Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 “Financial Statements and Supplementary Data” and included elsewhere in this Annual Report. This discussion and analysis contains forward-looking statements based upon our current beliefs, estimates, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report.

Overview

We are a biopharmaceutical company focused on the identification, acquisition, development and commercialization of novel therapies for debilitating rare and orphan diseases. We focus on diseases for which the unmet medical need is high and the biology for treatment is clear.

Our product LIVMARLI (maralixibat) oral solution (“Livmarli”), a novel, orally administered, minimally-absorbed IBAT inhibitor, is approved for the treatment of cholestatic pruritus in patients with Alagille syndrome ("ALGS") one year of age and older in the United States and for the treatment of cholestatic pruritus in patients with ALGS two months and older in Europe. We believe the prevalent patient population in the United States is approximately 2,000 to 2,500 pediatric ALGS patients, which, based on our current expectations and beliefs, represents a greater than $500.0 million market opportunity. ALGS is estimated to impact one out of every 30,000 births globally. We market and commercialize Livmarli in the United States and certain countries in Europe through our specialized and focused commercial team. We have also entered into license and distribution agreements with several rare disease companies for the commercialization of Livmarli in additional countries. We are also developing Livmarli for PFIC and BA. We have submitted an sNDA to the FDA based on positive data from our Phase 3 study of Livmarli in patients with PFIC. We also expect to report topline data from our EMBARK Phase 2b clinical trial in BA in the second half of 2023.

We are advancing our second product candidate, volixibat, a novel, oral, minimally-absorbed agent designed to inhibit IBAT, for the treatment of adult patients with cholestatic liver diseases. We are developing volixibat for the treatment of PSC and PBC. Volixibat has been studied in over 400 adults for up to 48 weeks. Clinical trials of volixibat have shown significant activity on IBAT and bile acid markers such as 7αC4, fecal bile acids and cholesterol, demonstrating potent biological activity. We expect to conduct an interim analysis of our VISTAS Phase 2b clinical trial in PSC in mid-2023 and report interim data from our VANTAGE Phase 2b clinical trial in PBC in the second half of 2023.

We were incorporated in May 2018 and commenced operations in November 2018. To date, we have focused primarily on acquiring and in-licensing our product candidates, organizing and staffing our company, business planning, raising capital, advancing our product candidates through clinical development, preparing for commercialization of our product candidates, commercializing Livmarli, and conducting business development activities relating to, among other things, portfolio expansion through collaborations and acquisitions.

We have only one product approved for commercial sale and have not generated significant revenues from product sales, net as of December 31, 2022. We expect to incur significant operating losses for the foreseeable future. Since inception, we have funded our operations to date primarily through debt, equity, revenue interest financings and, to a lesser extent, cash from our product sales, net and collaboration revenue.

Financing Transactions

In August 2020, the Securities and Exchange Commission (“SEC”) declared effective a registration statement on Form S-3 (“Shelf Registration”) covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into a sales agreement (“Sales Agreement”) with SVB Securities LLC (“SVB Securities”) pursuant to which we may elect to issue and sell, in an at the market offering, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through SVB Securities acting as the sales agent and/or principal.

In August 2022, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,478,261 shares of common stock at a price to the public of $23.00 per share. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 521,739 additional shares of our common stock at the public offering price, less the underwriting discounts, commissions and offering expenses, which the underwriters exercised in full. The underwritten public offering, including the underwriters’ exercise of their option, resulted in net proceeds to us of $86.1 million after deducting underwriting discounts, commissions and offering expenses.

During the year ended December 31, 2022, we issued and sold 1,160,915 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $19.01 per share, resulting in aggregate gross proceeds to us of $22.1 million. The net proceeds after deducting sales commissions to SVB Securities and other issuance expenses were approximately $21.3 million. Through December 31, 2022, we have issued and sold an aggregate of 1,466,884 shares of common stock pursuant to the Sales Agreement, resulting in aggregate gross proceeds to us of $28.7 million. The remaining capacity under the Sales Agreement is approximately $46.3 million as of December 31, 2022. In January and February 2023, we sold 658,206 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $22.79 per share, resulting in net proceeds of $14.5 million.

In December 2020, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,750,000 shares of common stock at a public offering price of $20.00 per share, resulting in net proceeds of $70.0 million after deducting underwriting discounts, commissions and offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 562,500 additional shares of our common stock at the public offering price, less the underwriting discounts and commissions. In January 2021, the underwriters exercised their option for 375,654 shares of our common stock, resulting in net proceeds of $7.1 million after deducting underwriting discounts.

Financial Overview

Our net loss was $135.7 million and $84.0 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $392.8 million compared to $257.2 million as of December 31, 2021. As of December 31, 2022, we had cash, cash equivalents, restricted cash equivalents and investments of $251.7 million, compared to $261.5 million as of December 31, 2021, in each case, $100.0 million of which is restricted from use under the terms of the Revenue Interest Purchase Agreement ("RIPA"), as amended September 2021, by and among us and Mulholland SA LLC, an affiliate of Oberland Capital LLC, as agent for the purchasers party thereto (the "Purchasers"), and the Purchasers.

We anticipate we will continue to generate losses for the foreseeable future as we continue commercial activities for Livmarli, conduct our ongoing and planned clinical trials, seek regulatory approvals for our product candidates and make potential milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. We expect our product sales of Livmarli will continue to increase on an annual basis, though seasonality in demand and international product ordering may result in quarterly fluctuations. We have also entered into collaboration arrangements with other companies whereby we are entitled to receive upfront and license fees, research and development funding, development and sales-based milestones, and tiered royalties based on sales of commercialized products. As a result, our net losses may fluctuate significantly from quarter-to-quarter and year-to-year.

We expect to satisfy future cash needs through existing capital balances, product revenue from Livmarli and through a combination of equity offerings, debt financings or other capital sources, collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate the development of one or more of our product candidates or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Prior to the regulatory approval of Livmarli, the manufacturing and related costs were expensed as research and development as any future economic benefit was not considered probable; accordingly, these costs were not

capitalized and as a result gross margins resulting from product sales will initially be higher until we deplete inventories that we had expensed prior to receiving approval. We expect we will substantially deplete such inventories within the next 12 months from the filing of the Annual Report.

Geopolitical and Macroeconomic Developments

The coronavirus (including its variants, “COVID-19”) pandemic has had a significant economic impact across the global marketplace presenting challenges to maintaining business continuity and dramatically changing the ways in which we live and interact with others. While vaccines have become widely available in certain countries, and businesses and economies have reopened, the status of global economic recovery remains uncertain and unpredictable, and will continue to be impacted by developments in the pandemic including any subsequent waves of outbreak or new variant strains of COVID-19 which may require re-closures or other preventative measures. As public health directives surrounding the pandemic have relaxed, our offices have reopened and we are permitting travel and in-person events, taking into consideration government restrictions, employee safety, and health risks. Our approach may vary among geographies depending on appropriate health protocols, and may change at any time. Additionally, our efforts to reopen our offices safely may not be successful, could expose our employees to health risks, and could involve additional costs or liability.

Due to the ongoing military conflict between Ukraine and Russia, the U.S. and global financial markets experienced volatility, which has led to disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally. In connection with the military conflict, the United States, United Kingdom and European Union (“EU”), along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia and related sanctions, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity in both Europe and globally, and has introduced significant uncertainty into global markets. As a result, our business and results of operations may be adversely affected by the ongoing military conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict.

Although we did not see a significant financial impact to our business operations as a result of recent geopolitical and macroeconomic developments, such as the COVID-19 pandemic and the ongoing Ukraine-Russia conflict for the year ended December 31, 2022, there may be potential impacts to our business in the future that are highly uncertain and difficult to predict such as disruptions or restrictions in our supply chain, disruption or restrictions on our employees’ ability to travel, disruptions to or delays in ongoing non-clinical trials, clinical trials, third-party manufacturing supply and other operations, inability for patients to see their healthcare providers and access our product and product candidates, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic or adverse geopolitical and macroeconomic concerns, interruptions or delays in the operations of the FDA or other regulatory authorities, continued increases in inflation and interest rates, changes in availability and cost of credit and our ability to raise capital and conduct business development activities. The ultimate impact of these geopolitical and macroeconomic developments, as well as any lasting effects on our revenue and the way we conduct our business, is highly uncertain and subject to continued change, and we recognize that they may continue to present unique challenges for us.

We continue to believe that existing cash, cash equivalents and investments, excluding restricted cash equivalents, and existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditures, debt service requirements and other business development initiatives that we plan to strategically pursue in the 12 months from the issuance of the consolidated financial statements included in this Annual Report. However, should adverse geopolitical and macroeconomic events, such as the COVID-19 pandemic, the ongoing Ukraine-Russia conflict and related sanctions, and any associated recession or depression continue for a prolonged period, our results of operations, financial condition, liquidity and cash flows could be materially impacted as a result of a lower likelihood of effectively and efficiently developing new medicines and successfully commercializing our products.

License Agreements

Assignment and License Agreement with Shire (Takeda)

In November 2018, we entered into the Shire License Agreement with Shire, which was subsequently acquired by Takeda, in which we were granted an exclusive, royalty bearing worldwide license to develop and commercialize our two product candidates, Livmarli and volixibat. As part of the Shire License Agreement, we were assigned license agreements held by Shire with Satiogen, Pfizer, and Sanofi (collectively, “Assigned License Agreements”).

Under the Shire License Agreement and Assigned License Agreements, to date, we have paid aggregate development regulatory and sales milestones of $66.0 million related to our Livmarli and volixibat programs.

Satiogen Acquisition

In May 2022, we completed the acquisition of Satiogen for total consideration of $24.2 million. At the closing of the acquisition, Satiogen’s assets consisted of cash and intangible assets related to developed technology. Through the transaction, we obtained all Satiogen-owned intellectual property relating to Livmarli and volixibat. The transaction resulted in a reduction of total licensing royalty obligations for Livmarli and volixibat.

The total potential consideration for the acquisition consisted of 841,792 shares of common stock and approximately $2.6 million in cash, excluding $0.2 million of stock option exercise prices deemed to have been paid immediately prior to the acquisition, in respect of an equivalent amount of cash on the books of Satiogen acquired by us at closing.

Components of Results of Operations

Revenue

Product Sales, Net

Our approved product, Livmarli, was approved for the treatment of cholestatic pruritus in patients with ALGS one year of age and older in the United States and for the treatment of cholestatic pruritus in patients with ALGS two months and older in Europe. We expect our product sales of Livmarli will continue to increase on an annual basis, though seasonality in demand and international product ordering may result in quarterly fluctuations.

Our U.S. revenue from product sales, net further depends on our prescription mix of commercial payors, Medicaid and free drugs under our patient assistance program. We expect our prescription mix and resulting gross to net adjustment in the U.S. to remain consistent; however, we cannot reliably estimate it given our limited experience in the market. Our rest of world revenue from product sales, net primarily depends on our contractual obligations with our distributors and results of pricing negotiations with governmental authorities in certain European countries where we launch Livmarli and expect to launch our product candidates, if approved. In addition, in certain countries, governments place large periodic orders. The timing of these orders can be inconsistent and can create quarter-to-quarter variation in revenue.

License Revenue

Under the exclusive licensing agreements with CANbridge and GC Biopharma, we have recognized as revenue the upfront nonrefundable payments related to the licenses granted upon satisfaction of certain performance obligations. Pursuant to the agreements, we are eligible to receive future milestone payments. These milestone payments are fully constrained and will be recognized in revenue in the period when it is probable that a significant reversal of cumulative revenue recognized for the contract would not occur. We are also eligible to receive royalty payments related to the agreements, which will be recognized as the underlying product sales occur.

Our license revenue is dependent upon our licensees’ achievement of future milestones, which are not within our control, and we are unable to reliably estimate the timing of such revenues.

Cost of Sales

Cost of sales consist of third party manufacturing costs, personnel, facility and other costs of manufacturing commercial products, transportation and freight, amortization of finite-lived intangible assets, amortization of capitalized intangibles associated with contractual milestone payments paid to licensors upon certain regulatory approval and sales-based events and royalty payments payable on net sales of Livmarli under licensing agreements. Cost of sales may also include period costs related to certain manufacturing services and inventory adjustment charges. Prior to receiving approval from the FDA in September 2021 to market and sell Livmarli in the United States, we expensed all costs incurred related to the manufacture of Livmarli as research and development expense because of the inherent risks associated with the development of a drug candidate, the uncertainty about the regulatory approval process and the lack of history as a company of regulatory approval of drug candidates. Our inventory of Livmarli produced prior to FDA approval is available for commercial or clinical use.

Operating Expenses

Research and Development Expenses

Research and development expenses primarily relate to clinical development and manufacturing activities of our product candidates. Our research and development expenses include, among other things:

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salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions;

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external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials;

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expenses related to drug formulation development and the production of clinical trial supplies, including fees paid to contract manufacturers;

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licensing milestone payments related to development or regulatory events;

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research and development funding for collaboration arrangements;

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expenses related to non-clinical studies;

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expenses related to compliance with drug development regulatory requirements; and

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other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies.

We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Upfront payments, research and development funding and milestone payments made to third parties in connection with licenses and research and development collaborations are expensed as incurred.

Our research and development expense may increase in the future as we continue to develop our current product candidates and look to acquire and develop additional product candidates.

Selling, General and Administrative Expense

Sales and marketing expense, which is a component of selling, general and administrative expense, primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. General and administrative expense, which is a component of selling, general and administrative expense, primarily consisted of corporate support and other administrative expenses, including employee-related expenses.

We anticipate that our selling, general and administrative expenses will increase in the future to support our continued commercialization efforts of Livmarli in the United States and internationally as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include increased costs related to hiring of additional personnel and fees to outside consultants to support further marketing, legal, tax and accounting activities.

Interest Income

Interest income consists of interest earned on our cash equivalents and investments.

Interest Expense

Interest expense is related to the RIPA. Costs during the year consist primarily of costs associated with our liability and non-cash interest costs associated with the amortization of the related debt discount and deferred issuance costs. We impute interest expense associated with this liability using the effective interest rate method which is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability consists of the gain or loss from remeasurement of the compound derivative liability related to the revenue interest liability during the period.

Gain from Sale of Priority Review Voucher, Net

Gain from the sale of priority review voucher ("PRV") represents the sale of the PRV that was granted to us by the FDA in September 2021 along with the approval of Livmarli for the treatment of cholestatic pruritus in patients with ALGS one year of age and older.

Other Income (Expense), Net

Other income (expense), net consists of gain or loss from remeasurement of the liabilities associated with the common stock to be issued in connection with the acquisition of Satiogen after the satisfaction of certain purchase price adjustments and indemnification obligations that may arise during the 12 month period following the asset acquisition date (“Indemnification Holdback”) and the liability associated with the common stock to be issued in connection with the acquisition of Satiogen as contingent consideration upon achievement of a certain milestone (“Contingent Milestone”) both of which were recorded in connection with our acquisition of Satiogen and transactional currency exchange gain or loss.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported, including the amount of assets, liabilities, expenses and the disclosure of contingent assets and liabilities. Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases its estimates on historical experience, known trends and events, and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Intangible Assets, Net

Intangible assets, net are measured at their fair values as of the acquisition date or, in the case of commercial milestone payments, the date they become due. Intangible assets are generally amortized on a straight-line basis over their estimated useful lives. We base the useful lives and related amortization expense on the period of time we estimate the assets will generate net product sales or otherwise be used. We also periodically review the lives assigned to our intangible assets to ensure that our initial estimates do not exceed any revised estimated periods from

which we expect to realize cash flows from the technologies. If a change were to occur in any of the above-mentioned factors or estimates, the likelihood of a material change in our reported results would increase.

We evaluate our intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the intangible asset may be impaired, we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the technology over the remaining amortization period, we reduce the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period.

We make significant judgments in relation to the valuation of intangible assets resulting from asset acquisitions, particularly in the forecasts of future operating results that are used in the discounted cash flow valuation models. It is possible that plans may change and estimates used may prove to be inaccurate. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

Product Sales, Net

Revenues from direct product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, including amounts from payors and other third parties on behalf of our customers. For revenues from partner markets, we record net product sales based on the estimated variable consideration to be received when the product is sold. The transaction price, which may include fixed or variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the product sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. We recognize our best estimate of the consideration that we expect to receive when control of the inventory is transferred to our customer and revenue is recognized. Estimates are reviewed and updated quarterly as additional information becomes known. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

Government Rebates

We are obligated to pay rebates for mandated discounts under the Medicaid Drug Rebate Program. Our rebate calculations may require estimates, including estimates of customer mix, to determine which sales will be subject to rebates and the amount of such rebates. We update estimates and assumptions on a quarterly basis and record any necessary adjustments to revenue in the period identified. Estimated rebates are recorded as a reduction of revenue in the period the related sale is recognized. To date, actual government rebates have not differed materially from our estimates.

Revenue Interest Liability, Net

We impute interest expense associated with this liability using the effective interest rate method. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The effective interest rate on the liability may vary during the term of the agreement depending on a number of factors, including the level of actual and forecasted product sales, net. We evaluate the interest rate quarterly based on actual product sales, net and on our current product sales, net forecasts utilizing the prospective method. A significant increase or decrease in product sales, net will materially impact the revenue interest liability, interest expense and the time period for repayment.

At December 31, 2022, the revenue interest liability is calculated using our current estimate of global forecasted net sales of Livmarli and impacted by a debt discount comprising the estimated value of a bifurcated derivative liability and issuance costs incurred.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We accrue and expense clinical trial activities performed by third parties based upon estimates of the proportion of work completed over the life of the individual study and patient enrollment rates in accordance with agreements established with clinical research organizations, clinical trial sites and other vendors associated with the clinical trials. We determine the estimates by reviewing contracts, vendor agreements and purchase orders and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

We make estimates of accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Uncertain Tax Positions

We are subject to income taxes in the United States and certain foreign jurisdictions. The evaluation of uncertain tax positions involves significant judgment in the interpretation and application of GAAP and complex tax laws. Although management believes our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our reserves. Reserves are adjusted considering changing facts and circumstances, such as the closing of a tax examination or the refinement of an estimate. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

Results of Operations for the Years Ended December 31, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (in thousands):

Year Ended December 31,

Revenue:

Operating expenses:

Other income (expense):

Change in fair value of derivative liability 906 (732 ) 1,638

Gain from sale of priority review voucher, net — 108,000 (108,000 )

(Benefit from) provision for income taxes (6,406 ) 37 (6,443 )

Product Sales, Net

Product sales, net was $75.1 million for the year ended December 31, 2022, compared to $3.1 million for the year ended December 31, 2021. The increase in product sales, net was a result of our continued commercialization of Livmarli in the United States, and, to a lesser extent, from international sales through partner market supply orders.

License Revenue

License revenue was $2.0 million for the year ended December 31, 2022, compared to $16.0 million for the year ended December 31, 2021. The decrease in license revenue was primarily due to the satisfaction of certain performance obligations associated with the licenses granted under the license agreements with CANbridge and GC Biopharma in 2021. We did not have any comparable performance obligations in 2022.

Cost of Sales

For the year ended December 31, 2022, cost of sales was $12.4 million, compared to $1.9 million for the year ended December 31, 2021, and primarily consisted of royalties payable on net sales of Livmarli under licensing agreements, amortization of capitalized commercial milestone payments and acquired intangibles associated with our acquisition of Satiogen and indirect overhead costs associated with the manufacturing and distribution of Livmarli. There were minimal inventory costs reflected in cost of sales as inventory related to current product sold were expensed as research and development costs prior to Livmarli approval in the United States in September 2021.

Research and Development Expenses

The following table summarizes the period-over-period changes in research and development expenses relating to our product candidates in development for the periods indicated (in thousands):

Year Ended December 31,

Product-specific costs:

Non product-specific costs:

License fees (milestone payments) — 23,161 (23,161 )

Research and development expenses were $106.8 million for the year ended December 31, 2022, a decrease of $24.6 million compared to the year ended December 31, 2021. The decrease was primarily due to:

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for Livmarli programs, an increase of $4.7 million, primarily due to an increase of $6.6 million in clinical trial expenses primarily for the EMBARK Phase 2b clinical trial for BA, a long term rollover study from the MARCH Phase 3 clinical trial for PFIC and an infant safety study offset by $1.4 million in clinical trial expenses for the MARCH Phase 3 clinical trial, which was completed during 2022 and $0.7 million in manufacturing activities as a result of prior year completion of an NDA registrational production;

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for volixibat programs, an increase of $5.5 million, primarily due to an increase of $4.8 million in clinical trial expenses for PSC, PBC and ICP and non-clinical studies of $0.5 million;

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for personnel related expenses, an increase of $3.3 million, related to an increase in employee headcount to support our development pipeline;

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for other expense, an increase of $3.8 million, primarily due to outside consulting expenses, travel expenses and general overhead expenses;

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for license fees, a decrease of $23.2 million, related to developmental milestone payments for the year ended December 31, 2021 consisting of $15.0 million associated with the acceptance of our NDA for filing of Livmarli for the treatment of cholestatic pruritus in patients with ALGS one year of age and older, $4.0 million associated with the initiation of the VISTAS Phase 2b clinical trial of volixibat in PSC and the EMBARK Phase 2 clinical trial of maralixibat for BA, and $4.2 million in an upfront fee in connection with the Vivet Collaboration Agreement; and

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for collaboration funding, a decrease of $18.9 million due to a collaboration agreement with Vivet Therapeutics SAS ("Vivet"), which we terminated in 2021.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $89.1 million for the year ended December 31, 2022, an increase of $29.8 million compared to the year ended December 31, 2021. The increase was primarily due to an increase of $15.8 million in personnel and other compensation related expenses, including an increase of $3.9 million in stock-based compensation, reflecting an increase in the number of our selling, marketing and administrative employees to support commercial activities for Livmarli and increased requirements of operating as a public company, an increase of $10.9 million in advertising, promotion and patient support expenses associated with commercial activities for Livmarli, and an increase of $2.6 million in expenses primarily related to general legal and public relations, international expansion activities and other general administrative expenses.

Interest Income

Interest income was $3.9 million for the year ended December 31, 2022, an increase of $3.5 million compared to the year ended December 31, 2021. The increase was primarily due to higher interest earned on our cash equivalents and investment balances largely due to higher treasury yields.

Interest Expense

Interest expense was $16.0 million for the year ended December 31, 2022, a decrease of $1.6 million compared to the year ended December 31, 2021. Interest expense is related to the accreted interest recognized on the revenue interest liability in connection with the RIPA, with the decrease due to lower effective interest rate resulting from changes in estimates that enable the debt to be repaid in full over the anticipated life of the arrangement.

Change in Fair Value of Derivative Liability

Change in fair value of derivative liability was $0.9 million gain for the year ended December 31, 2022, compared to a $0.7 million loss for the year ended December 31, 2021. For the year ended December 31, 2022, the gain was related to the remeasurement of the derivative liability at December 31, 2022 and reflects a decrease in value of the put option associated with the RIPA resulting from the reduction in time for the put option to occur. For the year ended December 31, 2021, the loss was related to the remeasurement of the derivative liability at December 31, 2021 and reflects the net increase in the value of the underlying put option associated with the RIPA primarily resulting from changes in forecast product sales, net.

Other income (expense), net

Other income (expense), net was income of $0.4 million for the year ended December 31, 2022, compared to expense of $0.6 million for the year ended December 31, 2021. The change is primarily due to a gain resulting from the fair value remeasurement in the Satiogen Indemnification Holdback and Contingent Milestone liabilities since the acquisition date, which was primarily driven by a decrease in price of our common stock as of December 31, 2022.

Gain from Sale of Priority Review Voucher, Net

We did not have, and therefore did not sell, a PRV in the year ended December 31, 2022. Gain from the sale of the PRV, net of transaction costs, totaled $108.0 million for the year ended December 31, 2021.

Liquidity and Capital Resources

Overview

Since inception, we have funded our operations primarily through debt, equity, revenue interest financings and, to a lesser extent, cash from our product sales and license and collaboration revenue. We had $251.7 million of cash, cash equivalents, restricted cash equivalents and investments as of December 31, 2022, compared to $261.5 million as of December 31, 2021, in each case, inclusive of $100.0 million restricted cash equivalents. Since inception, we have incurred operating losses and negative cash flows from operations. As of December 31, 2022, we had an accumulated deficit of $392.8 million, compared to $257.2 million as of December 31, 2021.

In August 2020, the SEC declared effective the Shelf Registration covering the sale of up to $300.0 million of our securities. Also, in August 2020, we entered into the Sales Agreement with SVB Securities pursuant to which we may elect to issue and sell, in an at the market offering, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through SVB Securities acting as the sales agent and/or principal. During the year ended December 31, 2022, we issued and sold 1,160,915 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $19.01 per share, resulting in aggregate gross proceeds to us of $22.1 million. The net proceeds after deducting sales commissions to SVB Securities and other issuance expenses were approximately $21.3 million. Through December 31, 2022, we have issued and sold an aggregate of 1,466,884 shares of common stock pursuant to the Sales Agreement, resulting in aggregate gross proceeds to us of $28.7 million. The remaining capacity under the Sales Agreement is

approximately $46.3 million as of December 31, 2022. In January and February 2023, we sold 658,206 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $22.79 per share, resulting in net proceeds of $14.5 million.

In December 2020, we completed an underwritten public offering of our common stock pursuant to the Shelf Registration. We sold 3,750,000 shares of common stock at a public offering price of $20.00 per share, resulting in net proceeds of $70.0 million after deducting underwriting discounts, commissions and offering expenses. In addition, we granted the underwriters an option, exercisable for 30 days, to purchase up to 562,500 additional shares of our common stock at the public offering price, less the underwriting discounts and commissions. In January 2021, the underwriters partially exercised their option and purchased 375,654 shares of our common stock at a price of $20.0 per share, resulting in net proceeds of $7.1 million after deducting underwriting discounts.

On September 9, 2022, 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 from time to time in one or more offerings an unlimited amount of any combination of our common stock, preferred stock, debt securities and warrants, so long as we continue to satisfy the requirements of a “well-known seasoned issuer” under SEC rules. This automatic shelf registration statement will remain in effect for up to three years from the date it became effective. As of December 31, 2022, we have not issued any securities pursuant to the automatic shelf registration statement. We may lose well-known seasoned issuer status in the future upon the occurrence of certain events prescribed by the Securities Act or the rules and regulations of the SEC occurring after we file this Annual Report if, at the time of those certain events, the worldwide market value of our voting and non-voting common equity held by our non-affiliates does not equal $700.0 million or more, calculated as of a date within 60 days prior to such events. If that were to occur and we were no longer considered a well-known seasoned issuer, we anticipate needing to amend our automatic shelf registration statement on Form S-3 prior to the occurrence of such events in order to sell securities under that Form S-3 on an ongoing basis.

Based on our current and anticipated level of operations, including cash generated from sales of Livmarli, we believe our cash, cash equivalents and investments, excluding restricted cash equivalents, will be sufficient to fund current operations through at least the next 12 months and beyond from the filing of this Annual Report. Our cash, cash equivalents and investments include money market funds, government agency securities and commercial paper. We maintain established guidelines relating to diversification and maturities of our investments to preserve principal and maintain liquidity.

We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, continue commercialization activities for Livmarli and potentially expand into additional markets, hire additional staff, including clinical, scientific, operational, financial and management personnel and pay potential development and commercial milestones in connection with our license agreements.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, selling, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Although Livmarli has been approved for the treatment of cholestatic pruritus in patients with ALGS in patients one year of age and older in the United States and for the treatment of cholestatic pruritus in patients two months of age and older in Europe, and we expect product revenues to increase as we continue commercial activities, Livmarli may not achieve commercial success. Our principal sources of liquidity are cash from the sale of

our equity securities, product revenue from sales of Livmarli, and, to a lesser extent, from our collaboration agreements. Until such time, if ever, as we can generate sufficient product revenue from sales of Livmarli, our current product candidates or any future product candidates, if approved, to fund operations, we expect to finance our cash needs through a combination of equity offerings, debt financings, revenue interest purchase agreements and potential collaboration, license or development agreements. Our primary cash needs are for day-to-day operations, to pay our debt obligations under the RIPA and to fund our working capital requirements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required 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. As a result of adverse geopolitical and macroeconomic developments, such as the COVID-19 pandemic, actions taken to slow its spread, the ongoing military conflict between Ukraine and Russia and related sanctions, actual and anticipated changes in interest rates, economic inflation and the responses by central banking authorities to control such inflation, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

In addition to ongoing capital needs to fund our ongoing operations, our material cash requirements include the following contractual and other obligations.

Pursuant to the RIPA, the Purchasers have a right to receive the Revenue Interests based on product sales, net of Livmarli. The amounts of quarterly Revenue Interest Payments will change each reporting period based upon the underlying product sales, net of Livmarli and will initially be 9.75% of product sales, net. Under the RIPA, every $100.0 million of net sales generated, less than or equal to $350 million in an annual aggregate, would result in a repayment obligation of approximately $9.8 million. Additionally, every $100.0 million of net sales generated in excess of $350.0 million in an annual aggregate would result in a repayment obligation of approximately $2.0 million. In the future, as net sales thresholds set forth in the agreement are met and the repayment percentage rate changes, the amount of the obligation and timing of payment is likely to change. A significant increase or decrease in actual and forecast net sales will materially impact the revenue interest liability, interest expense and the time period for repayment.

Under the Shire License Agreement, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. The amount and timing of milestone obligations are unknown or uncertain as we are unable to estimate the timing or likelihood of achieving the milestone events. Additionally, the amount of royalty payments are based upon future product sales, which we are unable to predict with certainty. These potential obligations are further described in Note 7 to our consolidated financial statements.

We additionally have contractual obligations for our operating leases for our corporate headquarters. These obligations are further described in Note 9 to our consolidated financial statements.

We are party to certain license and collaboration agreements, which contain a number of contractual obligations. Those contractual obligations may entitle us to receive, or may obligate us to make, certain payments.

The amount and timing of those payments are unknown or uncertain as we are unable to estimate the timing or likelihood of the events that will obligate those payments.

We enter into contracts in the normal course of business with clinical research organizations and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancelable contracts.

Cash Flows

The following table provides a summary of the net cash flow activity for the periods indicated (in thousands):

Year Ended December 31,

Net cash used in operating activities $ (120,136 ) $ (132,758 )

Net cash provided by investing activities 7,700 48,547

Net cash provided by financing activities 109,087 73,466

Net Cash Used in Operating Activities

Net cash used in operating activities was $120.1 million for the year ended December 31, 2022, reflecting our net loss of $135.7 million partially offset by non-cash items of $36.6 million. Non-cash items consisted primarily of $27.0 million of stock-based compensation, $16.0 million of effective interest expense in connection with the RIPA, $3.7 million of depreciation and amortization of our intangible assets, fixed assets and operating lease right-of use assets, $6.6 million related to deferred tax liability recognized as a result of intangible assets acquired as part of the Satiogen acquisition, $1.7 million accretion of discounts on our investments, $0.9 million gain related to the change in fair value of Indemnification Holdback and Contingent Milestone liabilities and $0.9 million gain related to the change in fair value of the derivative liability. Additionally, cash used in operating activities reflected changes in net operating assets of $21.0 million, consisting primarily of a $20.7 million increase in accounts receivable related to sales of Livmarli, a $3.4 million increase in inventory, a $3.7 million increase in prepaid expenses and other current assets, a $0.1 million increase in other long term assets, and a $0.7 million decrease in operating lease liability, partially offset by a $7.6 million increase in accounts payable, accrued expenses and other liabilities.

Net cash used in operating activities was $132.8 million for the year ended December 31, 2021, reflecting our net loss of $84.0 million partially offset by non-cash items of $42.2 million and a non-cash gain of $108.0 million from the sale of the PRV. Non-cash items consisted primarily of $23.1 million of stock-based compensation, $17.6 million of effective interest expense in connection with the RIPA, $0.7 million related to the change in fair value of the derivative liability, and $1.0 million of depreciation and amortization of our fixed assets and operating lease right-of use assets. Additionally, cash used in operating activities reflected changes in net operating assets of $17.0 million, consisting primarily of a $22.7 million increase in accounts payable, accrued expenses and other liabilities primarily associated with clinical, manufacturing and commercial planning activities and collaboration funding pursuant to the collaboration agreement with Vivet and $5.0 million increase in prepaid expenses, inventory and other assets, partially offset by a $0.6 million decrease in our operating lease liability.

Net Cash Provided by Investing Activities

Net cash provided by investing activities was $7.7 million for the year ended December 31, 2022, primarily due to proceeds of $140.3 million from maturities of investments, partially offset by $132.3 million used in purchases of investments and $0.3 million used in purchases of property and equipment.

Net cash provided by investing activities was $48.5 million for the year ended December 31, 2021, primarily due to $108.0 million of net proceeds received from the sale of the PRV, proceeds of $155.6 million from maturities of investments, and proceeds of $2.0 million from paydowns of investments partially offset by $198.0 million used in purchases of investments and $19.0 million in milestone payments triggered under license agreements.

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Net Cash Provided by Financing Activities

Net cash provided by financing activities was $109.1 million for the year ended December 31, 2022, due to net proceeds of $86.1 million from completion of an underwritten public offering of 4,000,000 shares of common stock at a price of $23.00 per share, net proceeds of $21.3 million from the issuance and sale of common stock under the Sales Agreement with SVB Securities, pursuant to which we issued and sold an aggregate of 1,160,915 shares of common stock at a weighted-average price of $19.01 per share, and proceeds of $7.3 million from employee equity award exercises, partially offset by $5.6 million of revenue interest payments made under the RIPA.

Net cash provided by financing activities was $73.5 million for the year ended December 31, 2021, due to net proceeds of $64.6 million pursuant to the RIPA, net proceeds of $6.9 million received from the underwriters when they exercised their option to purchase 375,654 shares of our common stock in January 2021 following the follow-on underwritten public offering of our common stock in December 2020, and proceeds of $2.1 million from employee equity award exercises, partially offset by $0.1 million of revenue interest payments made under the RIPA.

JOBS Act

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”).

We will remain an emerging growth company until the earliest of (i) December 31, 2024, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our cash, cash equivalents, restricted cash equivalents and investments as of December 31, 2022 consist of readily available checking, money market funds, and investments. The primary objective of our investment activities is to preserve our capital to fund operations. We invest in highly liquid and high-quality government and debt securities. As a result, our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. Although we are seeing, and expect to continue to see, increased interest rates, due to the strategies we employ, as of the date of this Annual Report, we do not expect anticipated changes in interest rates to have a material effect on our interest rate risk in future reporting periods due to the short-term nature of the instruments in our portfolio and the low risk profile of our investments. For example, a hypothetical change in interest rates of 100 basis points would not have a material impact on the fair market value of our cash equivalents, restricted cash equivalents and investments as of December 31, 2022. In addition, we maintain significant amounts of cash and cash equivalents at one financial institution that is in excess of federally insured limits.

We have entered into the RIPA. Our primary exposure to interest rate risk is that the effective interest rate on the liability may vary during the term of the RIPA primarily due to the level of actual and forecasted net product sales. Due to the nature of the RIPA instrument, the total interest due under this facility is fixed. However, a significant increase or decrease in actual and forecasted net product sales may materially impact the interest expense recognized each reporting period.

Foreign Currency Rate Risk

Our operations include activities in the U.S., Switzerland and certain other countries in Europe. While our operating results are exposed to changes in foreign currency exchange rates between the U.S. dollar and various foreign currencies, the most significant of which are the Swiss Franc and the Euro, as of December 31, 2022, we had minimal assets and liabilities denominated in foreign currencies and, as a result, changes in foreign currency exchange rates did not have a material impact on our business, financial condition or results of operations for the year ended December 31, 2022.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation and changing prices had a significant impact on our results of operations for any periods presented herein.

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Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 104

Consolidated Balance Sheets 105

Consolidated Statements of Operations 106

Consolidated Statements of Comprehensive Loss 107

Consolidated Statements of Stockholders’ Equity 108

Consolidated Statements of Cash Flows 109

Notes to Consolidated Financial Statements 110

103

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Mirum Pharmaceuticals, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Mirum Pharmaceuticals, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2019.

Irvine, California

March 8, 2023

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Mirum Pharmaceuticals, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share data)

December 31,

Assets

Current assets:

Prepaid expenses and other current assets 8,947 5,271

Long-term investments - 4,983

Property and equipment, net 914 981

Operating lease right-of-use assets 1,431 1,569

Liabilities and Stockholders’ Equity

Current liabilities:

Operating lease liabilities 931 711

Operating lease liabilities, noncurrent 1,257 1,903

Commitments and contingencies

Stockholders’ equity:

Accumulated other comprehensive income (loss) (217 ) (35 )

Total liabilities and stockholders’ equity $ 352,906 $ 294,651

The accompanying notes are an integral part of these consolidated financial statements.

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Mirum Pharmaceuticals, Inc.

Consolidated Statements of Operations

(In thousands, except share and per share data)

Year Ended December 31,

Revenue:

Operating expenses:

Other income (expense):

Change in fair value of derivative liability 906 (732 )

Other income (expense), net 365 (582 )

Gain from sale of priority review voucher, net — 108,000

Net loss before provision for income taxes (142,071 ) (83,951 )

(Benefit from) provision for income taxes (6,406 ) 37

Net loss per share:

Weighted-average shares outstanding:

The accompanying notes are an integral part of these consolidated financial statements.

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Mirum Pharmaceuticals, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)

Year Ended December 31,

Other comprehensive gain (loss):

Unrealized loss on available-for-sale investments (194 ) (117 )

Cumulative translation adjustments 12 (1 )

The accompanying notes are an integral part of these consolidated financial statements.

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Mirum Pharmaceuticals, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share data)

Shares Amount Shares Amount Capital Deficit Income (Loss) Equity

Restricted common stock vested in the period — — 133,592 — — — — —

Other comprehensive loss — — — — — — (118 ) (118 )

Restricted common stock vested in the period — — 122,464 — — — — —

Other comprehensive loss — — — — — — (182 ) (182 )

The accompanying notes are an integral part of these consolidated financial statements.

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Mirum Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,

Operating activities

Reconciliation of net loss to net cash used in operating activities:

Depreciation and amortization 3,238 595

Amortization of operating lease right-of-use assets 443 380

Net accretion of discounts on investments (1,703 ) (137 )

Change in fair value of derivative liability (906 ) 732

Deferred income taxes associated with an acquisition (6,580 ) —

Gain on sale of priority review voucher, net — (108,000 )

Change in operating assets and liabilities:

Accounts receivable (20,727 ) —

Prepaid and other current assets (3,676 ) (4,009 )

Accounts payable, accrued expenses and other liabilities 7,639 22,655

Operating lease liabilities (711 ) (649 )

Investing activities

Proceeds from paydown of investments — 2,000

Purchase of property and equipment (278 ) (24 )

Proceeds from sale of priority review voucher, net — 108,000

Additions to intangible assets — (19,000 )

Net cash provided by investing activities 7,700 48,547

Financing activities

Proceeds from issuance of common stock pursuant to equity plans 7,272 2,098

Proceeds from revenue interest liability, net of issuance costs — 64,575

Payments on revenue interest liability (5,552 ) (121 )

Net cash provided by financing activities 109,087 73,466

Supplemental disclosure of cash flow information:

Operating cash flows paid for operating lease $ 911 $ 864

Non-cash operating, investing and financing activities:

Issuance of common stock in exchange for acquired intangible assets $ 15,585 $ —

Accrued milestone payments classified as intangible assets, net $ 15,000 $ —

Deferred tax liability incurred from acquired intangible $ 6,580 $ —

Stock-based compensation capitalized into inventory $ 441 $ 71

Right-of-use assets obtained in exchange for lease liability $ 285 $ —

Inventory purchases included in accrued liabilities $ 163 $ 1,018

The accompanying notes are an integral part of these consolidated financial statements.

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Mirum Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

1. Organization and Description of Business

Mirum Pharmaceuticals, Inc. (the “Company”) was incorporated in the State of Delaware on May 2, 2018, and is headquartered in Foster City, California. The Company is a biopharmaceutical company focused on the identification, acquisition, development and commercialization of novel therapies for debilitating rare and orphan diseases.

The Company’s product LIVMARLI® (maralixibat) oral solution (“Livmarli”), was approved for the treatment of cholestatic pruritus in patients with Alagille syndrome (“ALGS”) one year of age and older in the United States in September 2021 and for the treatment of cholestatic pruritus in patients with ALGS two months and older in Europe in December 2022.

The Company’s development pipeline consists of two clinical-stage product candidates, Livmarli and volixibat. The Company commenced significant operations in November 2018.

The Company views its operations and manages its business as one operating segment. The Company determined its operating segment on the same basis that it uses to evaluate its performance internally.

Liquidity

The Company has a limited operating history, has incurred significant operating losses since its inception, and the revenue and income potential of the Company’s business and market are unproven. As of December 31, 2022, the Company had an accumulated deficit of $392.8 million and cash, cash equivalents, restricted cash equivalents and investments of $251.7 million. The Company believes that its unrestricted cash, cash equivalents and investments of $151.7 million as of December 31, 2022, provide sufficient capital resources to continue its operations for at least twelve months from the issuance date of the accompanying consolidated financial statements. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Management expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development activities.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company translates the financial statements of its foreign subsidiaries using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. All significant intercompany balances and transactions among the consolidated entities have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the financial statements and accompanying notes. These estimates and assumptions are based upon historical experience, knowledge of current events and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ materially from those estimates.

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The Company’s consolidated financial statements as of and for the year ended December 31, 2022 reflect the Company’s estimates of the impact of the geopolitical and macroeconomic environment, including the impact of inflation, higher interest rates, foreign exchange rate fluctuations and the COVID-19 pandemic. The duration and the scope of these conditions cannot be predicted; therefore, the extent to which these conditions will directly or indirectly impact the Company’s business, results of operations and financial condition, is uncertain. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments and assumptions or a revision of the carrying value of the Company’s assets or liabilities as of the date of this filing.

Cash, Cash Equivalents and Restricted Cash Equivalents

The Company considers all highly liquid investments that are readily convertible into cash without penalty and with original maturities of three months or less at the date of purchase to be cash equivalents. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents are valued at cost, which approximate their fair value.

Restricted cash equivalents consist of deposits placed in a segregated bank account as required under the terms of the Company’s Revenue Interest Purchase Agreement ("RIPA"), as amended September 2021, with Mulholland SA LLC, an affiliate of Oberland Capital LLC, as agent for the purchasers party thereto (the "Purchasers"), and the Purchasers in connection with the sale of the Priority Review Voucher ("PRV") in December 2021.

The following table provides a reconciliation of cash, cash equivalents and restricted cash equivalents reported within the consolidated balance sheets that together reflect the same amounts shown in the consolidated statements of cash flows (in thousands):

December 31,

Concentrations of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, accounts receivable and investments. The Company limits the amount of credit exposure by investing cash that is not required for immediate operating needs in money market funds, government obligations and/or commercial paper with short maturities. Additionally, the Company has established guidelines regarding diversification of its investments and their maturities, which are designed to maintain principal and maximize liquidity. To date, the Company has not experienced any losses associated with this credit risk and continues to believe that this exposure is not significant.

The Company relies on a specialty pharmacy and a single distributor for all of the Company’s sales of Livmarli in the United States as well as a single distributor for sales outside the United States.

The Company sources materials and services through several vendors. Certain materials are sourced from a single vendor. The loss of certain vendors could result in a temporary disruption of the Company’s commercialization efforts.

For the years ended December 31, 2022 and 2021, the Company had one customer that accounted for approximately 23% and zero, respectively, of accounts receivable. For the years ended 2022 and 2021, the Company did not have revenue attributable to any one customer in excess of 10% of sales.

Investments

The Company classifies all investments in securities as available-for-sale, as the sale of such securities may be required prior to maturity. Management determines the appropriate classification of its investments in debt securities at the time of purchase. Investments with original maturities beyond three months at the date of purchase and which mature at, or less than twelve months from the balance sheet date, are classified as a current asset.

Investments are recorded at fair value, with unrealized gains and losses reported as accumulated other comprehensive income (loss) until realized. The Company periodically evaluates whether declines in fair values of

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its available-for-sale securities below their cost basis are other-than-temporary and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as the Company’s ability and intent to hold the available-for-sale security until a forecasted recovery occurs. Additionally, the Company assesses whether it has plans to sell the security or it is more likely than not it will be required to sell any available-for-sale securities before recovery of its amortized cost basis. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, as well as interest and dividends, are included in interest income. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis and are also included in interest income (loss). To date, the Company has not identified any other than temporary declines in fair value of its investments.

Fair Value of Financial Instruments

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement determined based on assumptions that market participants would use in pricing an asset or liability. The following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1: Observable inputs (unadjusted) such as quoted prices in active markets for identical assets or liabilities;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly for similar assets or liabilities; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Accounts Receivable

Accounts receivable are recorded net of allowances for sales discounts and any allowance for doubtful accounts. Management estimates the allowance for doubtful accounts based on existing contractual payment terms, actual payment patterns of customers and individual customer circumstances. To date, an allowance for doubtful accounts has not been material.

Inventory

Inventory is valued at the lower of cost or net realizable value, with cost determined on a first-in, first-out (FIFO) basis. The Company periodically reviews the composition of inventory to identify excess, obsolete, slow-moving or otherwise unsaleable items. If unsaleable items are observed and there are no alternate uses for the inventory, the Company will record a write-down to net realizable value in the period that the decline in value is recognized through a charge to cost of sales. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required.

Prior to the initial regulatory approval for Livmarli, the Company expensed costs relating to raw materials and production of inventory as research and development expense in the accompanying consolidated statements of operations, in the period incurred. The Company expects it will deplete such inventories within 12 months of the balance sheet date.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, ranging from three to five years. Leasehold improvements are amortized over the shorter of their useful lives or the related lease term. As of December 31, 2022, property and equipment consisted primarily of leasehold improvements of $1.3 million and furniture and equipment of $0.6 million. As of December 31, 2021, property and equipment consisted primarily of leasehold improvements of $1.3 million and furniture and equipment of $0.2 million. Accumulated depreciation as of

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December 31, 2022 and 2021 was $1.0 million and $0.7 million, respectively. Depreciation expense was $0.3 million for the years ended December 31, 2022 and 2021, respectively.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for indications of possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amounts to the future undiscounted cash flows attributable to these assets. An impairment loss is recognized to the extent an asset group is not recoverable, and the carrying amount exceeds the projected discounted future cash flows arising from these assets. There were no impairments of long-lived assets for any of the periods presented.

Intangible Assets, Net

The Company accounts for asset acquisitions that do not meet the definition of a business using the cost accumulation method, whereby the cost of the acquisition, including certain transaction costs, is allocated to the asset (or assets) acquired on the basis of its (or their) relative fair value(s) on the measurement date. No goodwill is recognized in an asset acquisition.

Intangible assets are measured at their fair values as of the acquisition date or, in the case of commercial milestone payments, the date they become due. The evaluation of intangible assets includes assessing the amortization period for which the asset is expected to contribute to the future cash flows of the Company. Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis when the Company is unable to reliably estimate the pattern of cash flow. The Company tests its finite lived intangible assets for impairment annually or if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If it is determined that the asset is impaired, the carrying value is written down to its estimated fair value, with the related impairment charge recognized in the consolidated statements of operations in the period in which the impairment occurs. The Company has not recorded any impairments to its intangible assets for any of the periods presented.

The following table provides detail of the carrying amount of the Company’s intangible assets (in thousands):

Gross Carrying Value Accumulated Amortization Net Carrying Value

Intangible asset - commercial milestone payments $ 34,000 $ (1,333 ) $ 32,667

Gross Carrying Value Accumulated Amortization Net Carrying Amount

Intangible asset - commercial milestone payments $ 19,000 $ (260 ) $ 18,740

As of December 31, 2022, the remaining weighted-average amortization period of the Company’s intangible assets was 11.9 years. The remaining weighted-average amortization periods of the commercial milestone payments and the Satiogen Pharmaceutical, Inc. ("Satiogen") acquisition intangible assets were 17.1 years and 8.4 years, respectively.

Amortization expense was $2.9 million and $0.3 million for the years ended December 31, 2022 and 2021, respectively, and was included in cost of sales on the accompanying consolidated statements of operations.

The following table summarizes the estimated future amortization expense associated with the Company’s intangible assets as of December 31, 2022 (in thousands):

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Years Ended December 31, Amount

Leases

The Company determines if a contractual arrangement is or contains a lease at inception. Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on the accompanying consolidated balance sheets. Operating lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the leased asset, unless the implicit rate is readily determinable. Operating lease ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. The Company determines the lease term as the noncancelable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets. The Company’s leases do not contain any residual value guarantees. Lease expense for minimum lease payments is recognized as rent expense on a straight-line basis over the lease term. Variable lease payments include lease operating expenses.

Accrued Research and Development Expenses

The Company accrues and expenses clinical trial activities performed by third parties based upon estimates of the proportion of work completed over the life of the individual study and patient enrollment rates in accordance with agreements established with clinical research organizations and clinical trial sites. The Company determines the estimates by reviewing contracts, vendor agreements and purchase orders and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

The Company makes estimates of accrued expenses as of each balance sheet date based on facts and circumstances known to the Company at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. The Company has not experienced any material differences between accrued costs and actual costs incurred for the periods presented. Nonrefundable advance payments for goods and services are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Revenue Interest Liability, Net

The revenue interest liability, net, associated with the RIPA that the Company entered into in December 2020, as amended in September 2021,with Mulholland SA LLC, an affiliate of Oberland Capital LLC (“Oberland”), as agent for purchasers party thereto (the “Purchasers”), and the Purchasers, is presented net of issuance costs and a debt discount on the consolidated balance sheets. The Company imputes interest expense associated with this liability using the effective interest rate method. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The interest rate on the liability may vary during the term of the agreement depending on a number of factors, including the level of actual and forecasted product sales, net. The Company evaluates the interest rate quarterly based on actual product sales, net and forecast product sales, net, utilizing the prospective method. A significant increase or decrease in product sales, net will materially impact the revenue interest liability, interest expense and the time period for repayment.

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Derivative Liability

The RIPA contains certain features that meet the definition of being an embedded derivative requiring bifurcation as a separate compound financial instrument apart from the RIPA. The derivative liability is initially measured at fair value on issuance and is subject to remeasurement at each reporting period with changes in fair value recognized as other income (expense) in the accompanying consolidated statements of operations as the change in fair value of derivative liability.

Revenue Recognition

The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

Product Sales, Net

The Company recognizes product sales, net when the customer obtains control of our product, which occurs at a point in time, typically upon delivery of the Company’s product to the customer.

Revenues from product sales are recorded at the net sales price, or the transaction price, which may include fixed or variable consideration for discounts, government rebates, co-pay assistance, returns and other allowances that are offered within contracts with a customer relating to the sale of Livmarli. Estimates of variable consideration are calculated based on the actual product sales each reporting period and the nature of the variable consideration related to those sales. Overall, these estimates reflect the Company’s best estimate of the amount of consideration to which the Company expects to be entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained and is included in product sales, net only to the extent that it is considered probable that a significant reversal in the amount of the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimates are reviewed and updated quarterly as additional information becomes known. Actual amounts of consideration ultimately received may differ materially from estimates. If actual results in the future vary from estimates, the Company will adjust these estimates, which would affect product sales, net and earnings in the period such variances are adjusted. Significant categories of sales discounts and allowances are as follows:

Government Rebates: The Company records rebates payable under Medicaid and other government programs as a reduction of revenue at the time product revenues are generated. The Company’s rebate calculations may require estimates, including estimates of customer mix, to determine which sales will be subject to rebates and the amount of such rebates. The Company updates its estimates and assumptions on a quarterly basis and records any necessary adjustments to revenue in the period identified. The liability for unpaid rebates is included in accrued expenses in the accompanying consolidated balance sheets. To date, actual government rebates have not differed materially from the Company’s estimates.

Other Incentives: Other incentives include a branded co-pay assistance program for eligible patients with commercial insurance in the United States. The branded co-pay assistance program assists commercially insured patients who have coverage for Livmarli and is intended to reduce each participating patient’s portion of the financial responsibility of the purchase price up to a specified dollar amount of assistance. The calculation of the accrual for co-pay assistance is based upon an identification of claims and the cost per claims associated with product that has been recognized as revenue. The Company records amounts paid under the brand specific co-pay assistance program for each patient as a reduction of revenue from product sales. To date, actual other incentives have not differed materially from the Company’s estimates.

Product Returns: The Company records revenue for product sales, net of estimated product returns. Customers have limited return rights related only to the product’s damage or defect identified upon delivery of the product. The Company estimates the amount of product sales that may be returned and records the estimate as a reduction of revenue and a refund liability in the period the related product revenue is recognized. To date, actual returns have not differed materially from the Company’s estimates.

License and Collaboration Arrangements

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The Company enters into collaborative arrangements with partners and analyzes the collaboration arrangements to assess whether they are within the scope of Collaborative Arrangements (Topic 808) ("Topic 808") and determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. The accounting for some of the activities under collaboration arrangements may be subject to Revenue from Contracts with Customers (Topic 606) (“Topic 606”) for distinct units of account that are reflective of a vendor-customer relationship. For other elements of collaboration arrangements, such as reimbursements of certain development costs, the Company generally records reimbursements received as a reduction of research and development expenses.

In determining the appropriate amount of revenue to be recognized under Topic 606 as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the contracts with customers; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) determination and measurement of the transaction price, including any constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The terms of the Company’s license and collaborative research and development agreements include upfront license fees, research, development and other funding or reimbursements, milestone and other contingent payments for the achievement of defined collaboration objectives and certain development, regulatory and sales-based events, as well as royalties on sales of commercialized products. Arrangements that include upfront payments may require deferral of revenue recognition to a future period until the Company satisfies performance obligations under these arrangements.

A performance obligation is a promise in a contract to transfer a distinct good or service and is the unit of accounting in Topic 606. A contract’s transaction price is allocated among each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, the applicable performance obligation is satisfied.

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues attributed to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price as variable consideration using the most likely amount method or expected value method, depending on the nature of the contingency and the variable payments. If it is probable that a significant reversal of cumulative revenue recognized for the contract would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not generally considered probable of being achieved until those approvals are received. Given the high degree of uncertainty around the occurrence of these events, the Company generally determines the milestone and other contingent amounts to be fully constrained until the uncertainty associated with these payments is resolved. At the end of each reporting period, the Company re-evaluates the probability of achievement of any development milestones, and if necessary, adjusts its estimate of the transaction price. Any such adjustments would be recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, the Company recognizes revenue at the later of (i) when or as the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Accounting for these arrangements requires the Company to develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. The Company has never sold the performance obligations in its collaborative arrangements separately; therefore, an observable stand-alone selling price does not exist. Accordingly, the Company estimates a stand-alone selling price through maximizing the use of observable inputs such as market data, project cost estimates, and targeted margins.

Cost of Product Sales

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Prior to receiving approval from the U.S. Food and Drug Administration ("FDA") in September 2021 to sell Livmarli in the United States, the Company expensed all costs incurred related to the manufacture of Livmarli as research and development expense because of the inherent risks associated with the development of a drug candidate, the uncertainty about the regulatory approval process and the lack of history for the Company of regulatory approval of drug candidates. Subsequent to receiving FDA approval, when commercialization was considered probable and the future economic benefit was expected to be realized, the Company began capitalizing inventory costs incurred.

Cost of product sales consist of manufacturing costs, transportation and freight, amortization of capitalized intangible assets, royalties and indirect overhead costs associated with the manufacturing and distribution of Livmarli. Cost of product sales may also include period costs related to certain manufacturing services and inventory adjustment charges.

Research and Development Expenses

Research and development expenses consists primarily of fees paid to contract research organizations and other vendors for clinical, non-clinical and manufacturing services, salaries and employee benefits, including stock-based compensation, consultant expenses, costs related to acquiring manufacturing materials, costs related to compliance with regulatory requirements and license payments related to acquiring intellectual property rights for the Company’s product candidates. Research and development expenses are expensed as incurred.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses relate to sales and marketing, finance, human resources, legal and other administrative activities. SG&A expenses consist primarily of personnel costs, facilities and overhead costs, outside marketing, advertising and legal expenses, and other general and administrative costs.

The Company expenses the costs of advertising, including promotional expenses, as incurred. Advertising expenses were $4.0 million and $9.2 million for the years ended December 31, 2022 and 2021, respectively.

Stock-Based Compensation

The Company recognizes stock-based compensation for all stock-based awards based on the grant date fair value of the award granted to employees and nonemployees, including members of its board of directors. For stock-based awards with service conditions, the fair value of the awards is recognized on a straight-line basis over the requisite service period in which the awards are expected to vest. For stock-based awards with performance vesting conditions, stock-based compensation is recognized when it is considered probable that the performance conditions will be satisfied. At each reporting period, the Company reassesses the probability of the achievement of the performance vesting conditions. Any change in stock-based compensation resulting from an adjustment in the vesting is treated as a cumulative catch-up in the period of adjustment. For stock-based awards with market conditions, stock-based compensation is recognized over the appropriate requisite service period. The Company accounts for forfeitures as they occur.

The Company evaluates the grant date fair value of awards granted for impacts of any potential material non-public information at the time of grant.

Income Taxes

Income taxes are recorded using the liability method, under which deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are recorded against deferred tax assets, including net operating losses and tax credits, when it is determined it is more-likely-than-not that some or all of the tax benefits will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 740, Income Taxes (“ASC 740”). When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to

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whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

Interest and penalties related to unrecognized tax benefits, if any, are recorded as a component of income tax expense.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average shares of common stock and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods.

The following table sets for the computation of basic and diluted earnings per share (in thousands, except share and per share data):

Year Ended December 31,

Numerator:

Add: Change in fair value of Holdback Indemnification liability (214 ) —

Add: Change in fair value of Contingent Milestone liability (700 ) —

Denominator:

Effect of dilutive securities:

Weighted-average Holdback-Indemnification shares issuable 19,590 —

Weighted-average contingent shares 123,831 —

Net loss per share, basic $ (4.01 ) $ (2.77 )

Net loss per share, diluted $ (4.02 ) $ (2.77 )

In addition to the equity instruments included above, the following outstanding potential dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect:

As of December 31,

Options to purchase common stock and restricted stock units 8,955,557 6,940,566

Common stock subject to repurchase — 122,464

Employee stock purchase plan contingently issuable 26,305 23,116

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires an entity to utilize a new impairment model that requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to available-for-sale debt securities. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. The new guidance requires the use of forward-looking expected credit loss models based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount, which may result in earlier recognition of credit losses under the new guidance. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. Subsequent to the issuance of ASU

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2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU does not change the core principle of the guidance in ASU 2016-13, instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses guidance. The FASB also subsequently issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 842), which did not change the core principle of the guidance in ASU 2016-13 but clarified that expected recoveries of amounts previously written off and expected to be written off should be included in the valuation account and should not exceed amounts previously written off and expected to be written off. In March 2020, the FASB issued ASU No. 2020-3, Codification Improvements to Financial Instruments which makes narrow-scope improvements to various financial instruments topics, including the new credit losses standard and clarifies the following areas (i) the contractual term of a net investment in a lease should be the contractual term used to measure expected credit losses; (ii) when an entity regains control of financial assets sold, an allowance for credit losses should be recorded. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 for public business entities, excluding smaller reporting companies. For smaller reporting companies, the guidance will be effective during the first quarter of 2023. The Company does not expect the new standard to have a significant impact on its consolidated financial statements and related disclosures.

In October 2021, the FASB, issued Accounting Standards Update No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an entity (acquirer) to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. This update is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company does not expect the new standard to have a significant impact on its consolidated financial statements.

3. Fair Value Measurements

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type are presented in the following table (in thousands):

Level 1 Level 2 Level 3 Total

Financial assets:

Financial liabilities:

Contingent milestone liability $ 3,900 $ — $ — $ 3,900

Indemnification holdback — — 617 617

Level 1 Level 2 Level 3 Total

Financial assets:

Financial liabilities:

Derivative liability $ — $ — $ 1,996 $ 1,996

Total financial liabilities $ — $ — $ 1,996 $ 1,996

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The carrying amounts of certain financial instruments such as cash and cash equivalents, restricted cash equivalents, accounts receivable, prepaid expenses, other current assets, accounts payable and accrued expenses as of December 31, 2022 and 2021 approximate their related fair values due to the short-term maturities of these instruments.

Money market funds and U.S. treasury bills are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

U.S. government agency bonds, U.S. government bonds and commercial paper, are measured at fair value using Level 2 inputs. The Company reviews trading activity and pricing for these investments as of each measurement date.

The carrying amount of the revenue interest liability as of December 31, 2022 and 2021 approximates its fair value and is based on the Company’s contractual repayment obligation to the Purchasers, based on the current estimates of future revenues, over the life of the RIPA. The derivative liability and Indemnification Holdback liability (each as defined below) are each considered a Level 3 input based on the three-level hierarchy.

At time of issuance, the Contingent Milestone liability at fair value was recognized using Level 3 inputs as no observable inputs were available at the time in the market. At December 31, 2022, the Contingent Milestone liability has been reclassified as a Level 1 input as the significant inputs were known and observable.

Derivative Liability

The debt pursuant to the RIPA (refer to Note 6 "Revenue Interest Purchase Agreement" for further information) contains an embedded derivative requiring bifurcation as a single compound derivative instrument. The Company estimated the fair value of the derivative liability using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative. The difference between the entire instrument with the embedded derivative compared to the instrument without the embedded derivative was the fair value of the derivative liability at December 31, 2022 and 2021. The estimated probability and timing of underlying events triggering the exercisability of the put option contained within the RIPA, forecasted cash flows and the discount rate are significant unobservable inputs used to determine the estimated fair value of the entire instrument with the embedded derivative. As of December 31, 2022 and 2021, the discount rate used for valuation of the derivative liability was 15.7%, respectively.

The following table provides a summary of the change in the estimated fair value of the Company’s derivative liability, classified as Level 3 in the fair value hierarchy (in thousands):

Change in fair value of derivative liability 732

Change in fair value of derivative liability (906 )

Indemnification Holdback and Contingent Milestone Liabilities

In May 2022, in connection with the acquisition of Satiogen (refer to Note 7 “Asset Acquisitions” for further information), the Company recorded at fair value liabilities related to the Company’s common stock issuable upon satisfaction of certain purchase price adjustments and indemnification obligations that may arise during the 12 month period following the asset acquisition date (“Indemnification Holdback”) and contingent consideration upon achievement of a certain milestone (“Contingent Milestone”). The fair value of the Indemnification Holdback and the Contingent Milestone was classified within Level 3 of the fair value hierarchy and was estimated based upon the value of the Company’s common stock price. The fair value of the Indemnification Holdback was additionally

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determined based on management’s estimate of the probability of indemnification obligations being incurred during the one year following the acquisition date, while the fair value of the Contingent Milestone was additionally determined based upon management’s estimate of the probability of the milestone being met. The fair value of the Indemnification Holdback and Contingent Milestone was initially measured on May 20, 2022, the date on which the Company completed the acquisition of Satiogen. The Company assesses the fair value of the Indemnification Holdback and Contingent Milestone each reporting period until resolution of the related contingency and changes in fair value are recorded in other income (expense), net in the accompanying consolidated statements of operations. As of December 31, 2022, the contingency for the Contingent Milestone was resolved and the fair value of the liability was determined based solely upon the closing price of the Company’s common stock.

The following table provides a summary of the changes in the estimated fair value of the Indemnification Holdback and Contingent Milestone liability (in thousands):

Indemnification Holdback Liability Contingent Milestone Liability

Balance at January 1, 2022 $ — $ —

Change in fair value (214 ) (700 )

Transfer out of Level 3 fair value hierarchy — (3,900 )

The Indemnification Holdback and Contingent Milestone liabilities are included in other liabilities in the accompanying consolidated balance sheets as of December 31, 2022. The change in fair value was recorded in Other income (expense), net in the consolidated statements of operations.

4. Financial Instruments

The fair value and amortized cost of cash equivalents and available-for-sale investments by major security type are presented in the following table (in thousands):

AmortizedCost UnrealizedGain UnrealizedLoss EstimatedFairValue

Cash equivalents and investments:

Classified as:

Cash equivalents - restricted 100,000

Total cash equivalents, restricted cash equivalents and investments $ 247,942

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AmortizedCost UnrealizedGain UnrealizedLoss EstimatedFairValue

Cash equivalents and investments:

Classified as:

Cash equivalents - restricted 100,000

Long-term investments 4,983

Total cash equivalents, restricted cash equivalents and investments $ 258,604

As of December 31, 2022, the remaining contractual maturities of available-for-sale debt securities were less than 12 months. During the years ended December 31, 2022 and 2021, there have been no significant realized gains or losses on available-for-sale investments, no investments have been in a continuous unrealized loss position for more than 12 months, and the Company did not recognize any other-than-temporary impairment losses on these securities.

5. Balance Sheet Components

Inventory

Inventory consists of the following (in thousands):

December 31,

Raw material $ — $ 856

Accrued Expenses

Accrued expenses consist of the following (in thousands):

December 31,

Accrued milestone payments $ 15,000 $ -

Accrued compensation and related benefits 14,660 9,988

Accrued professional service fees 5,372 2,458

Accrued contract manufacturing and non-clinical costs 3,927 4,635

Accrued collaboration funding — 6,300

6. Revenue Interest Purchase Agreement

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In December 2020, the Company entered into the RIPA, as amended in September 2021, with Mulholland SA LLC, an affiliate of Oberland Capital LLC, as agent for the Purchasers, and the Purchasers to obtain financing for the commercialization and further development of Livmarli and other working capital needs. Pursuant to the RIPA, the Company has received $115.0 million consisting of an upfront payment of $50.0 million in December 2020 and $65.0 million in April 2021 associated with the acceptance for filing by the FDA of a New Drug Application for Livmarli for the treatment of cholestatic pruritus in patients with ALGS, less certain transaction expenses.

The Company was entitled to receive an additional $35.0 million upon FDA approval of Livmarli, which it elected to forgo. The Company was also entitled to receive up to approximately $50.0 million at the option of the Purchasers to finance in-licenses or other acquisitions on or prior to December 31, 2022, which the Company did not request.

As consideration for such payments, the Purchasers have the right to receive certain revenue interests (the "Revenue Interests") from the Company based on annual product sales, net of Livmarli, which will be tiered payments (the “Revenue Interest Payments”) based on whether such annual product sales, net are (i) less than or equal to $350.0 million (“Tier 1”), (ii) exceeding $350.0 million and less than or equal to $1.1 billion (“Tier 2”), or (iii) exceeding $1.1 billion (“Tier 3”).

The Revenue Interest Payments will initially be 9.75% (at Tier 1) and 2.0% (at Tier 2 and Tier 3) of such annual net sales. If the Purchasers have received Revenue Interest Payments in an amount equal to or greater than 110.0% of the total payments actually made by the Purchasers to the Company, exclusive of transaction expenses (the “Cumulative Purchaser Payments”), on or prior to December 31, 2026, the Revenue Interests shall be reduced to 2.0% at Tier 1 and 0.0% at Tier 3 for all subsequent calendar years beginning on January 1, 2027. If the Purchasers have not received Revenue Interest Payments in an amount equal to or greater than 110.0% of the Cumulative Purchaser Payments on or prior to December 31, 2026, the Revenue Interests shall be increased for all subsequent calendar years beginning on January 1, 2027 to a single defined rate (with no separate tiers) that would have provided the Purchasers with an amount equal to 110.0% of the Cumulative Purchaser Payments on or prior to December 31, 2026 had such rate applied to Tier 1 of initial Revenue Interest Payments. The Purchasers’ rights to receive the Revenue Interest Payments shall terminate on the date on which the Purchasers have received Revenue Interest Payments of 195.0% of the Cumulative Purchaser Payments, unless the RIPA is terminated earlier.

Under the RIPA, the Company has an option (the “Call Option”) to terminate the RIPA and repurchase future Revenue Interests at any time upon advance written notice. Additionally, the Purchasers have an option (the “Put Option”) to terminate the RIPA and to require the Company to repurchase future Revenue Interests upon enumerated events such as a bankruptcy event, an uncured material breach, a material adverse effect or a change of control, or upon the 12th anniversary of the first payment made by Purchasers. If the Put Option is exercised prior to the first anniversary of the closing date by the Purchasers (except pursuant to a change of control), the required repurchase price will be 120.0% of the Cumulative Purchaser Payments (minus all payments Company has made to the Purchasers in connection with the Revenue Interests). In all other cases, if the Put Option or the Call Option are exercised, the required repurchase price will be 175.0% of the Cumulative Purchaser Payments (minus all payments Company has made to the Purchasers in connection with the Revenue Interests), if such option is exercised prior to the third anniversary of the closing date, and 195.0% of the Cumulative Purchaser Payments (minus all payments Company has made to the Purchasers in connection with the Revenue Interests) if such option is exercised thereafter.

In addition, the RIPA contains various representations and warranties, information rights, non-financial and financial covenants, indemnification obligations and other provisions that are customary for a transaction of this nature. The Purchasers’ obligations to fund the scheduled installments are subject to certain customary conditions as set forth in the RIPA.

Concurrently with the RIPA, the Company entered into a Common Stock Purchase Agreement (“CSPA”) with certain affiliates of Oberland, pursuant to which the Company sold an aggregate of 509,164 shares of its common stock for an aggregate purchase price of $10.0 million. The $50.0 million upfront payment received pursuant to the RIPA and $10.0 million received pursuant to the CSPA was allocated between the resulting financial instruments on a relative fair value basis, with $49.2 million allocated to the debt under the RIPA and $10.8 million allocated to the common stock issued under the CSPA.

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The Put Option under the RIPA that is exercisable by Purchasers upon certain contingent events was determined to be an embedded derivative requiring bifurcation and separately accounted for as a single compound derivative instrument. The Company recorded the initial fair value of the derivative liability of $1.3 million as a debt discount, which is amortized to interest expense over the expected term of the debt using the effective interest method.

As of December 31, 2022 and 2021, $140.4 million and $129.9 million, respectively, was recorded as a revenue interest liability on the accompanying consolidated balance sheets. The Company imputes interest expense associated with this liability using the effective interest rate method. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the anticipated life of the arrangement. The interest rate on this liability may vary during the term of the agreement depending on a number of factors, including the level of forecasted product sales, net. The Company evaluates the interest rate quarterly based on its current product sales, net forecasts utilizing the prospective method. A significant increase or decrease in product sales, net will materially impact the revenue interest liability, interest expense and the time period for repayment. The Company recorded interest expense related to this arrangement of $16.0 million and $17.6 million for the years ended December 31, 2022 and 2021, respectively.

The Company incurred $0.9 million of issuance costs in connection with the RIPA, which are being amortized to interest expense over the estimated term of the debt.

Revenue Interest Payments made as a result of the Company’s product sales, net reduce the revenue interest liability. During the year ended December 31, 2022, the Company made payments of $5.6 million in connection with the RIPA.

The following table summarizes the revenue interest liability activity during the years ended December 31, 2022 and 2021 (in thousands):

Revenue interest liability at January 1, 2021 $ 47,651

Proceeds from purchaser payments 65,000

Interest expense recognized 17,590

Capitalized issuance costs (197 )

Revenue interest payments (121 )

Interest expense recognized 15,979

Revenue interest payments (5,551 )

7. Asset Acquisitions

Assignment and License Agreement with Shire International GmbH (Takeda)

In November 2018, the Company entered into an Assignment and License Agreement (the “Shire Agreement”) with Shire International GmbH (“Shire”), which was subsequently acquired by Takeda Pharmaceutical Company Limited ("Takeda"). Under the terms of the Shire Agreement, Shire granted the Company an exclusive, royalty bearing worldwide license to develop and commercialize its two product candidates, Livmarli and volixibat. As part of the Shire Agreement, the Company was assigned license agreements held by Shire with Satiogen, Pfizer Inc. (“Pfizer”) and Sanofi-Aventis Deutschland GmbH (“Sanofi”). The Company has the right to sublicense under the Shire Agreement and additionally has the right to sublicense under the Satiogen, Pfizer and Sanofi licenses subject to the terms of those license agreements.

The Company is obligated to pay Shire up to an aggregate of $109.5 million upon the achievement of certain clinical development and regulatory milestones for Livmarli in certain indications and an additional $25.0 million upon regulatory approval of Livmarli for each and every other indication. In addition, the Company is required to pay up to an aggregate of $30.0 million upon the achievement of certain clinical development and regulatory

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milestones for volixibat solely for the first indication sought. Upon commercialization, the Company is obligated to pay Shire product sales milestones on total licensed products up to an aggregate of $30.0 million. The Company is also obligated to pay tiered royalties with rates ranging from low double-digits to mid-teens based upon annual worldwide net sales for all licensed products; however, these royalties are reduced in part by royalties due under the Satiogen and Sanofi licenses, as discussed below, related to Livmarli and volixibat, as applicable. The Company’s royalty obligations will continue on a licensed product-by-licensed product and country-by-country basis until the later to occur of the expiration of the last valid claim in a licensed patent covering the applicable licensed product in such country, expiration of any regulatory exclusivity for the licensed product in a country and ten years after the first commercial sale of a licensed product in such country. As of December 31, 2022, the Company accrued $15.0 million for a regulatory milestone associated with approval of Livmarli by the European Commission for the treatment of cholestatic pruritus in patients with ALGS two months of age and older. No additional milestones have been accrued as there were no potential milestones yet considered probable. There were $15.0 million of Livmarli development or regulatory milestones achieved during the year ended December 31, 2022, compared to $32.0 million for the year ended December 31, 2021. There were no volixibat development and regulatory milestones achieved during the year ended December 21, 2022, compared to $2.0 million during the year ended December 31, 2021.

Satiogen License

Through the Shire Agreement, the Company was assigned a license agreement with Satiogen pursuant to which the Company obtained an exclusive, worldwide license to certain patents and know-how, with the right to sublicense to a third party subject to certain financial considerations. Pursuant to the terms of the license agreement, the Company is obligated to pay to Satiogen up to an aggregate of $10.5 million upon the achievement of certain milestones, of which $0.5 million was for initiation of certain development activities, $5.0 million for the completion of regulatory approvals and $5.0 million for commercialization activities. Additionally, the Company will be required to pay a low single-digit royalty on net sales. The Company’s royalty obligations continue on a licensed product-by-licensed product and country-by-country basis until the expiration of the last valid claim in a licensed patent covering the applicable licensed product in such country. Royalty obligations under the Satiogen license are creditable against the royalty obligations to Shire under the Shire Agreement. The Company has not paid milestone payments pursuant to this agreement for the periods presented.

In May 2022, the Company completed the merger and acquisition of Satiogen for total consideration of approximately $24.2 million. At acquisition, Satiogen’s assets consisted of cash and intangible assets related to developed technology. The purchase consideration consisted of 609,305 shares of the Company’s common stock issued upon the closing of the acquisition and cash consideration of $2.6 million, excluding $0.2 million of stock option exercise prices deemed to have been paid immediately prior to the acquisition, in respect of an equivalent amount of cash on the books of Satiogen, with up to an additional 32,494 shares of common stock that would have been issued upon the closing of the acquisition except the parties agreed to such shares being held back by the Company for 12 months from the acquisition date to satisfy certain purchase price adjustments and indemnification obligations that may arise during this period. Specifically, purchase price adjustments and indemnification obligations that arise will reduce the number of shares issuable by the Company at settlement in accordance with the terms of the definitive acquisition agreement. The purchase consideration also included issuance of up to an additional 199,993 shares of the Company’s common stock, contingent upon the achievement of a certain milestone by June 30, 2025, subject to adjustment to satisfy certain purchase price adjustments and indemnification obligations that may arise. In December 2022, with the approval of Livmarli by the European Commission for the treatment of cholestatic pruritus in patients with ALGS two months of age and older, the milestone was achieved. The Company issued 199,993 shares of common stock in January 2023. Through the transaction, the Company obtained all Satiogen licensing payments and Satiogen-owned intellectual property relating to Livmarli and volixibat. The transaction resulted in a reduction of total licensing royalty obligations for Livmarli and volixibat.

The Company accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business and substantially all the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets, namely, the Satiogen intangible assets comprised of intellectual property. The Company evaluated that the intellectual property assets acquired were deemed to be commercially viable and the cost of the acquisition was recorded as an intangible asset in the accompanying consolidated balance sheets as of December 31, 2022.

There was no gain or loss recognized from settlement of the preexisting contractual relationship with Satiogen as the pre-existing contract was determined to be at fair value on the date of acquisition. For the year ended

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December 31, 2022, there were no significant expenses incurred that were approved for settlement against the Indemnification Holdback.

As the number of shares potentially issuable upon the resolution of the Indemnification Holdback and the Contingent Milestone is variable, they were recorded as liabilities at their respective fair values on the date of acquisition using the Company’s common stock price. The fair value of the Indemnification Holdback was additionally determined based on management’s estimate of the probability of indemnification obligations being incurred during the one year following the acquisition date, while the fair value of the Contingent Milestone was additionally determined based upon management’s estimate of the probability of the milestone being met until the contingency was resolved in December 2022. The fair value of the Indemnification Holdback liability and the Contingent Milestone liability are remeasured at each reporting period until settled, with resulting changes in the fair value recorded in other income (expense) in the accompanying consolidated statements of operations.

The following represents the consideration paid and allocation of purchase price for the acquisition of Satiogen (in thousands, except per share data):

Issued common stock $ 15,585

Cash consideration 2,600

Indemnification Holdback 831

Contingent consideration settled in common stock 4,600

Transaction costs 545

Total purchase consideration 24,161

Assets acquired:

Intangible assets - developed technology 21,561

Cash consideration 2,600

Total assets acquired $ 24,161

Pfizer License

Through the Shire Agreement, the Company was assigned a license agreement with Pfizer pursuant to which the Company obtained an exclusive, worldwide license to certain Pfizer know-how with a right to sublicense. Upon commercialization of any product utilizing the licensed product, the Company will be required to pay to Pfizer a low single-digit royalty on net sales of product sold by the Company, its affiliates or sublicensees. The Company’s royalty obligations continue on a licensed product-by-licensed product basis until the eighth anniversary of the first commercial sale of such licensed product anywhere in the world.

Sanofi License

Through the Shire Agreement, the Company was assigned a license agreement with Sanofi pursuant to which the Company obtained an exclusive, worldwide license to certain patents and know-how with the right to sublicense to a third party subject to certain financial considerations. The Company is obligated to pay up to an aggregate of $36.0 million upon the achievement of certain regulatory, commercialization and product sales milestones. Additionally, upon commercialization, the Company is required to pay tiered royalties in the mid to high single-digit range based upon net sales of licensed products sold by the Company and sublicensees in a calendar year, subject to adjustments in certain circumstances. The Company’s royalty obligations continue on a licensed product-by-licensed product and country-by-country basis until the later to occur of the expiration of the last valid claim in a licensed patent covering the applicable licensed product in such country and ten years after the first commercial sale of a licensed product in such country. Royalty obligations under the Sanofi license are creditable against the royalty obligations to Shire under the Shire Agreement. The Company has not paid milestone payments pursuant to this agreement for the periods presented. As of December 31, 2022, no milestones had been accrued as there were no potential milestones considered probable.

8. Collaboration and License Agreements

License and Collaboration Agreement with CANbridge

In April 2021, the Company entered into an exclusive license and collaboration agreement with CANbridge Pharmaceuticals, Inc. (“CANbridge”). Under the terms of the agreement, CANbridge has obtained the exclusive right to develop and commercialize Livmarli within the Greater China regions (China, Hong Kong, Macau and

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Taiwan). In connection with the agreement, the Company received an upfront payment of $11.0 million, which, upon satisfaction of the performance obligation and receipt by CANbridge of the right to use and benefit from the license, was recorded as license revenue in the accompanying consolidated statements of operations. Additionally, the Company is eligible to receive up to $5.0 million in research and development funding, and up to $109.0 million for the achievement of future regulatory and commercial milestones, with double-digit tiered royalties based on product net sales. The Company concluded at inception of the agreement that the transaction price should not include the variable consideration related to unachieved developmental and regulatory milestones as this consideration was considered to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal in cumulative revenue. The Company will recognize any consideration related to sales-based payments when the related sales occur, as the Company has determined that these amounts relate predominantly to the license granted and therefore will be recognized at the later of (i) when or as the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company re-evaluates the transaction price at each reporting period as uncertain events are resolved and other changes in circumstances occur. For the year ended December 31, 2022 and December 31, 2021, the Company recorded research and development funding of $0.9 million and $1.9 million, respectively, payable by CANbridge to the Company which is reflected as a reduction of research and development expense in the accompanying consolidated statements of operations. As of December 31, 2022 and 2021, such research and development funding of $0.2 million and $0.8 million, respectively, was recorded as a receivable which was included in accounts receivable on the accompanying consolidated balance sheets. In January 2022, CANbridge achieved a regulatory milestone, triggering a milestone payment to the Company of $2.0 million, which was recorded as license revenue on the accompanying consolidated statements of operations for the year ended December 31, 2022.

License and Collaboration Agreement with GC Biopharma

In July 2021, the Company entered into an exclusive license and collaboration agreement with GC Biopharma. Under the terms of the agreement, GC Biopharma has obtained the exclusive right to develop and commercialize Livmarli within South Korea for ALGS, PFIC, and BA. In connection with the agreement, the Company received a $5.0 million upfront payment, which, upon satisfaction of the performance obligation and receipt by GC Biopharma of the right to use and benefit from the license, was recorded as license revenue in the accompanying consolidated financial statements of operations for the year ended December 31, 2021. There was no license revenue recorded for the year ended December 31, 2022. Additionally, the Company is entitled to certain research and development funding and up to $23.0 million for the achievement of future regulatory and commercial milestones, with double-digit tiered royalties based on product net sales. At inception of the agreement, the Company concluded that the transaction price should not include the variable consideration related to unachieved developmental and regulatory milestones as this consideration was considered to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal in cumulative revenue for this contract when the uncertainty is resolved in the future. The Company will recognize any consideration related to sales-based payments (including milestones and royalties) when the related sales occur, as the Company has determined that these amounts relate predominantly to the license granted and therefore will be recognized on the later to occur of satisfaction of the performance obligation or the occurrence of the related sales. The Company will re-evaluate the transaction price at each reporting period as uncertain events are resolved and other changes in circumstances occur. For the years ended December 31, 2022 and December 31, 2021, no adjustments were made to the transaction price. For the years ended December 31, 2022 and December 31, 2021, the Company recorded research and development funding of zero and $0.3 million, respectively, payable by GC Biopharma to the Company which is reflected as a reduction of research and development expense in the accompanying consolidated statements of operations. As of December 31, 2022 and December 31, 2021, such research and development funding of zero and $0.3 million, respectively, was recorded as a receivable which was included in prepaids and other current assets on the accompanying consolidated balance sheets. In February 2023, GC Biopharma achieved a regulatory milestone under this agreement triggering a milestone payment to the Company of $2.5 million.

Licensing Agreement with Takeda

In September 2021, the Company entered into an exclusive licensing agreement with Takeda for the development and commercialization of Livmarli in Japan for ALGS, PFIC, and BA. Under the terms of the agreement, Takeda will be responsible for regulatory approval and commercialization of Livmarli in Japan. Takeda will also be responsible for development, including conducting clinical studies in cholestatic indications. The Company is responsible for commercial supply to Takeda. In exchange, the Company is eligible to receive a percentage of Takeda’s annualized net sales, which range from high double digits declining to mid double digits over the first four years from commercial launch and thereafter remains at mid double digits. The Company fully constrained all revenues upon transfer of control of the license to Takeda, which occurred when Takeda could use and benefit from the license, and will recognize any consideration related to sales-based payments when the related

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sales occur, as the Company has determined that these amounts relate predominantly to the license granted and therefore will be recognized on the later to occur of satisfaction of the performance obligation or the occurrence of the related sales.

Option, License and Collaboration Agreement with Vivet

In April 2021, the Company entered into an Option, License and Collaboration Agreement (“Vivet Collaboration Agreement”) with Vivet Therapeutics SAS (“Vivet”). Pursuant to the Vivet Collaboration Agreement, Vivet granted the Company the exclusive option, at the Company’s discretion, to develop and subsequently commercialize Vivet’s two proprietary AAV gene therapy programs for PFIC, subtypes 3 and 2. Under the terms of the Vivet Collaboration Agreement, the Company paid an upfront fee of $4.2 million and agreed to provide funding to support certain research and development costs associated with the two gene therapy programs through July 2023. In December 2021, the Company elected not to exercise its option, terminating the agreement. The Company made a final payment of $6.3 million in January 2022 under the terms of the agreement, which was reflected in accrued expenses at December 31, 2021 on the accompanying consolidated balance sheets.

For the year ended December 31, 2021, pursuant to the terms of the Vivet Collaboration Agreement, the Company recorded research and development expense of $18.9 million on the accompanying consolidated statements of operations.

9. Leases

In January 2019, the Company entered into an operating lease agreement for office space which consisted of approximately 5,600 square feet (the “Initial Lease”). The lease term is approximately four years with an option to extend the term for one five-year term, which at the time was not reasonably assured of exercise and therefore, not included in the lease term. The lease contained a tenant improvement allowance of $0.4 million, which has been recorded as leasehold improvements in the accompanying consolidated balance sheets with a corresponding reduction of the ROU asset at inception of the lease. Rent payments commenced in August 2019.

In November 2019, the Company amended the operating lease agreement (the “Amended Agreement”) to extend the term of the Initial Lease through March 2025. This extension was accounted for as a lease modification and the Company recorded an increase to the ROU asset and lease liability of $0.6 million at the time of the amendment.

Additionally, pursuant to the Amended Agreement, the Company expanded the office space by 5,555 square feet for a five-year term expiring in March 2025 (the “Expanded Space”). The Company accounted for the Expanded Space as a separate contract as there were material additional rights of use that were not included in the Initial Lease. The Amended Agreement contained a tenant improvement allowance of $0.8 million in connection with the expanded space, which has been recorded as leasehold improvements within property and equipment, net on the accompanying consolidated balance sheets with a corresponding reduction of the ROU asset at inception of the lease for the expanded space.

In June 2022, the Company entered into a lease agreement for approximately 3,500 square feet of office space in Switzerland. The lease commenced in November 2022 and has a term of approximately two and a half years with no option to extend the term. The Company recorded a ROU asset and lease liability of $0.3 million at inception of the lease.

The ROU and corresponding lease liabilities were estimated using a weighted-average incremental borrowing rate of 8.0%.

As of December 31, 2022, the Company recorded an aggregate ROU asset of $1.4 million and an aggregate lease liability of $2.2 million in the accompanying consolidated balance sheets. The weighted-average remaining lease term is 2.1 years.

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As of December 31, 2022, undiscounted future minimum payments under the Company’s operating leases are as follows (in thousands):

Years Ended December 31, UndiscountedRent Payments

Total undiscounted lease payments 2,378

Less: imputed interest (190 )

Total lease liability $ 2,188

Rent expense was $0.8 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively. Variable lease payments for the year ended December 31, 2022 were $0.2 million. Variable lease payments for the year ended December 31, 2021 were immaterial.

10. Stockholders’ Equity (Deficit)

Common Stock

In August 2020, the SEC declared effective a registration statement on Form S-3 (“Shelf Registration”) covering the sale of up to $300.0 million of the Company’s securities. Also, in August 2020, the Company entered into a sales agreement (“Sales Agreement”) with SVB Leerink LLC (“SVB Leerink”) pursuant to which the Company may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through SVB Leerink acting as the sales agent and/or principal. During the year ended December 31, 2021, the Company did not issue or sell any shares of common stock pursuant to the Sales Agreement. During the year ended December 31, 2022, the Company issued and sold 1,160,915 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $19.01 per share, resulting in aggregate gross proceeds to the Company of $22.1 million. The net proceeds for the year ended December 31, 2022 to the Company after deducting sales commissions to SVB Securities and other issuance expenses were approximately $21.3 million. Through December 31, 2022, the Company has issued and sold an aggregate of 1,466,884 shares of common stock pursuant to the Sales Agreement, resulting in aggregate gross proceeds to the Company of $28.7 million. The remaining capacity under the Sales Agreement is approximately $46.3 million as of December 31, 2022. In January and February 2023, the Company sold 658,206 shares of common stock pursuant to the Sales Agreement at a weighted-average price of $22.79 per share, resulting in net proceeds of $14.5 million.

In December 2020, the Company completed an underwritten public offering of its common stock pursuant to the Shelf Registration. The Company issued and sold 3,750,000 shares of common stock at a public offering price of $20.00 per share, resulting in net proceeds of $70.0 million after deducting underwriting discounts, commissions and offering expenses. In addition, the Company granted the underwriters an option, exercisable for 30 days, to purchase up to 562,500 additional shares of its common stock at the public offering price, less the underwriting discounts and commissions. In January 2021, the underwriters partially exercised their option and purchased 375,654 shares of the Company’s common stock at a price of $20.00 per share, resulting in net proceeds of $7.1 million after deducting underwriting discounts.

MIRM US Equity

MIRM · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

MIRM US Equity☆

MIRM · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

MIRM US Equity