021, primarily related to the sale of the PRV, offset by a tax benefit from
our ordinary losses. We expect to maintain a full valuation allowance against
the net deferred tax assets for the year. There was no provision for incomes
taxes for the nine months ended September 30, 2022.

Cash and capital resources

Sources of liquidity

We anticipate that we will continue to generate losses for the foreseeable
future, and we expect the losses to increase as we commercialize Bylvay and
continue the development of and seek regulatory approvals for Bylvay in other
indications and for our other product candidates. We are subject to all of the
risks applicable to the development and commercialization of new pharmaceutical
products and may encounter unforeseen expenses, difficulties, complications,
delays and other unknown factors that may harm our business. We expect that we
will need substantial additional funding to complete development of and
potentially commercialize our other product candidates.

Our operations have historically been financed primarily through issuances of
equity or convertible debt, upfront fees paid upon entering into license
agreements, payments received upon the achievement of specified milestone events
under license agreements, grants and venture debt borrowings, the HealthCare
Royalty Partners III, L.P. (HCR) royalty monetization transactions and the
Sagard Healthcare Partners (Delaware) LP (Sagard) revenue interest transaction.
Our primary uses of capital are, and we expect will continue to be,
personnel-related costs, third party expenses associated with our research and
development programs, including the conduct of clinical trials, and
manufacturing-related costs for our other product candidates as well as
commercialization and pre-commercialization efforts.

From September 30, 2022our cash, cash equivalents and restricted cash were approximately $272.5 million.

During the first quarter of 2018, following the Japanese Ministry of Health,
Labour and Welfare's approval of elobixibat for the treatment of chronic
constipation in January 2018, we received a $44.5 million payment, net of
certain transaction expenses, from HCR under our royalty interest acquisition
agreement (RIAA). Additionally, this approval triggered a milestone payment to
us from EA Pharma of $11.2 million. In June 2020, we entered into an

                                       37

Contents

amendment to the RIAA with HCR pursuant to which HCR agreed to pay us an
additional $14.8 million, net of certain transaction expenses in exchange for
the elimination of the (i) $78.8 million cap amount on HCR's rights to receive
royalties on sales in Japan and sales milestones for elobixibat in certain other
territories that may become payable by EA Pharma and (ii) $15.0 million payable
to us if a specified sales milestone is achieved for elobixibat in Japan. As of
September 30, 2022, we have received approximately $59.3 million in upfront and
milestone payments from EA Pharma under a license agreement for the development
and commercialization of elobixibat in specified countries in Asia. We are
eligible to receive additional amounts of up to $4.2 million under the amended
agreement, if a specified regulatory event is achieved for elobixibat. To the
extent we receive future Japanese royalties, sales milestones or other specified
payments from EA Pharma, we are obligated to pay those amounts as royalty
interest payments to HCR under the RIAA.

On February 25, 2021, we filed an automatic shelf registration statement on Form
S-3 with the SEC, which became effective upon filing, pursuant to which we
registered for sale an unlimited amount of any combination of our common stock,
preferred stock, debt securities, warrants, rights and/or units from time to
time and at prices and on terms that we may determine, so long as we continued
to satisfy the requirements of a "well-known seasoned issuer" under SEC rules,
which we refer to as the 2021 Form S-3. Because we no longer qualified as a
well-known seasoned issuer, the 2021 Form S-3 was no longer available for us to
offer and sell securities pursuant to the 2021 Form S-3 following the filing of
our Annual Report on Form 10-K for the year ended December 31, 2021 on March 1,
2022. On February 25, 2021, we also entered into a sales agreement with Cowen,
which we refer to as the 2021 Sales Agreement, with respect to an at-the-market
offering program which provided for us to offer and sell, from time to time at
our sole discretion, shares of our common stock having an aggregate offering
price of up to $100.0 million. Subsequently in July 2021, we sold 7,508 shares
of our common stock for net proceeds of approximately $0.2 million pursuant to
the 2021 Sales Agreement. The 2021 Sales Agreement was terminated on August 15,
2022 in connection with us entering into the 2022 Sales Agreement (as defined
below) with Cowen.

On August 31, 2021, we entered into a definitive agreement to sell the rare
pediatric disease priority review voucher ("PRV") that we received from the FDA
in connection with the approval of the Company's product Bylvay (odevixibat),
for cash proceeds of $105.0 million. On September 28, 2021, we completed our
sale of the PRV and received net proceeds of $103.4 million, after deducting
commission costs, which was recorded as a gain from sale of priority review
voucher, net of transaction costs.

On August 16, 2022, we filed a new universal shelf registration on Form S-3 with
the SEC, which was declared effective on August 25, 2022, pursuant to which we
registered for sale up to $400.0 million of any combination of our common stock,
preferred stock, debt securities, warrants, rights and/or units from time to
time and at prices and on terms that we may determine, which we refer to as the
2022 Form S-3. The 2022 Form S-3 includes a prospectus covering up to $100.0
million in shares of common stock that can be issued and sold under a new sales
agreement we entered into with Cowen on August 15, 2022, which we refer to as
the 2022 Sales Agreement, with respect to an at-the-market offering program
under which we may offer and sell, from time to time at our sole discretion,
shares of our common stock having an aggregate offering price of up to $100.0
million. Subsequently in the third quarter of 2022, we sold 1,072,310 shares of
our common stock for net proceeds of approximately $20.6 million pursuant to the
2022 Sales Agreement.

On September 22, 2022, we entered into the Purchase Agreement with Sagard for
the sale of a revenue interest on sales generated from Bylvay (odevixibat) for
an aggregate purchase price of $115.0 million payable upon the closing of the
transaction, which occurred on September 22, 2022. In consideration for the
payment of such purchase price, we are obligated to pay to Sagard revenue
interest payments on the worldwide annual consolidated net sales of Bylvay, or
the Included Product Revenue, at a rate of (A) 12.5% for Included Product
Revenue up to and including $250.0 million, (B) 5% for Included Product Revenue
in excess of $250.0 million but less than or equal to $350.0 million, and (C)
prior to approval of a New Drug Application by the FDA of Bylvay for the
treatment of biliary atresia, or the Marketing Approval, 5% for Included Product
Revenue in excess of $350.0 million and, from and after Marketing Approval, the
rate is decreased to 1% for Included Product Revenue in excess of $350.0
million. These obligations payable to Sagard are capped at $184.0

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Contents

million which will be increased to $230.0 million if Sagard has not received
aggregate payments of $184.0 million by December 31, 2028. In addition, if the
aggregate amount of payments received by Sagard as of December 31, 2036 is less
than $230.0 million, we have agreed to pay Sagard the difference between the cap
and the aggregate amount of all payments received by Sagard as of December 31,
2036 (such difference, the True-Up Payment). In addition, at any time after the
closing, we have the right, but not the obligation, or the Call Option, to buy
out Sagard's interest in the payments at a repurchase price, or the Put/Call
Payment, equal to the difference between (a) a specified amount ranging from
$149.5 million up to $230.0 million, based on the period of time between the
closing and the exercise of the Call Option, and (b) the aggregate amount of
payments that have been received by Sagard. Further, Sagard has the right, but
not the obligation, to require us to make the Put/Call Payment at any time
during the 180 days following the occurrence of certain specified events,
including, but not limited to, a sale or merger of the Company resulting in a
change of control, certain uncured material breaches of the Purchase Agreement
by the Company, the withdrawal or suspension of marketing approval for Bylvay,
or any sale or other disposition of Bylvay by the Company within the United
States. We also agreed that the Put/Call Payment will be automatically payable
upon the occurrence of a bankruptcy event.

Cash flow

End of nine months September 30, 2022 and September 30, 2021

                                                          Nine Months Ended September 30,
                                                             2022                   2021

                                                                   (in thousands)
Net cash (used in) provided by:
Operating activities                                   $       (101,431)              (93,668)
Investing activities                                               (960)               102,922
Financing activities                                             127,666                 2,389
Total                                                  $          25,275      $         11,643
Effect of exchange rate changes on cash, cash
equivalents and restricted cash                                    (906)                 (303)
Net increase in cash, cash equivalents and
restricted cash                                                   24,369                11,340


Operating activities
Cash used in operating activities of $101.4 million during the nine months ended
September 30, 2022 was primarily a result of our $120.2 million net loss from
operations and a net decrease in assets and liabilities of $8.7 million. The net
decrease in operating assets and liabilities during the nine months ended
September 30, 2022 was primarily driven by decreases in accrued expenses,
inventory, and other current and long-term liabilities, offset by increases in
prepaid expenses and other current assets and accounts receivable, net and
accounts payable. This decrease was primarily offset by non-cash items,
including $10.7 million of share-based compensation expense, $8.3 million of
accretion of liability related to sale of future royalties and $7.0 million of
foreign currency adjustments. Cash used in operating activities of $93.7 million
during the nine months ended September 30, 2021 was primarily a result of our
$23.1 million net loss, $103.4 million net gain from the sale of PRV, and a net
increase in assets and liabilities of $1.8 million. The net increase in
operating assets and liabilities during the nine months ended September 30, 2021
was primarily driven by increases in accrued expenses, accounts payable,
accounts receivable, other assets and inventory, offset by decreases in other
current and long-term liabilities and prepaid expenses and other current assets.
This increase was offset by non-cash items, including $13.3 million of
stock-based compensation expense, $9.4 million of accretion of liability related
to sale of future royalties, and $7.8 million of foreign currency adjustments.

Investing activities

Cash used in investing activities of $1.0 million during the nine months ended
September 30, 2022 was primarily related to purchases of property and equipment.
Cash provided by investing activities of $102.9 million during the nine months
ended September 30, 2021 was primarily related to net proceeds from the sale of
the PRV offset by purchases of property and equipment.

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  Table of Contents

Financing activities

Cash provided by financing activities of $127.7 million during the nine months
ended September 30, 2022 was primarily related to proceeds from the royalty
agreement, net of issuance costs of $111.6 million, proceeds of issuance of
common stock, net of issuance costs of $20.6 million, proceeds from exercise of
options of $6.3 million offset by payment of principal on borrowings of $10.8
million. Cash provided by financing activities of $2.4 million during the nine
months ended September 30, 2021 was primarily related to proceeds from the
exercise of options.

Financing needs

Cash used to fund operating expenses is affected by the timing of when we pay
expenses, as reflected in the change in our outstanding accounts payable and
accrued expenses.

Our future funding needs will depend on many factors, including the following:

 ? Future revenue from commercial sales of Bylvay for patients with PFIC;

any adverse development or delay to our Bylvay program in ALGS, including

? the submission, review or approval of our Bylvay marketing applications in the

United States and Europe for ALGS and the costs and timing of our

pre-market preparations;

? the costs, design, duration and any potential delays of the pivotal clinical study

Bylvay’s trial in biliary atresia;

the scope, number, progress, initiation, duration, cost, results and timing of

? clinical trials and non-clinical studies of our current or future product

candidates;

? whether and to what extent milestones are achieved under our license

agreement with EA Pharma or any prospective licensee or collaborator;

our ability to perform our obligations under the purchase agreement with

? Sagard, including our ability to pay royalties and our ability to purchase

in Sagard’s interest or at Sagard’s request, in certain circumstances,

redeem Sagard’s interest in the royalty interest payments;

? the results and timing of regulatory reviews, approvals or other actions;

? our ability to obtain marketing approval for our product candidates;

our ability to establish and maintain licenses, collaborations or

? similar arrangements on favorable terms and whether and to what extent we

retain development or marketing responsibilities for any new

license, collaboration or similar agreement;

? the success of any other business, product or technology that we acquire or in

that we invest;

? our ability to maintain, expand and defend the reach of our

real estate portfolio;

? our ability to manufacture any approved product at commercially reasonable prices

terms;

? our ability to build and maintain a sales and marketing organization or

suitable third-party alternatives for any approved product;


 ? the number and characteristics of product candidates and programs that we
   pursue;


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  Table of Contents

? current and potential impacts of the COVID-19 pandemic on our business;

? global economic uncertainty, rising inflation, rising interest rates, market

commodity price disruptions and volatility;

? the costs of acquiring, licensing or investing in companies, products

candidates and technologies;

? our need and ability to hire additional scientific and medical staff

personal;

operating costs as a public company in United Statesincluding the

? need to implement and maintain financial and reporting systems and other

our company’s internal systems and infrastructure;

? market acceptance of our product candidates, to the extent that they are approved for

commercial sale; and

? the effect of competing technological and commercial developments.


We cannot be certain that we will be able to successfully commercialize Bylvay
or that we will be able to establish and maintain distribution arrangements. Our
failure or the failure of our distributors to successfully commercialize Bylvay
could have a material adverse effect on our financial position or results of
operations. In addition, we cannot be certain that we will be able to
successfully complete our pre-commercialization activities or research and
development programs or establish licensing, collaboration or similar
arrangements for our product candidates. Our failure or the failure of any
current or potential future licensee to complete research and development
programs for our product candidates could have a material adverse effect on our
financial position or results of operations.

We expect to continue to incur losses. Our ability to achieve and maintain
profitability is dependent upon the successful development, regulatory approval
and commercialization of our products and product candidates and achieving a
level of revenues adequate to support our cost structure. We may never achieve
profitability.

If the conditions for raising capital are favorable, we may seek to finance
future cash needs through public or private equity or debt offerings or other
financings. Additionally, if we need to raise additional capital to fund our
operations, complete clinical trials, or potentially commercialize our product
candidates, we may likewise seek to finance future cash needs through public or
private equity or debt offerings or other financings. The necessary funding may
not be available to us on acceptable terms or at all.

We have an effective universal shelf registration on Form S-3 with the SEC
pursuant to which we registered for sale up to $400.0 million of any combination
of our common stock, preferred stock, debt securities, warrants, rights and/or
units from time to time and at prices and on terms that we may determine, which
we refer to as the 2022 Form S-3. The 2022 Form S-3 includes a prospectus
covering up to $100.0 million in shares of common stock that can be issued and
sold under a new sales agreement we entered into with Cowen on August 15, 2022,
which we refer to as the 2022 Sales Agreement, with respect to an at-the-market
offering program under which we may offer and sell, from time to time at our
sole discretion, shares of our common stock having an aggregate offering price
of up to $100.0 million. Subsequently in the third quarter of 2022, we sold
1,072,310 shares of our common stock for net proceeds of approximately $20.6
million pursuant to the 2022 Sales Agreement. As of September 30, 2022,
approximately $379.2 million of securities remain available for issuance under
the 2022 Form S-3, including up to $79.2 million of our common stock that we may
offer and sell, from time to time at our discretion, through Cowen as sales
agent under the 2022 Sales Agreement.

The sale of additional equity or convertible debt securities may result in
significant dilution to our stockholders, and the terms may include liquidation
or other preferences that adversely affect the rights of our stockholders. The
incurrence of additional debt financing would result in debt service obligations
and the instruments governing such debt may provide for operating and financing
covenants that would restrict our operations. We may also seek to finance future
cash needs through potential future licensing, collaboration or similar
arrangements. These arrangements may not be available on acceptable terms or at
all, and we may have to relinquish valuable rights to our technologies, future
revenue streams, research programs or product candidates or to grant licenses on
terms that may not be favorable to us.

                                       41

Contents

If adequate funds are not available, we may be required to delay, reduce the
scope of or eliminate our development programs or obtain funds through
third-party arrangements that may require us to relinquish rights to certain
product candidates that we might otherwise seek to develop or commercialize
independently.

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