Albireo Pharma (ALBO) 10-Q 7 May 20 2020 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	Apr. 30, 2020
Document And Entity Information [Abstract]
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Entity Registrant Name	Albireo Pharma, Inc.
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		14,979,540
Entity Central Index Key	0001322505
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 150,515	$ 131,843
Prepaid expenses and other current assets	7,818	9,956
Total current assets	158,333	141,799
Property and equipment, net	554	597
Goodwill	17,260	17,260
Other assets	5,962	5,413
Total assets	182,109	165,069
Current liabilities:
Accounts payable	6,788	4,785
Accrued expenses	7,561	13,486
Other current liabilities	798	653
Total current liabilities	15,147	18,924
Liability related to sale of future royalties	49,407	48,714
Other long-term liabilities	4,121	4,270
Total liabilities	68,675	71,908
Stockholders' Equity:
Common stock, $0.01 par value per share - 30,000,000 authorized at March 31, 2020 and December 31, 2019; 14,977,855 and 12,749,443 issued and outstanding at March 31, 2020 and December 31, 2019, respectively	149	127
Additional paid in capital	291,221	245,769
Accumulated other comprehensive income	12,739	6,452
Accumulated deficit	(190,675)	(159,187)
Total stockholders' equity	113,434	93,161
Total liabilities and stockholders' equity	$ 182,109	$ 165,069

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	14,977,855	12,749,443
Common stock, shares outstanding	14,977,855	12,749,443

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Revenue	$ 1,549	$ 570
Operating expenses:
Research and development	16,130	8,329
General and administrative	8,153	5,293
Other operating expense, net	6,816	2,296
Total operating expenses	31,099	15,918
Operating loss	(29,550)	(15,348)
Interest expense, net	(1,938)	(1,309)
Net loss	$ (31,488)	$ (16,657)
Net loss per share attributable to holders of common stock:
Net loss per common share - basic and diluted	$ (2.23)	$ (1.39)
Weighted-average shares outstanding:
Weighted-average common shares used to compute basic and diluted net loss per common share	14,132,217	12,001,125

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Income and Comprehensive Income [Abstract]
Net loss	$ (31,488)	$ (16,657)
Other comprehensive income:
Foreign currency translation adjustment	6,287	2,298
Total other comprehensive income	6,287	2,298
Total comprehensive loss	$ (25,201)	$ (14,359)

Consolidated Statements of Shar

Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income	Accumulated Deficit	Total
Balance at beginning of period at Dec. 31, 2018	$ 120	$ 214,694	$ 4,293	$ (96,470)	$ 122,637
Balance (in shares) at Dec. 31, 2018	11,969,928
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense		1,823			1,823
Exercise of options		1,290			1,290
Exercise of options (in shares)	68,908
Other comprehensive income			2,298		2,298
Net loss				(16,657)	(16,657)
Balance at end of period at Mar. 31, 2019	$ 120	217,807	6,591	(113,127)	111,391
Balance (in shares) at Mar. 31, 2019	12,038,836
Balance at beginning of period at Dec. 31, 2019	$ 127	245,769	6,452	(159,187)	93,161
Balance (in shares) at Dec. 31, 2019	12,749,443
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense		2,381			2,381
Exercise of options		94			94
Exercise of options (in shares)	37,662
Issuance of common stock, net of costs	$ 22	42,977			42,999
Issuance of common stock (in shares)	2,190,750
Other comprehensive income			6,287		6,287
Net loss				(31,488)	(31,488)
Balance at end of period at Mar. 31, 2020	$ 149	$ 291,221	$ 12,739	$ (190,675)	$ 113,434
Balance (in shares) at Mar. 31, 2020	14,977,855

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net loss	$ (31,488)	$ (16,657)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of liability related to sale of future royalties	2,040	2,005
Depreciation and amortization	39	11
Stock-based compensation expense	2,381	1,823
Foreign currency adjustments	6,544	3,441
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	1,283	(326)
Other assets	135	(440)
Accounts payable	2,233	(1,262)
Accrued expenses	(6,987)	(1,619)
Other current and long-term liabilities	24	(499)
Net cash used in operating activities	(23,796)	(13,523)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs	42,999
Proceeds from exercise of options	94	1,290
Net cash provided by financing activities	43,093	1,290
Effect of exchange rate changes on cash and cash equivalents	(625)	(1,313)
Net increase (decrease) in cash and cash equivalents	18,672	(13,546)
Cash and cash equivalents - beginning of period	131,843	163,885
Cash and cash equivalents - end of period	$ 150,515	150,339
Supplemental disclosures of cash and non-cash activities:
Right of use assets and lease obligations recorded upon amended lease agreements		1,205
Lease liability		$ 1,190

Summary of significant accounti

Summary of significant accounting policies and basis of presentation	3 Months Ended
	Mar. 31, 2020
Summary of significant accounting policies and basis of presentation
Summary of significant accounting policies and basis of presentation	1. Summary of significant accounting policies and basis of presentation Organization Albireo Pharma, Inc. (the Company) is a clinical-stage biopharmaceutical company focused on the development and commercialization of novel bile acid modulators to treat orphan pediatric liver diseases and other liver and gastrointestinal diseases and disorders. The Company’s clinical pipeline includes a Phase 3 product candidate, a Phase 2 product candidate, and elobixibat, which is approved in Japan for the treatment of chronic constipation. Odevixibat, the Company’s Phase 3 lead product candidate, is in development for multiple pediatric cholestatic liver diseases, with an ongoing Phase 3 trial for the treatment of patients with progressive familial intrahepatic cholestasis (PFIC), a pivotal trial initiated for the treatment of patients with biliary atresia, and another pivotal trial for the treatment of patients with Alagille syndrome (ALGS) planned to be initiated by the end of 2020. PFIC, biliary atresia and ALGS are each a rare, life-threatening genetic disorder affecting young children. Basis of presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, and the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2019. The Company combined prepaid expenses and other assets with other receivables in the Condensed Consolidated Statements of Cash Flows. These combinations are reflected at March 31, 2020 and March 31, 2019 respectively, with a change in the prior period presentation being made to conform to the current period presentation. There was no change to previously reported net loss or total comprehensive loss in the prior period presented as a result. In the opinion of management, all adjustments (including normal recurring adjustments) considered necessary for fair presentation have been included in the Condensed Consolidated Financial Statements. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the full fiscal year, any other interim period or any future fiscal year. The condensed consolidated financial statements are prepared on a basis consistent with prior periods. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). Principles of consolidation The accompanying Consolidated Financial Statements include the accounts of the Company and its direct or indirect wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Foreign currency translation Functional currency Items included in the financial statements of each entity comprising the Company are measured using the currency of the primary economic environment in which the entity operates (the functional currency). Transactions and balances Foreign currency transactions in each entity comprising the Company are remeasured into the functional currency of the entity using the exchange rates prevailing at the respective transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized within other operating expense, net in the Condensed Consolidated Statements of Operations. The results and financial position of the Company that have a functional currency different from the USD are translated into the presentation currency as follows: a. assets and liabilities presented are translated at the closing exchange rate as of March 31, 2020 and December 31, 2019; b. income and expenses for each statement of comprehensive loss are translated at the average exchange rate for the applicable period; and c. significant transactions use the closing exchange rate on the date of the transaction. All resulting exchange differences arising from such translations are recognized directly in other comprehensive income (loss) and presented as a separate component of equity. Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes. Management must apply significant judgment in this process. On an ongoing basis, the Company evaluates its estimates and assumptions, including but not limited to accruals, and the accretion of interest on the monetization liability. Actual results could materially differ from these estimates. Revenue recognition Milestone Payments 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 using the most likely amount method. If it is probable that a significant revenue reversal 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 considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Royalties For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when 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). In 2012, the Company entered into a license agreement (the Agreement) with EA Pharma Co., Ltd. (EA Pharma, formerly Ajinomoto Pharmaceuticals Co., Ltd.) to develop a select product candidate (elobixibat) for registration and subsequent commercialization in select markets. In conjunction with the Agreement, the Company granted EA Pharma an exclusive license to its intellectual property for development and commercialization activities in the designated field and territories. The Company has completed all of its performance obligations under the Agreement. As of March 31, 2020, the Company is eligible to receive an additional regulatory-based milestone payment under the Agreement of $4.7 million if a specified regulatory event is achieved for elobixibat. The cash payments and any other payments for milestones and royalties from EA Pharma are non-refundable, non-creditable and not subject to set-off. The Agreement will continue until the last royalty period for any product in the territory, which is defined as the period when there are no remaining patent rights or regulatory exclusivity in place for any products subject to royalties. EA Pharma may terminate the Agreement upon 180 days’ prior written notice to the Company. Either party may terminate the Agreement for the other party’s uncured material breach or insolvency and in certain other circumstances agreed to by the parties. Monetization of Future Royalties In December 2017, the Company entered into a royalty interest acquisition agreement (RIAA) with HealthCare Royalty Partners III, L.P. (HCR) pursuant to which it sold to HCR the right to receive all royalties from sales in Japan and sales milestones achieved from any covered territory potentially payable to the Company under the Agreement, up to a specified maximum “cap” amount of $78.8 million, based on the funds the Company received from HCR to date. The Company received $44.5 million from HCR, net of certain transaction expenses, under the RIAA and the Company is eligible to receive an additional $15.0 million under the RIAA if a specified sales milestone is achieved for elobixibat in Japan. If the cap amount is reached, the Company will again become eligible to receive royalties from Japanese sales and sales milestones from covered territories for elobixibat from EA Pharma under the Agreement. The Company is obligated to make royalty interest payments to HCR under the RIAA only to the extent it receives future Japanese royalties, sales milestones or other specified payments from EA Pharma. Although the Company sold its rights to receive royalties from the sales of elobixibat in Japan, as a result of its ongoing involvement in the cash flows related to these royalties, the Company will continue to account for these royalties as revenue. The Company recorded the $44.5 million as a liability related to sale of future royalties (royalty obligation). The royalty obligation will be amortized using the effective interest rate method, based on the Company’s best estimate of the time it will take to reach the capped amount. The following table shows the activity within the liability account for the period ended March 31, 2020: March 31, 2020 (in thousands) Liability related to sale of future royalties—beginning balance $ 55,144 Foreign currency translation loss 43 Accretion of interest expense on liability related to royalty monetization Repayment of the liability (6,271) Liability related to sale of future royalties—ending balance $ 50,956 Less current portion classified within accrued expenses (1,549) Net ending liability related to sale of future royalties $ 49,407 The Company records estimated royalties due for the current period in accrued other until the payment is received from EA Pharma at which time the Company then remits payment to HCR. As royalties are remitted to HCR, the balance of the royalty obligation will be effectively repaid over the life of the RIAA. In order to determine the accretion of the royalty obligation, the Company is required to estimate the total amount of future royalty payments to be received and submitted to HCR, as noted above, based on the Company’s best estimate of the time it will take to reach the cap amount and when milestones will be received. The sum of these amounts less the $44.5 million proceeds the Company received will be recorded as interest expense over the life of the royalty obligation. At March 31, 2020, the Company’s estimate of its total interest expense resulted in an annual effective interest rate of approximately 16.76%. The Company periodically assesses the estimated royalty payments to HCR and to the extent such payments are greater or less than its initial estimates or the timing of such payments is materially different than its original estimates, the Company will prospectively adjust the accretion of interest on the royalty obligation. There are a number of factors that could materially affect the amount and the timing of royalty payments, most of which are not within the Company’s control. Such factors include, but are not limited to, the rate of elobixibat prescriptions, the number of doses administered, the introduction of competing products, manufacturing or other delays, patent protection, adverse events that result in governmental health authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to HCR are in U.S. dollars while sales of elobixibat are in Japanese yen, and sales never achieving forecasted numbers, which would result in reduced royalty payments and reduced non-cash interest expense over the life of the royalty obligation. To the extent future royalties result in an amount less than the liability, the Company is not obligated to fund any such shortfall. Recently adopted accounting pronouncements In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ( ASU 2018-15) This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The guidance also requires the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. The guidance becomes effective for the Company for the fiscal year beginning after December 15, 2019 and early adoption is permitted. The Company adopted this guidance in the first quarter of 2020 on a prospective basis and there was no material impact on its consolidated financial statements.

Fair value of financial instrum

Fair value of financial instruments	3 Months Ended
	Mar. 31, 2020
Fair value of financial instruments
Fair value of financial instruments	2. Fair Value of financial instruments When measuring the fair value of financial instruments, the Company evaluates valuation techniques such as the market approach, the income approach and the cost approach. A three-level valuation hierarchy, which prioritizes the inputs to valuation techniques that are used to measure fair value, is based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows: Level 1—Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; Level 2—Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable for substantially the full term of the assets or liabilities; and Level 3—Unobservable inputs that reflect the reporting entity’s estimate of assumptions that market participants would use in pricing the asset or liability.

Commitments and contingencies

Commitments and contingencies	3 Months Ended
	Mar. 31, 2020
Commitments and contingencies
Commitments and contingencies	3. Commitments and contingencies Agreements with CROs As of March 31, 2020, the Company had various agreements with CROs for the conduct of specified research and development activities. Based on the terms of the respective agreements, the Company may be required to make future payments of up to $46.1 million to CROs upon the completion of contracted work.

Net loss per share

Net loss per share	3 Months Ended
	Mar. 31, 2020
Net loss per share
Net loss per share	4. Net loss per share Basic net loss per share, or Basic EPS, is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding. The following table sets forth the computation of Basic EPS and Diluted EPS (in thousands, except for share and per share data): Three Months Ended March 31, 2020 2019 Basic and Diluted EPS: Numerator Net loss $ (31,488) $ (16,657) Denominator Weighted average number of shares outstanding 14,132,217 12,001,125 Basic and Diluted EPS $ (2.23) $ (1.39) The following outstanding common stock equivalents were excluded from the computation of Diluted EPS for the three months ended March 31, 2020 and 2019 because including them would have been anti-dilutive: Three Months Ended March 31, 2020 2019 Options to purchase common stock and RSUs 2,293,790 1,757,728

Income taxes

Income taxes	3 Months Ended
	Mar. 31, 2020
Income taxes
Income taxes	5. Income taxes The Company did not record a tax provision or benefit for the three months ended March 31, 2020 or 2019. The Company has continued to maintain a full valuation allowance against its net deferred tax assets. The Company has had an overall net operating loss position since its inception.

Financings

Financings	3 Months Ended
	Mar. 31, 2020
Financings
Financings	6. Financings 2020 Underwritten Public Offering On February 3, 2020, the Company completed an underwriting public offering of 2,190,750 shares of its common stock, which includes the exercise in full of the underwriters’ option to purchase additional shares. The Company received net proceeds from this offering of approximately $43.0 million, after deducting underwriting discounts, commissions and offering expenses.

Stock-based Compensation

Stock-based Compensation	3 Months Ended
	Mar. 31, 2020
Stock-based Compensation
Stock-based Compensation	7. Stock-based Compensation The Company granted 518,325 options at a weighted average price of $24.38. The Company recorded the following stock-based compensation expense: Three Months Ended March 31, 2020 2019 (in thousands) Employee awards: Research and development expense $ 880 $ 708 General and administrative expense 1,501 1,115 Total stock-based compensation expense $ 2,381 $ 1,823

Summary of significant accoun_2

Summary of significant accounting policies and basis of presentation (Policies)	3 Months Ended
	Mar. 31, 2020
Summary of significant accounting policies and basis of presentation
Basis of presentation	Basis of presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, and the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2019. The Company combined prepaid expenses and other assets with other receivables in the Condensed Consolidated Statements of Cash Flows. These combinations are reflected at March 31, 2020 and March 31, 2019 respectively, with a change in the prior period presentation being made to conform to the current period presentation. There was no change to previously reported net loss or total comprehensive loss in the prior period presented as a result. In the opinion of management, all adjustments (including normal recurring adjustments) considered necessary for fair presentation have been included in the Condensed Consolidated Financial Statements. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the full fiscal year, any other interim period or any future fiscal year. The condensed consolidated financial statements are prepared on a basis consistent with prior periods. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).
Principles of consolidation	Principles of consolidation The accompanying Consolidated Financial Statements include the accounts of the Company and its direct or indirect wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Foreign currency translation	Foreign currency translation Functional currency Items included in the financial statements of each entity comprising the Company are measured using the currency of the primary economic environment in which the entity operates (the functional currency). Transactions and balances Foreign currency transactions in each entity comprising the Company are remeasured into the functional currency of the entity using the exchange rates prevailing at the respective transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized within other operating expense, net in the Condensed Consolidated Statements of Operations. The results and financial position of the Company that have a functional currency different from the USD are translated into the presentation currency as follows: a. assets and liabilities presented are translated at the closing exchange rate as of March 31, 2020 and December 31, 2019; b. income and expenses for each statement of comprehensive loss are translated at the average exchange rate for the applicable period; and c. significant transactions use the closing exchange rate on the date of the transaction. All resulting exchange differences arising from such translations are recognized directly in other comprehensive income (loss) and presented as a separate component of equity.
Use of estimates	Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes. Management must apply significant judgment in this process. On an ongoing basis, the Company evaluates its estimates and assumptions, including but not limited to accruals, and the accretion of interest on the monetization liability. Actual results could materially differ from these estimates.
Revenue recognition	Revenue recognition Milestone Payments 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 using the most likely amount method. If it is probable that a significant revenue reversal 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 considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Royalties For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when 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). In 2012, the Company entered into a license agreement (the Agreement) with EA Pharma Co., Ltd. (EA Pharma, formerly Ajinomoto Pharmaceuticals Co., Ltd.) to develop a select product candidate (elobixibat) for registration and subsequent commercialization in select markets. In conjunction with the Agreement, the Company granted EA Pharma an exclusive license to its intellectual property for development and commercialization activities in the designated field and territories. The Company has completed all of its performance obligations under the Agreement. As of March 31, 2020, the Company is eligible to receive an additional regulatory-based milestone payment under the Agreement of $4.7 million if a specified regulatory event is achieved for elobixibat. The cash payments and any other payments for milestones and royalties from EA Pharma are non-refundable, non-creditable and not subject to set-off. The Agreement will continue until the last royalty period for any product in the territory, which is defined as the period when there are no remaining patent rights or regulatory exclusivity in place for any products subject to royalties. EA Pharma may terminate the Agreement upon 180 days’ prior written notice to the Company. Either party may terminate the Agreement for the other party’s uncured material breach or insolvency and in certain other circumstances agreed to by the parties.
Monetization of future royalties	Monetization of Future Royalties In December 2017, the Company entered into a royalty interest acquisition agreement (RIAA) with HealthCare Royalty Partners III, L.P. (HCR) pursuant to which it sold to HCR the right to receive all royalties from sales in Japan and sales milestones achieved from any covered territory potentially payable to the Company under the Agreement, up to a specified maximum “cap” amount of $78.8 million, based on the funds the Company received from HCR to date. The Company received $44.5 million from HCR, net of certain transaction expenses, under the RIAA and the Company is eligible to receive an additional $15.0 million under the RIAA if a specified sales milestone is achieved for elobixibat in Japan. If the cap amount is reached, the Company will again become eligible to receive royalties from Japanese sales and sales milestones from covered territories for elobixibat from EA Pharma under the Agreement. The Company is obligated to make royalty interest payments to HCR under the RIAA only to the extent it receives future Japanese royalties, sales milestones or other specified payments from EA Pharma. Although the Company sold its rights to receive royalties from the sales of elobixibat in Japan, as a result of its ongoing involvement in the cash flows related to these royalties, the Company will continue to account for these royalties as revenue. The Company recorded the $44.5 million as a liability related to sale of future royalties (royalty obligation). The royalty obligation will be amortized using the effective interest rate method, based on the Company’s best estimate of the time it will take to reach the capped amount. The following table shows the activity within the liability account for the period ended March 31, 2020: March 31, 2020 (in thousands) Liability related to sale of future royalties—beginning balance $ 55,144 Foreign currency translation loss 43 Accretion of interest expense on liability related to royalty monetization Repayment of the liability (6,271) Liability related to sale of future royalties—ending balance $ 50,956 Less current portion classified within accrued expenses (1,549) Net ending liability related to sale of future royalties $ 49,407 The Company records estimated royalties due for the current period in accrued other until the payment is received from EA Pharma at which time the Company then remits payment to HCR. As royalties are remitted to HCR, the balance of the royalty obligation will be effectively repaid over the life of the RIAA. In order to determine the accretion of the royalty obligation, the Company is required to estimate the total amount of future royalty payments to be received and submitted to HCR, as noted above, based on the Company’s best estimate of the time it will take to reach the cap amount and when milestones will be received. The sum of these amounts less the $44.5 million proceeds the Company received will be recorded as interest expense over the life of the royalty obligation. At March 31, 2020, the Company’s estimate of its total interest expense resulted in an annual effective interest rate of approximately 16.76%. The Company periodically assesses the estimated royalty payments to HCR and to the extent such payments are greater or less than its initial estimates or the timing of such payments is materially different than its original estimates, the Company will prospectively adjust the accretion of interest on the royalty obligation. There are a number of factors that could materially affect the amount and the timing of royalty payments, most of which are not within the Company’s control. Such factors include, but are not limited to, the rate of elobixibat prescriptions, the number of doses administered, the introduction of competing products, manufacturing or other delays, patent protection, adverse events that result in governmental health authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to HCR are in U.S. dollars while sales of elobixibat are in Japanese yen, and sales never achieving forecasted numbers, which would result in reduced royalty payments and reduced non-cash interest expense over the life of the royalty obligation. To the extent future royalties result in an amount less than the liability, the Company is not obligated to fund any such shortfall.
Recently adopted accounting pronouncements	Recently adopted accounting pronouncements In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ( ASU 2018-15) This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The guidance also requires the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. The guidance becomes effective for the Company for the fiscal year beginning after December 15, 2019 and early adoption is permitted. The Company adopted this guidance in the first quarter of 2020 on a prospective basis and there was no material impact on its consolidated financial statements.

Summary of Significant Accoun_3

Summary of Significant Accounting Policies and Basis of Presentation (Tables)	3 Months Ended
	Mar. 31, 2020
Summary of significant accounting policies and basis of presentation
Schedule of Activity within Liability Account from Inception of Royalty Transaction	March 31, 2020 (in thousands) Liability related to sale of future royalties—beginning balance $ 55,144 Foreign currency translation loss 43 Accretion of interest expense on liability related to royalty monetization Repayment of the liability (6,271) Liability related to sale of future royalties—ending balance $ 50,956 Less current portion classified within accrued expenses (1,549) Net ending liability related to sale of future royalties $ 49,407

Net loss per share (Tables)

Net loss per share (Tables)	3 Months Ended
	Mar. 31, 2020
Net loss per share
Summary of Computation of Basic EPS and Diluted EPS	Three Months Ended March 31, 2020 2019 Basic and Diluted EPS: Numerator Net loss $ (31,488) $ (16,657) Denominator Weighted average number of shares outstanding 14,132,217 12,001,125 Basic and Diluted EPS $ (2.23) $ (1.39)
Summary of Outstanding Shares Excluded from Computation of Diluted EPS	Three Months Ended March 31, 2020 2019 Options to purchase common stock and RSUs 2,293,790 1,757,728

Stock-based Compensation (Table

Stock-based Compensation (Tables)	3 Months Ended
	Mar. 31, 2020
Stock-based Compensation
Summary of stock-based compensation expense	Three Months Ended March 31, 2020 2019 (in thousands) Employee awards: Research and development expense $ 880 $ 708 General and administrative expense 1,501 1,115 Total stock-based compensation expense $ 2,381 $ 1,823

Summary of significant accoun_4

Summary of significant accounting policies and basis of presentation - Royalties (Details) $ in Millions	3 Months Ended
	Mar. 31, 2020USD ($)
Disaggregation of revenue
Period of written notice required prior to termination of agreement	180 days
Royalty
Disaggregation of revenue
Milestone payment receivable	$ 4.7

Summary of significant accoun_5

Summary of significant accounting policies and basis of presentation - Monetization of future royalties (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Dec. 31, 2017	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Dec. 31, 2019
Monetization Of Future Royalties [Abstract]
Accretion of interest expense on liability related to royalty monetization		$ 2,040	$ 2,005
Liability related to sale of future royalties				$ 49,407	$ 48,714
Royalty Interest Acquisition Agreement
Summary Of Significant Accounting Policies
Maximum royalties under monetization agreement	$ 78,800
Monetization Of Future Royalties [Abstract]
Liability related to the sale of future royalties - beginning balance		55,144
Foreign currency translation gain		43
Accretion of interest expense on liability related to royalty monetization		2,040
Repayment of the liability		(6,271)
Liability related to sale of future royalties - ending balance		$ 55,144		50,956	$ 55,144
Less current portion classified within accrued expenses				(1,549)
Liability related to sale of future royalties				$ 49,407
Quarterly effective interest rate				16.76%
HCR | Royalty Interest Acquisition Agreement
Summary Of Significant Accounting Policies
Proceeds from sale of future royalties, net	44,500
Milestone payment receivable	15,000
Monetization Of Future Royalties [Abstract]
Liability related to sale of future royalties - ending balance	$ 44,500

Commitments and contingencies -

Commitments and contingencies - Agreements with CROs (Details) $ in Millions	Mar. 31, 2020USD ($)
Commitments and contingencies
Maximum future payable under agreements with CROs	$ 46.1

Net loss per share - Basic EPS

Net loss per share - Basic EPS and Diluted EPS (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Basic and Diluted EPS:
Net loss	$ (31,488)	$ (16,657)
Denominator
Weighted average number of shares outstanding	14,132,217	12,001,125
Basic and Diluted EPS	$ (2.23)	$ (1.39)

Net loss per share - Anti-dilut

Net loss per share - Anti-dilutive shares (Details) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Options to purchase common stock and RSUs
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of diluted net loss per share	2,293,790	1,757,728

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income taxes
Income tax provision (benefit)	$ 0	$ 0

Financings (Details)

Financings (Details) - Underwritten Public Offering $ in Millions	Feb. 03, 2020USD ($)shares
Financing
Issuance of common stock (in shares) | shares	2,190,750
Proceeds from sale of stock | $	$ 43

Stock-based Compensation activi

Stock-based Compensation activity (Details)	3 Months Ended
	Mar. 31, 2020$ / sharesshares
Stock-based Compensation
Options granted (in shares) | shares	518,325
Weighted average exercise price - Options granted (in dollars per share) | $ / shares	$ 24.38

Stock-based Compensation - Stoc

Stock-based Compensation - Stock-based compensation expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stock-based compensation
Stock-based compensation expense	$ 2,381	$ 1,823
Research and Development
Stock-based compensation
Stock-based compensation expense	880	708
General and Administrative
Stock-based compensation
Stock-based compensation expense	$ 1,501	$ 1,115