2017 Q4 Form 10-K Financial Statement

#000143853318000006 Filed on February 27, 2018

View on sec.gov

Income Statement

Concept 2017 Q4 2017 Q3 2017
Revenue $42.00K $40.00K $154.9M
YoY Change -99.89% -99.88% 15.98%
Cost Of Revenue $1.170M $925.0K $3.605M
YoY Change -2.5% -41.2% -20.84%
Gross Profit $41.00M -$885.0K $151.3M
YoY Change 13.51% -102.73% 17.28%
Gross Profit Margin 97619.05% -2212.5% 97.67%
Selling, General & Admin $22.40M $24.85M $101.3M
YoY Change -0.8% 5.91% 10.22%
% of Gross Profit 54.63% 66.96%
Research & Development $19.49M $19.61M $78.17M
YoY Change -2.55% 6.5% 10.37%
% of Gross Profit 47.54% 51.65%
Depreciation & Amortization $4.460M $4.620M $17.80M
YoY Change 6.44% 12.96% 10.34%
% of Gross Profit 10.88% 11.76%
Operating Expenses $57.35M $50.95M $208.7M
YoY Change 3.25% -6.2% 8.82%
Operating Profit -$15.18M -$10.61M -$53.79M
YoY Change -16.71% -47.93% -7.6%
Interest Expense -$4.230M -$660.0K $4.400M
YoY Change 227.91% 120.74% -6.38%
% of Operating Profit
Other Income/Expense, Net $4.139M -$8.409M -$4.572M
YoY Change -169.74% -181.85% -823.42%
Pretax Income -$11.04M -$19.02M -$58.36M
YoY Change -10.17% -37.95% 1.36%
Income Tax $6.580M -$1.223M $1.368M
% Of Pretax Income
Net Earnings -$17.62M -$17.79M -$59.73M
YoY Change 104.79% -52.05% 24.69%
Net Earnings / Revenue -41947.62% -44485.0% -38.55%
Basic Earnings Per Share -$0.45 -$0.46 -$1.54
Diluted Earnings Per Share -$0.55 -$0.46 -$1.54
COMMON SHARES
Basic Shares Outstanding 39.31M shares 38.65M shares 38.77M shares
Diluted Shares Outstanding 38.65M shares 38.77M shares

Balance Sheet

Concept 2017 Q4 2017 Q3 2017
SHORT-TERM ASSETS
Cash & Short-Term Investments $222.7M $303.9M $300.6M
YoY Change -12.98% 10.78% 17.47%
Cash & Equivalents $99.39M $98.99M $99.40M
Short-Term Investments $123.3M $204.9M $201.2M
Other Short-Term Assets $6.000M $2.600M $6.000M
YoY Change -27.71% -27.78% -27.71%
Inventory $5.351M $4.318M $5.400M
Prepaid Expenses
Receivables $13.87M $14.54M $13.90M
Other Receivables $0.00 $0.00 $0.00
Total Short-Term Assets $325.8M $325.3M $325.8M
YoY Change -1.97% -5.04% -1.99%
LONG-TERM ASSETS
Property, Plant & Equipment $3.230M $2.717M $3.200M
YoY Change 24.86% 611.26% 23.08%
Goodwill $936.0K $936.0K
YoY Change 0.0% 0.0%
Intangibles $184.8M
YoY Change 1.52%
Long-Term Investments $0.00
YoY Change
Other Assets $5.556M $7.101M $5.600M
YoY Change -24.55% 259.73% -24.32%
Total Long-Term Assets $194.5M $195.2M $194.5M
YoY Change 0.83% 2.81% 0.83%
TOTAL ASSETS
Total Short-Term Assets $325.8M $325.3M $325.8M
Total Long-Term Assets $194.5M $195.2M $194.5M
Total Assets $520.3M $520.5M $520.3M
YoY Change -0.94% -2.24% -0.95%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $18.94M $7.370M $18.90M
YoY Change 151.77% 140.38% 152.0%
Accrued Expenses $36.02M $32.25M $24.00M
YoY Change 8.14% -20.12% 2.13%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00 $0.00
YoY Change
Long-Term Debt Due
YoY Change
Total Short-Term Liabilities $85.67M $83.90M $85.70M
YoY Change 2.89% -2.43% 2.88%
LONG-TERM LIABILITIES
Long-Term Debt $45.10M $44.90M $45.10M
YoY Change 1.58% 1.35% 1.58%
Other Long-Term Liabilities $2.472M $3.808M $96.50M
YoY Change -38.35% 54.73% 15.71%
Total Long-Term Liabilities $2.472M $3.808M $141.6M
YoY Change -38.35% 54.73% 10.8%
TOTAL LIABILITIES
Total Short-Term Liabilities $85.67M $83.90M $85.70M
Total Long-Term Liabilities $2.472M $3.808M $141.6M
Total Liabilities $227.2M $216.0M $227.2M
YoY Change 4.46% -3.93% 4.46%
SHAREHOLDERS EQUITY
Retained Earnings -$177.7M -$160.0M
YoY Change 57.14% 53.21%
Common Stock $471.8M $465.2M
YoY Change 11.98% 12.8%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $293.1M $304.5M $293.1M
YoY Change
Total Liabilities & Shareholders Equity $520.3M $520.5M $520.3M
YoY Change -0.94% -2.24% -0.95%

Cashflow Statement

Concept 2017 Q4 2017 Q3 2017
OPERATING ACTIVITIES
Net Income -$17.62M -$17.79M -$59.73M
YoY Change 104.79% -52.05% 24.69%
Depreciation, Depletion And Amortization $4.460M $4.620M $17.80M
YoY Change 6.44% 12.96% 10.34%
Cash From Operating Activities -$860.0K $6.200M $7.403M
YoY Change -89.87% 33.91% -315.14%
INVESTING ACTIVITIES
Capital Expenditures -$2.940M -$3.740M $887.0K
YoY Change -30.5% 34.53% -37.89%
Acquisitions $0.00
YoY Change -100.0%
Other Investing Activities $2.840M $1.540M $59.61M
YoY Change -91.82% -147.09% 167.43%
Cash From Investing Activities -$110.0K -$2.180M $45.60M
YoY Change -100.36% -63.97% 339.75%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net $0.00
YoY Change
Debt Paid & Issued, Net $0.00
YoY Change
Cash From Financing Activities 1.370M 5.830M $5.445M
YoY Change -127.13% 44.31% -241.47%
NET CHANGE
Cash From Operating Activities -860.0K 6.200M $7.403M
Cash From Investing Activities -110.0K -2.180M $45.60M
Cash From Financing Activities 1.370M 5.830M $5.445M
Net Change In Cash 400.0K 9.850M $58.39M
YoY Change -97.64% 275.95% 1795.84%
FREE CASH FLOW
Cash From Operating Activities -$860.0K $6.200M $7.403M
Capital Expenditures -$2.940M -$3.740M $887.0K
Free Cash Flow $2.080M $9.940M $6.516M
YoY Change -148.83% 34.14% -233.83%

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550000 USD
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726000 USD
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214871000 USD
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100000 USD
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18383000 USD
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19389000 USD
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3197000 USD
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58392000 USD
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0.0001
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0.0001
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100000000 shares
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100000000 shares
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4554000 USD
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3605000 USD
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6991000 USD
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3803000 USD
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1709000 USD
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802000 USD
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6425000 USD
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358000 USD
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18520000 USD
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2603000 USD
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0 USD
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34153000 USD
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16810000 USD
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500000 USD
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600000 USD
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100000 USD
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500000 USD
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17804000 USD
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1881000 USD
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0 USD
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0.0000
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117000 USD
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0.0000
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0.0115
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0.0368
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2425000 USD
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CY2017 us-gaap Excess Tax Benefit From Share Based Compensation Financing Activities
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0 USD
CY2015 us-gaap Fair Value Adjustment Of Warrants
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33307000 USD
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7000 USD
CY2017 us-gaap Income Tax Expense Benefit
IncomeTaxExpenseBenefit
1368000 USD
CY2015 us-gaap Income Taxes Paid
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9610000 USD
CY2016 us-gaap Income Taxes Paid
IncomeTaxesPaid
7933000 USD
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IncomeTaxesPaid
7172000 USD
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3379000 USD
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9672000 USD
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2656000 USD
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-11000 USD
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6467000 USD
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CY2016 us-gaap Income Tax Expense Benefit
IncomeTaxExpenseBenefit
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IncomeTaxExpenseBenefit
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CY2017 us-gaap Fair Value Adjustment Of Warrants
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4491000 USD
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0
CY2017 us-gaap Fair Value Assumptions Expected Dividend Rate
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0
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33497000 USD
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51046000 USD
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74962000 USD
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16871000 USD
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16871000 USD
CY2017Q4 us-gaap Finite Lived Intangible Assets Amortization Expense Year Four
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16871000 USD
CY2017Q4 us-gaap Finite Lived Intangible Assets Amortization Expense Year Three
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16871000 USD
CY2017Q4 us-gaap Finite Lived Intangible Assets Amortization Expense Year Two
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16871000 USD
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159317000 USD
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0 USD
CY2016 us-gaap Foreign Currency Transaction Gain Loss Before Tax
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0 USD
CY2017 us-gaap Foreign Currency Transaction Gain Loss Before Tax
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1081000 USD
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-40000 USD
CY2016 us-gaap Foreign Currency Transaction Gain Loss Realized
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93000 USD
CY2017 us-gaap Foreign Currency Transaction Gain Loss Realized
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CY2015 us-gaap Gain Loss On Disposition Of Assets1
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900000 USD
CY2015 us-gaap Gain Loss Related To Litigation Settlement
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15500000 USD
CY2016 us-gaap Gain Loss Related To Litigation Settlement
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0 USD
CY2017 us-gaap Gain Loss Related To Litigation Settlement
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0 USD
CY2015 us-gaap Gains Losses On Extinguishment Of Debt
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-4151000 USD
CY2016 us-gaap Gains Losses On Extinguishment Of Debt
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0 USD
CY2017 us-gaap Gains Losses On Extinguishment Of Debt
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0 USD
CY2016Q4 us-gaap Goodwill
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936000 USD
CY2017Q4 us-gaap Goodwill
Goodwill
936000 USD
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0 USD
CY2016 us-gaap Goodwill Impairment Loss
GoodwillImpairmentLoss
0 USD
CY2017 us-gaap Goodwill Impairment Loss
GoodwillImpairmentLoss
0 USD
CY2015 us-gaap Impairment Of Intangible Assets Excluding Goodwill
ImpairmentOfIntangibleAssetsExcludingGoodwill
4700000 USD
CY2016 us-gaap Impairment Of Intangible Assets Excluding Goodwill
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0 USD
CY2017 us-gaap Impairment Of Intangible Assets Excluding Goodwill
ImpairmentOfIntangibleAssetsExcludingGoodwill
0 USD
CY2015 us-gaap Impairment Of Intangible Assets Finitelived
ImpairmentOfIntangibleAssetsFinitelived
4710000 USD
CY2016 us-gaap Impairment Of Intangible Assets Finitelived
ImpairmentOfIntangibleAssetsFinitelived
0 USD
CY2017 us-gaap Impairment Of Intangible Assets Finitelived
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0 USD
CY2015 us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
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105467000 USD
CY2016Q1 us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
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6146000 USD
CY2016Q2 us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest
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99000 USD
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25900000 USD
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3200000 USD
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96000 USD
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0 USD
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3324000 USD
CY2016Q4 us-gaap Unrecognized Tax Benefits
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CY2017Q4 us-gaap Unrecognized Tax Benefits
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0 USD
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0 USD
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0 USD
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0 USD
CY2017 us-gaap Unrecognized Tax Benefits Increases Resulting From Prior Period Tax Positions
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0 USD
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CY2015 us-gaap Weighted Average Number Of Diluted Shares Outstanding
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37581439 shares
CY2016 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
38288012 shares
CY2017 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
38769816 shares
CY2015 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
33560249 shares
CY2016 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
36997865 shares
CY2017 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
38769816 shares
CY2017 us-gaap Nature Of Operations
NatureOfOperations
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:13px;padding-top:12px;font-size:13pt;"><font style="font-family:Arial;font-size:13pt;color:#000000;font-style:normal;font-weight:bold;text-decoration:none;">DESCRIPTION OF BUSINESS</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:16px;font-size:12pt;"><font style="font-family:Arial;font-size:12pt;color:#006ebf;font-style:normal;font-weight:bold;text-decoration:none;">Organization and Description of Business</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;text-align:justify;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">Retrophin, Inc. (&#8220;we&#8221;, &#8220;our&#8221;, &#8220;us&#8221;, &#8220;Retrophin&#8221; and the &#8220;Company&#8221;) refers to Retrophin, Inc., a Delaware corporation, as well as our direct and indirect subsidiaries. Retrophin is a fully integrated biopharmaceutical company headquartered in San Diego, California focused on the development, acquisition and commercialization of therapies for the treatment of rare diseases. We regularly evaluate and, where appropriate, act on opportunities to expand our product pipeline through licenses and acquisitions of products in areas that will serve patients with rare diseases and that we believe offer attractive growth characteristics. </font></div><div style="line-height:120%;padding-bottom:8px;padding-top:12px;font-size:10.5pt;"><font style="font-family:Arial;font-size:10.5pt;color:#666666;font-style:italic;font-weight:bold;text-decoration:none;">The Company is developing the following pipeline products:</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">The Company is developing fosmetpantotenate (RE-024), a novel small molecule, as a potential treatment for PKAN. PKAN is a genetic neurodegenerative disorder that is typically diagnosed in the first decade of life. Consequences of PKAN include dystonia, dysarthria, rigidity, retinal degeneration, and severe digestive problems. There are currently no viable treatment options for patients with PKAN. Fosmetpantotenate is a phosphopantothenate replacement therapy that aims to restore levels of this key substrate in PKAN patients. </font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;text-align:left;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">Sparsentan (RE-021) is an investigational product candidate which acts as both a potent ARB, as well as a selective ERA, with in vitro selectivity toward endothelin receptor type A. The Company secured a license to sparsentan from Ligand Pharmaceuticals, Inc. and Bristol-Myers Squibb Company (who referred to it as DARA). The Company is developing sparsentan as a treatment for FSGS, which is a leading cause of end-stage renal disease and nephrotic syndrome (&#8220;NS&#8221;). There are no U.S. Food and Drug Administration (the "FDA") approved treatments for FSGS and off-label resources are limited to ACE/ARBs, steroids, and immunosuppressant agents, which are effective in only a subset of patients.</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;text-align:left;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">The Company recently announced the exploration of a second indication, IgAN, for sparsentan. IgAN is characterized by hematuria, proteinuria, and variable rates of progressive renal failure. There is no FDA approved treatment for IgAN. </font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">The Company is a party to a&#160;joint development agreement with&#160;Censa Pharmaceuticals Inc., a privately held biotechnology company focused on developing therapies for orphan metabolic diseases, to evaluate sepiapterin ("CNSA-001") for the treatment of phenylketonuria (PKU). CNSA-001 is an orally bioavailable form of a natural precursor of tetrahydrobiopterin (BH4) with the potential to provide improved phenylalanine (Phe) reduction in patients with PKU when compared to BH4. </font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">PKU is a rare, genetic metabolic condition in which the body cannot breakdown Phe due to a missing or defective phenylalanine hydroxylase (PAH) enzyme. High Phe levels can lead to developmental and physical growth delay, executive function impairment, seizures, and microcephaly caused by toxic Phe accumulation in the brain. </font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">In September 2017, the Company entered a three-way Cooperative Research and Development Agreement ("CRADA")&#160;with the National Institutes of Health&#8217;s National Center for Advancing Translational Sciences (NCATS) and patient advocacy foundation NGLY1.org&#160;to collaborate on research efforts aimed at the identification of potential small molecule therapeutics for NGLY1 deficiency.</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">N-glycanase deficiency, or NGLY1 deficiency, is an extremely rare genetic disorder believed to be caused by a deficiency in an enzyme called N-glycanase-1, which is encoded by the gene NGLY1. The condition has been characterized by symptoms such as developmental delays, seizures, complex hyperkinetic movement disorders, diminished reflexes and an inability to produce tears. There are no approved therapeutic options for NGLY1 deficiency, and current therapeutic strategies are limited to symptom management.</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">Liquid ursodeoxycholic acid ("L-UDCA") is a liquid formulation of ursodeoxycholic acid being developed for the treatment of a rare liver disease called primary biliary cholangitis ("PBC"). The Company obtained the rights to L-UDCA during 2016 with the intention of making L-UDCA commercially available to the subset of PBC patients who have difficulty swallowing.</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:12px;font-size:10.5pt;"><font style="font-family:Arial;font-size:10.5pt;color:#666666;font-style:italic;font-weight:bold;text-decoration:none;">The Company sells the following </font><font style="font-family:Arial;font-size:10.5pt;color:#666666;font-style:italic;font-weight:bold;text-decoration:none;">three</font><font style="font-family:Arial;font-size:10.5pt;color:#666666;font-style:italic;font-weight:bold;text-decoration:none;"> products:</font></div><table cellpadding="0" cellspacing="0" style="padding-top:4px;padding-bottom:8px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:9.5pt;padding-left:24px;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">Chenodal (chenodiol tablets) is approved in the United States for the treatment of patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age. Chenodal has been the standard of care for </font><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">cerebrotendinous xanthomatosis ("</font><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">CTX") patients for more than three decades and the Company is currently pursuing adding this indication to the label.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:4px;padding-bottom:8px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:9.5pt;padding-left:24px;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">Cholbam (cholic acid capsules) is approved in the United States for the treatment of bile acid synthesis disorders due to single enzyme defects and is further indicated for adjunctive treatment of patients with peroxisomal disorders.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-top:4px;padding-bottom:8px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:9.5pt;padding-left:24px;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">Thiola (tiopronin tablets) is approved in the United States for the </font><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">prevention of cystine (kidney) stone formation in patients with severe homozygous cystinuria.</font></div></td></tr></table></div>
CY2017 us-gaap Prior Period Reclassification Adjustment Description
PriorPeriodReclassificationAdjustmentDescription
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:8px;padding-top:8px;text-align:justify;font-size:10pt;"><font style="font-family:Arial Narrow;font-size:10pt;color:#006ebf;font-style:normal;font-weight:bold;text-decoration:none;">Reclassifications</font><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;font-style:italic;">&#160;</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;text-align:justify;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">Certain reclassifications have been made to the prior year financial statements in order to conform to the current year&#8217;s presentation.</font></div></div>
CY2017 us-gaap Revenue Recognition Services Licensing Fees
RevenueRecognitionServicesLicensingFees
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:8px;padding-top:8px;text-align:justify;font-size:10pt;"><font style="font-family:Arial Narrow;font-size:10pt;color:#006ebf;font-style:normal;font-weight:bold;text-decoration:none;">Patents</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;text-align:justify;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">The Company expenses external costs, such as filing fees and associated attorney fees, incurred to obtain issued patents and patent applications pending. The Company also expenses costs associated with maintaining and defending patents subsequent to their issuance in the period incurred.</font></div></div>
CY2017 us-gaap Use Of Estimates
UseOfEstimates
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:8px;padding-top:8px;font-size:10pt;"><font style="font-family:Arial Narrow;font-size:10pt;color:#006ebf;font-style:normal;font-weight:bold;text-decoration:none;">Use of Estimates</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:4px;text-align:left;font-size:9.5pt;"><font style="font-family:Arial Narrow;font-size:9.5pt;color:#000000;">In preparing financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions. These estimates and assumptions include revenue recognition, valuing equity securities in share-based payments, estimating expenses of contracted research organizations, estimating fair value of equity instruments recorded as derivative liabilities, estimating the fair value of net assets acquired in business combinations, estimating the useful lives of depreciable and amortizable assets, goodwill impairment, estimating the fair value of contingent consideration, estimating of valuation allowances and uncertain tax positions, and estimates associated with the assessment of impairment for long lived assets.</font></div></div>

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