Aegerion Pharmaceuticals, Inc. - FORM 10-Q

Aegerion Pharmaceuticals, Inc. - FORM 10-Q - August 17, 2015

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Attached files

Aegerion Pharmaceuticals, Inc. Reports

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EX-10.2 - EX-10.2 - Aegerion Pharmaceuticals, Inc.	d943604dex102.htm
EX-32.1 - EX-32.1 - Aegerion Pharmaceuticals, Inc.	d943604dex321.htm
EX-10.1 - EX-10.1 - Aegerion Pharmaceuticals, Inc.	d943604dex101.htm
EX-10.3 - EX-10.3 - Aegerion Pharmaceuticals, Inc.	d943604dex103.htm
EX-32.2 - EX-32.2 - Aegerion Pharmaceuticals, Inc.	d943604dex322.htm
EX-31.1 - EX-31.1 - Aegerion Pharmaceuticals, Inc.	d943604dex311.htm
EX-31.2 - EX-31.2 - Aegerion Pharmaceuticals, Inc.	d943604dex312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

Commission File Number 001-34921

AEGERION PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

20-2960116

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

One Main Street, Suite 800

Cambridge, Massachusetts 02142

(Address of principal executive offices, including zip code)

(617) 500-7867

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s Common Stock as of August 5, 2015 was 28,620,593.

AEGERION PHARMACEUTICALS, INC.

INDEX


		Page
Part I. Financial Information			4

Item 1.	Unaudited Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014		4

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014		5

	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2015 and 2014		6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014		7

	Notes to Unaudited Condensed Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		34

Item 4.	Controls and Procedures		35

Part II. Other Information			35

Item 1.	Legal Proceedings		35

Item 1A.	Risk Factors		36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		73

Item 3.	Defaults Upon Senior Securities		73

Item 4.	Mine Safety Disclosure		73

Item 5.	Other Information		73

Item 6.	Exhibits		74

Signatures			75

Exhibits & Certifications

Forward-Looking Statements

All statements included or incorporated by reference into this Quarterly Report on Form 10-Q, or Quarterly Report, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “forecasts,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing” and similar expressions, and variations or negatives of these words. Examples of forward-looking statements contained in this Quarterly Report include our statements regarding: the commercial potential for our products; our estimates as to the potential number of patients with the diseases for which our products are approved; our expectations with respect to reimbursement of our products in the United States; our expectations with respect to pricing and reimbursement approvals required for lomitapide in countries of the European Union where we have not received such approvals, Mexico, Canada, Taiwan, and other countries in which we receive, or have received, marketing approval for lomitapide; our expectations with respect to named patient sales of our products in Brazil and in other countries where such sales are permitted; the potential for and possible timing of approval of our products in countries where we have not yet obtained approval; plans for further clinical development of our products; our expectations regarding future regulatory filings for our products, including planned marketing approval applications with respect to lomitapide in Japan and metreleptin in the European Union; our plans for commercial marketing, sales, manufacturing and distribution of our products; our expectations with respect to the impact of competition on our future operations and results; our beliefs with respect to our intellectual property portfolio for our products and the extent to which it protects us; our expectations regarding the availability of data and marketing exclusivity in the United States, the European Union and other countries; our view of ongoing government investigations and stockholder litigation and the possible impact of each on our business; our forecasts regarding sales of our products, our future expenses, our cash position and the timing of any future need for additional capital to fund operations; and our plans to acquire rights to one or more product candidates.

The forward-looking statements contained in this Quarterly Report and in the documents incorporated into this Quarterly Report by reference are based on our current beliefs and assumptions with respect to future events, all of which are subject to change. Forward-looking statements are not guarantees of future performance, and are subject to risks, uncertainties and assumptions that are difficult to predict, including those discussed in “Risk Factors” in Part I, Item 1A of this Quarterly Report. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors may impact our operations or results. New risks may emerge from time to time. Past financial or operating performance is not necessarily a reliable indicator of future performance. Given these risks and uncertainties, we can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does occur or, alternatively, if any of the events described as a risk were to occur, what impact such event will have on our results of operations and financial condition. Our actual results could differ materially and adversely from those expressed in any forward-looking statement in this Quarterly Report or in our other filings with the Securities and Exchange Commission.

Except as required by law, we undertake no obligation to revise our forward-looking statements to reflect events or circumstances that arise after the date of this Quarterly Report or the respective dates of documents incorporated into this Quarterly Report by reference that include forward-looking statements. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in these forward-looking statements.

In this Quarterly Report, “Aegerion Pharmaceuticals, Inc.,” “Aegerion,” the “Company,” “we,” “us” and “our” refer to Aegerion Pharmaceuticals, Inc. taken as a whole, unless otherwise noted.

Trademarks

Aegerion, JUXTAPID, LOJUXTA and MYALEPT are trademarks of Aegerion. All other trademarks referenced in this Form 10-Q are the property of their respective owners.

PART I.

FINANCIAL INFORMATION

Aegerion Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)


	June 30, 2015			December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	82,562		$	375,937
Accounts receivable		23,967			17,125
Inventories		58,641			9,510
Prepaid expenses and other current assets		9,965			4,852

Total current assets		175,135			407,424

Property and equipment, net		4,550			4,711
Intangible assets, net		254,613			—
Goodwill		9,100			—
Other assets		6,254			5,322

Total assets	$	449,652		$	417,457

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	9,977		$	9,713
Accrued liabilities		37,970			26,648
Current portion of long-term debt		—			3,456

Total current liabilities		47,947			39,817

Long-term liabilities:
Convertible 2.0% senior notes, net		224,078			214,852
Long-term debt, net of current portion		25,000			555
Other liabilities		2,873			1,937

Total liabilities		299,898			257,161

Commitment and Contingencies (Note 12)

Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; none issued and outstanding at June 30, 2015 and December 31, 2014		—			—
Common stock, $0.001 par value, 125,000 shares authorized at June 30, 2015 and December 31, 2014; 29,848 and 29,716 shares issued at June 30, 2015 and December 31, 2014, respectively; 28,597 and 28,465 shares outstanding at June 30, 2015 and December 31, 2014, respectively		30			30
Treasury stock, at cost; 1,251 shares at June 30, 2015 and December 31, 2014		(35,000	)		(35,000	)
Additional paid-in-capital		507,474			490,994
Accumulated deficit		(322,440	)		(295,465	)
Accumulated other comprehensive items		(310	)		(263	)

Total stockholders’ equity		149,754			160,296

Total liabilities and stockholders’ equity	$	449,652		$	417,457

See accompanying notes.

Aegerion Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net product sales	$	64,197		$	36,014		$	123,581		$	62,987
Cost of product sales		13,997			4,158			25,835			6,822
Operating Expenses:
Selling, general and administrative		42,672			32,330			89,600			64,109
Research and development		12,471			8,942			22,269			16,846

Total operating expenses		55,143			41,272			111,869			80,955

Loss from operations		(4,943	)		(9,416	)		(14,123	)		(24,790	)
Interest expense, net		(7,069	)		(70	)		(14,000	)		(141	)
Other income (expense), net		1,116			(31	)		1,601			(138	)

Loss before provision for income taxes		(10,896	)		(9,517	)		(26,522	)		(25,069	)
Provision for income taxes		(254	)		(105	)		(453	)		(329	)

Net loss	$	(11,150	)	$	(9,622	)	$	(26,975	)	$	(25,398	)

Net loss per common share — basic and diluted	$	(0.39	)	$	(0.33	)	$	(0.94	)	$	(0.86	)

Weighted-average common shares outstanding — basic and diluted		28,582			29,494			28,556			29,453

See accompanying notes.

Aegerion Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net loss	$	(11,150	)	$	(9,622	)	$	(26,975	)	$	(25,398	)
Other comprehensive loss:
Unrealized losses on available-for-sale marketable securities		—			(23	)		—			(44	)
Foreign currency translation		247			(63	)		(47	)		(90	)

Other comprehensive loss		247			(86	)		(47	)		(134	)

Comprehensive loss	$	(10,903	)	$	(9,708	)	$	(27,022	)	$	(25,532	)

See accompanying notes.

Aegerion Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended June 30,
	2015			2014
Operating activities
Net loss	$	(26,975	)	$	(25,398	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		714			530
Amortization of premium on marketable securities		—			654
Amortization of intangible assets		10,187			—
Stock-based compensation		14,368			16,489
Noncash interest expense		10,393			36
Provision for inventory excess and obsolescence		406			1,235
Unrealized foreign exchange loss		328			—
Loss on disposal of property and equipment		66			—
Deferred income taxes		137			—
Deferred rent (income) expense		(61	)		603
Changes in assets and liabilities, excluding the effect of acquisition:
Accounts receivable		(6,842	)		(4,865	)
Inventories		2,157			(5,719	)
Prepaid expenses and other assets		(1,816	)		(1,963	)
Accounts payable		264			(2,325	)
Accrued and other liabilities		6,447			727

Net cash provided by (used in) operating activities		9,773			(19,996	)

Investing activities
Purchases of property and equipment		(619	)		(1,348	)
Payment for acquisition of MYALEPT		(325,000	)		—
Purchases of marketable securities		—			(38,401	)
Maturities of marketable securities		—			44,887

Net cash (used in) provided by investing activities		(325,619	)		5,138

Financing activities
Proceeds from long-term debt, net		24,962			—
Principal repayment of long-term debt		(4,010	)		(1,789	)
Payments for withholding taxes on restricted stock units		(117	)		—
Proceeds from exercises of stock options		2,011			2,339

Net cash provided by financing activities		22,846			550

Exchange rate effect on cash		(375	)		(53	)

Net decrease in cash and cash equivalents		(293,375	)		(14,361	)
Cash and cash equivalents, beginning of period		375,937			61,011

Cash and cash equivalents, end of period	$	82,562		$	46,650

Supplemental disclosures of cash flow information
Cash paid for interest	$	3,571		$	233

Cash paid for taxes	$	703		$	744

Non-cash investing activities
Purchases of property and equipment included in accounts payable and accrued liabilities	$	159		$	691

See accompanying notes.

Aegerion Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2015

1. Description of Business and Significant Accounting Policies

Organization

Aegerion Pharmaceuticals, Inc. (the “Company” or “Aegerion”) is a biopharmaceutical company dedicated to the development and commercialization of innovative therapies for patients with debilitating rare diseases.

The Company’s first product, lomitapide, received marketing approval, under the brand name JUXTAPID^® (lomitapide) capsules (“JUXTAPID”), from the U.S. Food and Drug Administration (“FDA”) on December 21, 2012, as an adjunct to a low-fat diet and other lipid-lowering treatments, including low-density lipoprotein (“LDL”) apheresis, where available to reduce low-density lipoprotein cholesterol (“LDL-C”), total cholesterol (“TC”), apolipoprotein B (“apo B”) and non-high-density lipoprotein cholesterol (“non-HDL-C”) in adult patients with homozygous familial hypercholesterolemia (“HoFH”). The Company launched JUXTAPID in the U.S. in late January 2013. In July 2013, the Company received marketing authorization for lomitapide in the European Union (“EU”), under the brand name LOJUXTA ^® (lomitapide) hard capsules (“LOJUXTA”), as a treatment for adult patients with HoFH. Lomitapide is also approved for the treatment of adult HoFH in Mexico, Canada, Taiwan and a small number of other countries. Pricing and reimbursement approval has not yet been received in many of countries in which the product is approved. Lomitapide is also sold on a named patient basis in Brazil and in a limited number of other countries as a result of the approval of lomitapide in the U.S. or the EU.

The Company acquired its second product, metreleptin, in January 2015, pursuant to an asset purchase agreement (the “Asset Purchase Agreement”) dated November 5, 2014 with Amylin Pharmaceuticals, LLC (“Amylin”) and AstraZeneca Pharmaceuticals LP, an affiliate of Amylin (together referred to as “AstraZeneca”). Metreleptin, a recombinant analog of human leptin, is currently marketed in the U.S. under the brand name MYALEPT^® (metreleptin) for injection (“MYALEPT”). MYALEPT received marketing approval from the FDA in February 2014 as an adjunct to diet as replacement therapy to treat the complications of leptin deficiency in patients with congenital or acquired generalized lipodystrophy (“GL”).

In the near term, the Company’s ability to generate revenues is primarily dependent upon sales of lomitapide in the U.S. and, on a named patient basis, in Brazil and on sales of MYALEPT in the U.S. The Company also expects to generate revenues from commercial sales of lomitapide in certain key countries of the EU, and in Mexico, Canada and Taiwan, assuming pricing and reimbursement approvals are received in those countries at acceptable levels, and from sales of lomitapide in those additional countries in which a marketing authorization for lomitapide and subsequent pricing and reimbursement of lomitapide are ultimately approved. The Company also expects revenue in the near-term from sales of metreleptin on a named patient basis in Brazil and in certain other countries where named patient sales are permitted. The Company expects that cash flows from operations, together with the Company’s cash and cash equivalents, and proceeds from the Company’s amended debt agreement with Silicon Valley Bank will be sufficient to fund its operations for at least the next twelve months.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments (including normal recurring accruals) considered necessary for fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. Operating results for the current interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015. This Form 10-Q should be read in conjunction with the audited financial statements and accompanying notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Form 10-K”).

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company operates in one segment, pharmaceuticals.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these condensed consolidated financial statements have been made in connection with the calculation of net product sales, inventories, certain accruals related to the Company’s research and development expenses, stock-based compensation, initial valuation procedures for the issuance of convertible notes, valuation procedures for the fair value of intangible assets, tangible assets and goodwill from the acquisition of MYALEPT, and the provision for or benefit from income taxes. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.

Revenue Recognition

The Company applies the revenue recognition guidance in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-15, Revenue Recognition—Products. The Company recognizes revenue from product sales when there is persuasive evidence that an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collectability is reasonably assured and the Company has no further performance obligations.

Lomitapide

In the U.S., JUXTAPID is only available for distribution through a specialty pharmacy, and is shipped directly to the patient. JUXTAPID is not available in retail pharmacies. Prior authorization and confirmation of coverage level by the patient’s private insurance plan or government payer are currently prerequisites to the shipment of product to a patient in the U.S. Revenue from sales in the U.S. covered by the patient’s private insurance plan or government payor is recognized once the product has been received by the patient. For uninsured amounts billed directly to the patient, revenue is recognized at the time of cash receipt as collectability is not reasonably assured at the time the product is received by the patient. To the extent amounts are billed in advance of delivery to the patient, the Company defers revenue until the product has been received by the patient.

The Company also records revenue on sales in Brazil and other countries where lomitapide is available on a named patient basis, and typically paid for by a government authority or institution. In many cases, these sales are facilitated through a third-party distributor that takes title to the product upon acceptance. Because of factors such as the pricing of lomitapide, the limited number of patients, the short period from product sale to delivery to the end-customer and the limited contractual return rights, these distributors typically only hold inventory to supply specific orders for the product. The Company generally recognizes revenue for sales under these named patient programs once the product is shipped through to the government authority or institution. In the event the payer’s creditworthiness has not been established, the Company recognizes revenue on a cash basis if all other revenue recognition criteria have been met.

The Company records distribution and other fees paid to its distributors as a reduction of revenue, unless the Company receives an identifiable and separate benefit for the consideration and the Company can reasonably estimate the fair value of the benefit received. If both conditions are met, the Company records the consideration paid to the distributor as an operating expense. At this time, both conditions have not been met and therefore, the fees paid to the Company’s distributors are recorded as a reduction to revenue. The Company records revenue net of estimated discounts and rebates, including those provided to Medicare, Medicaid, Tricare and other government programs in the U.S. Allowances are recorded as a reduction of revenue at the time revenues from product sales are recognized. Allowances for government rebates and discounts are established based on the actual payer information, which is reasonably estimated at the time of delivery. These allowances are adjusted to reflect known changes in the factors that may impact such allowances in the quarter those changes are known.

The Company also provides financial support to a 501(c)(3) organization which assists patients in the U.S. in accessing treatment for HoFH. This organization assists HoFH patients according to eligibility criteria defined independently by the organization. The Company records donations made to the 501(c)(3) organization as selling, general and administrative expense. Any payments received from the 501(c)(3) organization on behalf of a patient, who is taking lomitapide for the treatment of HoFH are recorded as a reduction of selling, general and administrative expense rather than as revenue. Effective January 2015, the Company also offers a branded co-pay assistance program for certain patients in the U.S. with HoFH who are on JUXTAPID therapy. The branded co-pay assistance program assists commercially insured patients who have coverage for JUXTAPID, and is intended to reduce each participating patient’s portion of the financial responsibility for JUXTAPID’s purchase price up to a specified dollar amount of assistance. The Company records revenue net of amounts paid under the branded specific co-pay assistance program for each patient.

Metreleptin

In the U.S., MYALEPT is only available through an exclusive third-party distributor that takes title to the product upon shipment. MYALEPT is not available in retail pharmacies. The distributor may contractually only hold inventory for an agreed number of days of inventory, not to exceed 21 business days. The Company recognizes revenue for these sales once the product is received by the patient as it is currently unable to reasonably estimate the rebates owed to certain government payers at the time of receipt by the distributor. Prior authorization and confirmation of coverage level by the patient’s private insurance plan or government payer are currently prerequisites to the shipment of product to a patient in the U.S.

The Company records distribution and other fees paid to its distributor as a reduction of revenue, unless the Company receives an identifiable and separate benefit for the consideration and the Company can reasonably estimate the fair value of the benefit received. If both conditions are met, the Company records the consideration paid to the distributor as an operating expense. At this time, both conditions have

not been met and therefore, these fees paid to the distributor of MYALEPT are recorded as reduction to revenue. The Company records revenue from sales of MYALEPT net of estimated discounts and rebates, including those provided to Medicare and Medicaid in the U.S. Allowances for government rebates and discounts are established based on the actual payer information, which is reasonably estimable at the time of delivery. These allowances are adjusted to reflect known changes in the factors that may impact such allowances in the quarter those changes are known.

The Company also offers co-pay assistance for patients in the U.S. with GL who are on MYALEPT therapy. The co-pay assistance program assists commercially insured patients who have coverage for MYALEPT, and is intended to reduce each participating patient’s portion of the financial responsibility for MYALEPT’s purchase price up to a specified dollar amount of assistance. The Company records revenue net of amounts paid under the MYALEPT co-pay assistance program for each patient.

Business Combinations

The Company evaluates acquisitions of assets and other similar transactions to assess whether or not each such transaction should be accounted for as a business combination by assessing whether or not the Company has acquired inputs and processes that have the ability to create outputs. If the Company determines that an acquisition qualifies as a business, the Company assigns the value of consideration transferred in such business combination to the appropriate accounts on the Company’s consolidated balance sheet based on their fair value as of the effective date of the transaction. Transaction costs associated with business combinations are expensed as incurred.

Fair Value of Purchased Tangible Assets, Intangibles and In-process Research and Development Assets in Business Combinations

The present-value models used to estimate the fair values of purchased tangible assets, intangibles and in-process research and development assets incorporate significant assumptions, including: assumptions regarding the probability of obtaining marketing approval and/or achieving relevant development milestones for a drug candidate; estimates regarding the timing of and the expected costs to develop a drug candidate; estimates of future cash flows from potential product sales and/or the potential to achieve certain commercial milestones with respect to a drug candidate; and the appropriate discount and tax rates.

The Company records the fair value of purchased intangible assets with definite useful lives as of the transaction date of a business combination. Purchased intangible assets with definite useful lives are amortized to their estimated residual values over their estimated useful lives and reviewed for impairment if certain events occur. Impairment testing and assessments of remaining useful lives are also performed when a triggering event occurs that could indicate a potential impairment. Such test first entails comparison of the carrying value of the intangible asset to the undiscounted cash flows expected from that asset. If impairment is indicated by this test, the intangible asset is written down by the amount by which the discounted cash flows expected from the intangible asset exceeds its carrying value.

The Company records the fair value of in-process research and development assets as of the transaction date of a business combination. Each of these assets is accounted for as an indefinite-lived intangible asset and is maintained on the Company’s consolidated balance sheet until either the project underlying it is completed or the asset becomes impaired. If the asset becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value, and an impairment charge is recorded in the period in which the impairment occurs. If a project is completed, the carrying value of the related intangible asset is amortized as a part of cost of product revenues over the remaining estimated life of the asset beginning in the period in which the project is completed. In-process research and development assets are tested for impairment on an annual basis as of October 31, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist.

The Company records the fair value of purchased tangible assets as of the transaction date of a business combination. These tangible assets are accounted for as either inventory or clinical and compassionate use materials, which are classified as other assets on the Company’s consolidated balance sheet. Inventory will be maintained on the Company’s consolidated balance sheet until the inventory is sold, donated as part of the Company’s compassionate use program, used for clinical development, or determined to be in excess of expected requirements. Inventory that is sold or determined to be in excess of expected requirements will be recognized as cost of product sales in the consolidated statement of operations, inventory that is donated as part of the Company’s compassionate use program will be recognized as a selling, general and administrative expense in the consolidated statement of operations, and inventory used for clinical development will be recognized as research and development expense in the consolidated statement of operations. Other assets will be maintained on the Company’s consolidated balance sheet until these assets are consumed. If the asset becomes impaired or is abandoned, the carrying value is written down to its fair value, and an impairment charge is recorded in the period in which the impairment occurs.

Goodwill

The difference between the purchase price and the fair value of assets acquired and liabilities assumed in a business combination is allocated to goodwill. Goodwill is evaluated for impairment on an annual basis as of October 31, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist.

Concentration of Credit Risk

The Company’s financial instruments that are exposed to credit risks consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents in bank accounts, which, at times, exceed federally insured limits. The Company has not experienced any credit losses in these accounts and does not believe it is exposed to any significant credit risk on these funds.

The Company is subject to credit risk from its accounts receivable related to its product sales of lomitapide and metreleptin. The majority of the Company’s accounts receivable arises from product sales in the U.S. For accounts receivable that have arisen from named patient sales outside of the U.S., the payment terms are predetermined and the Company evaluates the creditworthiness of each customer or distributor on a regular basis. The Company periodically assesses the financial strength of the holders of its accounts receivable to establish allowances for anticipated losses, if necessary. The Company does not recognize revenue for uninsured amounts billed directly to a patient until the time of cash receipt as collectability is not reasonably assured at the time the product is received. To date, the Company has not incurred any credit losses.

Inventories and Cost of Sales

Inventories are stated at the lower of cost or market price with cost determined on a first-in, first-out basis. Inventories are reviewed periodically to identify slow-moving or obsolete inventory based on sales activity, both projected and historical, as well as product shelf-life. In evaluating the recoverability of inventories produced, the Company considers the probability that revenue will be obtained from the future sale of the related inventory. The Company writes down inventory quantities in excess of expected requirements. Expired inventory is disposed of and the related costs are recognized as cost of product sales in the consolidated statement of operations.

Cost of product sales includes the cost of inventory sold, amortization of product rights and other identifiable intangible assets from product and business acquisitions, manufacturing and supply chain costs, product shipping and handling costs, charges for excess and obsolete inventory, as well as royalties payable related to the sale of lomitapide and metreleptin.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) which amends revenue recognition principles and provides a single set of criteria for revenue recognition among all industries. The new standard provides a five step framework whereby revenue is recognized when promised goods or services are transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires enhanced disclosures pertaining to revenue recognition in both interim and annual periods. The standard is effective for interim and annual periods beginning after December 15, 2016 and allows for adoption using a full retrospective method, or a modified retrospective method. In July of 2015, the FASB voted to approve a one year deferral of the effective date of ASU 2014-09. The FASB expects to issue a final ASU formally amending the effective date by the end of the third quarter of 2015. The Company is currently assessing the method of adoption and the expected impact the new standard has on its financial position and results of operations.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern, which provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year from the date the financial statements are issued each reporting period. This new accounting guidance is effective for annual periods ending after December 15, 2016. Early adoption is permitted. The Company does not expect the new guidance to have a significant effect on its consolidated financial statements, but may require further disclosure in its financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. ASU 2015-03 will not change the amortization of debt issuance costs, which will continue to follow the existing accounting guidance. ASU 2015-03 will be effective for interim and annual reporting periods beginning after December 15, 2015. Early application is permitted. The Company is currently evaluating the impact of the adoption of ASU 2015-03 on its operating results and financial position. As of June 30, 2015 we have approximately $4.7 million of deferred finance costs currently included in other assets.

2. BUSINESS ACQUISITIONS

MYALEPT

The Company completed the acquisition of its second product, MYALEPT, on January 9, 2015. MYALEPT received marketing approval from the FDA in February 2014 as an adjunct to diet as replacement therapy to treat the complications of leptin deficiency in patients with congenital or acquired GL. The total consideration to be assigned to the net assets acquired for MYALEPT was $325.0 million, which the Company paid in cash on the acquisition date. Transaction expenses incurred were approximately $3.8 million, and were charged to selling, general and administrative expenses.

The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill.

The Company has preliminarily valued the acquired assets and liabilities based on their estimated fair value. These estimates are subject to change as additional information becomes available. The preliminary fair values included in the balance sheet as of June 30, 2015 are based on the best estimates of management. The completion of the valuation of the acquired assets and liabilities may result in adjustments to the carrying value of MYALEPT’s assets and liabilities, revision of useful lives of intangible assets, the determination of any residual amount that will be allocated to goodwill and the related tax effects. The related amortization of acquired assets is also subject to revision based on the final valuation. During the second quarter of 2015, the Company adjusted the preliminary fair value of inventory, purchased intangibles, other assets and goodwill recorded to the preliminary purchase price allocation during the first quarter of 2015. The adjustment increased the preliminary fair value of inventory with a reduction to the preliminary fair value of purchased intangibles, other assets and goodwill. The adjustment did not have a material impact to the statement of operations for the three months ended March 31, 2015. Any adjustments to the preliminary fair values will be made as such information becomes available but no later than January 9, 2016.

The following table summarizes the estimated fair values of the net assets acquired (in thousands):


	January 9, 2015
Inventory	$	51,476
Purchased intangibles		244,500
In-process research and development assets		20,300
Other assets		4,624
Goodwill		9,100

Total assets acquired		330,000
Other liabilities assumed		(5,000	)

Total net assets acquired	$	325,000

The purchased intangibles represent the acquired product rights to MYALEPT. The fair value of these purchased product rights is being amortized to cost of product sales on a straight-line basis over the estimated useful life set forth below and tested for impairment whenever events or circumstances indicate that the carrying amount may not be recovered. The Company currently expects annual amortization expense of approximately $20.4 million in 2015 and for each year thereafter of the remaining estimated useful life of 12 years. The other assets represent the clinical and compassionate use materials acquired as part of the transaction and are classified on the Company’s condensed consolidated balance sheet based on the Company’s forecast of the usage of the materials.

The following is a summary of the preliminary fair values assigned to the assets acquired and the amortization period assigned to these rights (in thousands):


	June 30, 2015
	Gross Fair Value			Estimated Useful Life
Generalized Lipodystrophy-United States	$	244,500			12
In-process research and development assets (1)		20,300			—

		264,800
Less accumulated amortization		(10,187	)

Intangible assets, net	$	254,613

(1)

The in-process research and development assets include: partial lipodystrophy-U.S, GL and partial lipodystrophy-EU. These in-process research and development assets have been assigned indefinite lives and therefore will be tested for impairment annually on October 31 or in the event a triggering event presents itself.

The difference between the total consideration and the fair value of the net assets acquired of $325.0 million was recorded to goodwill in the consolidated balance sheet. Goodwill represents the excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed, principally representing certain operational synergies. The majority of the acquired intangibles and goodwill are expected to be deductible for tax purposes.

In accordance with the relevant accounting guidance, goodwill is not amortized. However, it must be assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. All goodwill has been assigned to the Company’s single reporting unit, which is the single operating segment by which the chief operating decision maker manages the Company. For purposes of assessing the impairment of goodwill, the Company uses its market capitalization as an input to its determination of fair value. If the carrying amount of the net assets of the Company exceeds the fair value, then a goodwill impairment test is performed to measure the amount of the impairment loss, if any.

Pro forma impact of the acquisition

The Company’s financial results for the three and six months ended June 30, 2015 are inclusive of MYALEPT financial results since the date of the acquisition on January 9, 2015. The unaudited pro forma results presented below include the effects of the MYALEPT acquisition as if it had been consummated as of January 1, 2014. The pro forma results include the direct expenses of MYALEPT as well as amortization associated with the estimated fair value (which is preliminary) of the acquired intangible assets. In addition, the pro forma results do not include any anticipated synergies or other expected benefits of the acquisition. Accordingly, the unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of January 1, 2014.


	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
	(in thousands)
Total net product sales	$	36,014		$	62,987
Net loss		(17,958	)		(39,851	)

3. Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC 820, Fair Value Measurements and Disclosures established a fair value hierarchy for those instruments measured at fair value that distinguishes between fair value measurements based on market data (observable inputs) and those based on the Company’s own assumptions (unobservable inputs). This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•

Level 1 —Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The Company’s Level 1 assets consist of cash and money market investments.

•

Level 2 —Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.

•

Level 3 —Inputs that are unobservable for the asset or liability.

The fair value measurements of the Company’s financial instruments at June 30, 2015 is summarized in the table below:


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at June 30, 2015
	(in thousands)
Cash and cash equivalents:
Cash	$	61,598	$	—	$	—	$	61,598
Money market funds		20,964		—		—		20,964

Total cash and cash equivalents	$	82,562	$	—	$	—	$	82,562

The fair value measurements of the Company’s financial instruments at December 31, 2014 is summarized in the table below:


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2014
	(in thousands)
Cash and cash equivalents:
Cash	$	28,523	$	—	$	—	$	28,523
Money market funds		347,414		—		—		347,414

Total cash and cash equivalents	$	375,937	$	—	$	—	$	375,937

Term Loan

The fair value of the Company’s long-term debt, computed pursuant to a discounted cash flow technique using the effective interest rate method based on a current market interest rate for the Company’s term loan, was $25.0 million and $4.0 million at June 30, 2015 and December 31, 2014, respectively.

Convertible 2.0% Senior Notes

In August 2014, the Company issued $325.0 million of 2.0% convertible senior notes due August 15, 2019 (the “Convertible Notes”). Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2015. The Company separately accounted for the liability and equity components of the Convertible Notes by allocating the proceeds between the liability component and equity component, as further discussed in Note 6. The fair value of the Convertible Notes, which differs from their carrying value, is influenced by interest rates, the Company’s stock price and stock price volatility and is determined by prices for the Convertible Notes observed in market trading which are Level 2 inputs. The estimated fair value of the Convertible Notes at June 30, 2015 was approximately $256.6 million.

4. Inventories

The components of inventory are as follows:


	June 30, 2015		December 31, 2014
	(in thousands)
Work-in-process	$	56,430	$	6,458
Finished goods		2,211		3,052

Total	$	58,641	$	9,510

The significant increase in the inventory balance as of June 30, 2015 is related to the adjustment to the preliminary fair value of metreleptin inventory acquired, as described in Note 2.

5. Other Comprehensive Loss and Accumulated Other Comprehensive Items

Other comprehensive loss includes changes in equity that are excluded from net loss, such as unrealized gains and losses on marketable securities and foreign currency translation adjustments.

The following table summarizes other comprehensive loss and the changes in accumulated other comprehensive items, by component, for the six months ended June 30, 2015 and 2014 (in thousands):


	Unrealized Gains/(Losses) on Marketable Securities		Foreign Currency Translation Adjustment			Total Accumulated Other Comprehensive Items
Balance at December 31, 2014	$	—	$	(263	)	$	(263	)

Other comprehensive loss before reclassifications		—		(47	)		(47	)
Amounts reclassified from other comprehensive items		—		—			—

Other comprehensive loss		—		(47	)		(47	)

Balance at June 30, 2015	$	—	$	(310	)	$	(310	)


	Unrealized Gains/(Losses) on Marketable Securities			Foreign Currency Translation Adjustment			Total Accumulated Other Comprehensive Items
Balance at December 31, 2013	$	35		$	(7	)	$	28

Other comprehensive loss		(44	)		(90	)		(134	)

Balance at June 30, 2014	$	(9	)	$	(97	)	$	(106	)

In preparing its financial statements for the quarter ended June 30, 2015, the Company determined that its accounting related to the elimination of intercompany profits attributable to sales of inventory between consolidated subsidiaries, including the associated exchange rate effect on these transactions, was not correct. The error in not correctly eliminating intercompany profits primarily affected cost of product sales and accumulated other comprehensive income and loss accounts, with a lesser effect on its inventory, which was corrected by the Company in the second quarter of 2015. The Company determined the effect of the error to be an understatement of cost of product sales of approximately $1.7 million for the year ended December 31, 2014 and an overstatement of cost of product sales of approximately $0.6 million for the three months ended March 31, 2015. Cost of product sales in the three months ended June 30, 2015 includes $1.1 million related to this error. In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108 (“SAB 108”), Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company assessed the materiality of this error on its financial statements for the year ended December 31, 2014 and for the three months ended March 31, 2015, using both the roll-over method and iron-curtain methods as defined in SAB 108. The Company concluded the effect of this error was not material to its financial statements for any prior period and, as such, those financial statements are not materially misstated.

6. Debt Financing

Term Loan

On January 9, 2015, the Company amended its Loan and Security Agreement with Silicon Valley Bank, entered into as of March 28, 2012 (as amended, the “Loan and Security Agreement”) to provide for a $25.0 million term loan (the “2015 Term Loan Advance”) with per annum interest of 3.0%. The proceeds received from the 2015 Term Loan Advance were used by the Company to repay an aggregate of $4.0 million outstanding due to Silicon Valley Bank under the Company’s term loan and equipment line of credit under the Loan and Security Agreement. The amendment provided for interest-only payments on the 2015 Term Loan Advance through January 31, 2017, and, starting on February 1, 2017, payment of principal in 30 equal monthly installments, plus accrued interest. The maturity date of the 2015 Term Loan Advance is the earlier of (a) July 1, 2019 and (b) the maturity date of the Convertible Notes (the “2015 Term Loan Maturity Date”). If the Company prepays the 2015 Term Loan Advance on or prior to the first anniversary of the funding date of the 2015 Term Loan Advance, then the Company will owe 2.0% of the then outstanding principal amount whereas if the Company prepays the 2015 Term Loan Advance after the first anniversary of the funding date of the 2015 Term Loan Advance but prior to the 2015 Term Loan Maturity Date, then the Company will owe 1.0% of the then outstanding principal amount. In addition, the 2015 Term Loan Advance is subject to a final payment of $1.25 million upon maturity or prior payment thereof.

The Company evaluated the 2015 amendment and concluded that it was a modification of the original Loan and Security Agreement rather than an extinguishment.

In connection with the Loan and Security Agreement, the Company granted Silicon Valley Bank a security interest in all of the Company’s personal property then owned or thereafter acquired, excluding intellectual property and assets held within the Company’s securities corporation, and a negative pledge on intellectual property. The Loan and Security Agreement also provides for standard indemnification of Silicon Valley Bank and contains representations, warranties and a material adverse change clause. The Company is also required to achieve certain covenants, including a specified level of liquidity and either a minimum quarterly revenue level or a minimum free cash flow level. The Company believes that it is in compliance with its covenants under the Loan and Security Agreement.

This 2015 amendment also provides for a revolving line of credit (the “Revolving Line”) of up to $15.0 million, subject to a borrowing base of 80% of eligible accounts minus certain reserves. Borrowings under the Revolving Line bear interest at a per annum rate equal to the prime rate. As of June 30, 2015, the Company has not drawn down on the Revolving Line.

Future minimum payments under the Company’s term loan agreements as of June 30, 2015, are as follows (in thousands):


Years Ending December 31,
2015	$	381
2016		763
2017		10,595
2018		10,291
2019		5,032

		27,062

Less amounts representing interest		(2,062	)

Long-term debt, net current portion	$	25,000

Convertible 2.0% Senior Notes

In August 2014, the Company issued Convertible Notes with an aggregate principal amount of $325.0 million. The Company received net proceeds of approximately $316.6 million from the sale of the Convertible Notes, after deducting fees and expenses of approximately $8.4 million. The Company used approximately $26.1 million of the net proceeds from the sale of the Convertible Notes to pay the net cost of the convertible bond hedges, as described below (after such cost was partially offset by the proceeds to the Company from the sale of warrants in the warrant transactions described below) and used $35.0 million to repurchase shares of the Company’s common stock.

The Convertible Notes are governed by the terms of an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as the Trustee. The Convertible Notes are senior unsecured obligations and bear interest at a rate of 2.0% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2015. The Convertible Notes will mature on August 15, 2019, unless earlier repurchased or converted. The Convertible Notes will be convertible into shares of the Company’s common stock at an initial conversion rate of 24.2866 shares of common stock per $1,000 principal amount of the Convertible Notes, which corresponds to an initial conversion price of approximately $41.175 per share of the Company’s common stock. At the Company’s 2015 Annual Meeting of Stockholders, the Company’s stockholders voted to approve the Company’s option to settle the conversion of the Convertible Notes through payment or delivery of cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election.

On or after February 15, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

The indenture does not contain any financial covenants or restrict the Company’s ability to repurchase the Company’s securities, pay dividends or make restricted payments in the event of a transaction that substantially increases the Company’s level of indebtedness. The indenture contains customary terms and covenants and events of default. If an event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Convertible Notes by written notice to the Company and the Trustee, may declare 100% of the principal of and accrued and unpaid interest, if any, on all of the Convertible Notes to be due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization involving the Company, 100% of the principal and accrued and unpaid interest, if any, on the Convertible Notes will become due and payable automatically. Notwithstanding the foregoing, the indenture provides that, upon the Company’s election, and for up to 180 days, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the indenture consists exclusively of the right to receive additional interest on the Convertible Notes.

In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the liability and equity components of the Convertible Notes by allocating the proceeds between the liability component and the embedded conversion option, or equity component, due to the Company’s ability to settle the Convertible Notes in cash, common stock, or a combination of cash and common stock at the option of the Company. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected the Company’s non-convertible debt borrowing rate for similar debt. The equity component of the Convertible Notes was recognized as a debt discount and represents the difference between the gross proceeds from the issuance of the Convertible Notes and the fair value of the liability of the Convertible Notes on their respective dates of issuance. The excess of the principal amount of the liability component over its carrying amount, or debt discount, is amortized to interest expense using the effective interest method over five years, or the life of the Convertible Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

The Company’s outstanding Convertible Note balances as of June 30, 2015 consisted of the following (in thousands):


Liability component:
Principal	$	325,000
Less: debt discount, net		(100,922	)

Net carrying amount	$	224,078

Equity component	$	116,900

In connection with the issuance of the Convertible Notes, the Company incurred approximately $8.4 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs to the liability and equity components based on the allocation of the proceeds. Of the total $8.4 million of debt issuance costs, $3.0 million were allocated to the equity component and recorded as a reduction to additional paid-in capital and $5.4 million were allocated to the liability component and recorded as other assets on the balance sheet. The portion allocated to the liability component is amortized to interest expense over the expected life of the Convertible Notes using the effective interest method.

The Company determined that the expected life of the debt was equal to the five year term on the Convertible Notes. The effective interest rate on the liability component was 11.53% for the period from the date of issuance through June 30, 2015. The following table sets forth total interest expense recognized related to the Convertible Notes during the three and six months ended June 30, 2015 (in thousands):


	Three months ended June 30, 2015		Six months ended June 30, 2015
Contractual interest expense	$	1,625	$	3,250
Amortization of debt issuance costs		220		427
Amortization of debt discount		4,748		9,226

Total	$	6,593	$	12,903

Future payments under the Company’s Convertible Notes as of June 30, 2015, are as follows (in thousands):


Years Ending December 31,
2015	$	3,250
2016		6,500
2017		6,500
2018		6,500
2019		331,500

		354,250

Less amounts representing interest		(29,250	)
Less debt discount, net		(100,922	)

Convertible notes balance	$	224,078

Convertible Bond Hedge and Warrant Transactions

In connection with the offering of the Convertible Notes and in order to reduce the potential dilution to the Company’s common stock and/or offset cash payments due upon conversion of the Convertible Notes, the Company entered into convertible bond hedge transactions convertible into approximately 7.9 million shares of the Company’s common stock (or the value thereof), subject to adjustment, underlying the $325.0 million aggregate principal amount of the Convertible Notes. The convertible bond hedges have an exercise price of approximately $41.175 per share, subject to adjustment upon certain events, and are exercisable when and if the Convertible Notes are converted. If upon conversion of the Convertible Notes, the price of the Company’s common stock is above the exercise price of the convertible bond hedges, shares of the Company’s common stock and/or cash will be delivered with an aggregate value approximately equal to the difference between the price of the Company’s common stock at the conversion date and the exercise price, multiplied by the number of shares of the Company’s common stock related to the convertible bond hedges being exercised. The convertible bond hedges are separate transactions entered into by the Company and are not part of the terms of the Convertible Notes or the warrants, discussed below.

At the same time, the Company also entered into separate warrant transactions relating to, in the aggregate, approximately 7.9 million shares of the Company’s common stock, subject to customary adjustments but capped at a maximum of approximately 15.8 million shares of the Company’s common stock underlying the $325.0 million aggregate principal amount of the Convertible Notes. The initial exercise price of the warrants is $53.375 per share, subject to adjustment upon certain events. The warrants would separately have a dilutive effect to the extent that the market value per share of the Company’s common stock, as measured under the terms of the warrants, exceeds the applicable exercise price of the warrants. The Company received $60.5 million for these warrants and recorded this amount to additional paid-in capital.

7. Accrued Liabilities

Accrued liabilities as of June 30, 2015 and December 31, 2014 consisted of the following:


	June 30, 2015		December 31, 2014
	(in thousands)
Accrued employee compensation and related costs	$	8,518	$	7,177
Accrued professional fees		7,104		3,414
Accrued sales allowances		7,888		3,411
Accrued royalties		4,709		2,942
Accrued research and development costs		2,455		2,280
Accrued sales and marketing costs		843		682
Accrued interest		2,500		2,461
Accrued manufacturing costs		644		809
Other accrued liabilities		3,309		3,472

Total	$	37,970	$	26,648

8. Capital Structure

Preferred Stock

At June 30, 2015, the Company was authorized to issue 5,000,000 shares of $0.001 par value preferred stock. There were no shares issued and outstanding. Dividends on the preferred stock will be paid when, and if, declared by the Board of Directors.

Common Stock

At June 30, 2015, the Company was authorized to issue 125,000,000 shares of $0.001 par value common stock. Dividends on the common stock will be paid when, and if, declared by the Board of Directors. Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held.

Treasury Stock

In August 2014, the Company’s Board of Directors authorized the Company to use a portion of the net proceeds of the Convertible 2.0% Senior Notes offering to repurchase up to an aggregate of $35.0 million of its common stock. In connection with the close of the transaction, the Company repurchased 1,147,540 shares of its common stock.

At June 30, 2015, the Company held 1,251,297 shares of common stock in treasury.

The Company will, at all times, reserve and keep available, out of its authorized but unissued shares of common stock, sufficient shares to effect the conversion of shares for stock options, restricted stock units and Convertible Notes.

9. Stock-Based Compensation

The Company issues stock options, restricted stock and restricted stock units (“RSUs”) with service conditions, which are generally the vesting periods of the awards. The Company has issued stock options and RSUs that vest upon the satisfaction of certain performance conditions. The Company also has issued stock options and RSUs that vest upon the satisfaction of certain market conditions.

Determining the Fair Value of Stock Awards and Restricted Stock Unit Awards

Stock Options

The Company measures the fair value of stock options with service-based and performance-based vesting criteria to employees, consultants and directors on the date of grant using the Black-Scholes option pricing model. The fair value of equity instruments issued to non-employees is remeasured as the award vests. For awards that vest upon the achievement of a market condition, the Company calculates the estimated fair value of the stock-based awards using a Monte Carlo simulation.

The Company does not have sufficient history to support a calculation of volatility and expected term using only its historical data. As such, the Company has used a weighted-average volatility considering the Company’s own volatility since its initial public offering in October 2010 and the volatilities of several guideline companies. For purposes of identifying similar entities, the Company considered characteristics such as industry, length of trading history, and stage of life cycle. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The average expected life was determined according to the “simplified method” as described in SAB 110, which is the mid-point between the vesting date and the end of the contractual term. The risk-free interest rate is determined by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on the Company’s historical analysis of both options and awards that forfeited prior to vesting. The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Expected stock price volatility		61.5	%		58.2	%		61.5	%		58.0	%
Risk free interest rate		1.58	%		2.01	%		1.56	%		1.92	%
Expected life of options (years)		6.17			6.22			6.19			6.27
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%

The Company’s stock option activity for the six months ended June 30, 2015 is as follows (in thousands, except per share amounts):


	Number of Stock Options			Weighted- Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (years)
Outstanding at December 31, 2014		6,409		$	28.03		7.6
Granted		1,318		$	24.13
Exercised		(124	)	$	16.21
Forfeited/cancelled		(471	)	$	38.35

Outstanding at June 30, 2015		7,132		$	26.84		7.3

Restricted Stock Units (RSUs)

RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. The Company expenses the cost of RSUs with service-based vesting conditions, which is determined to be the fair value of the shares of common stock underlying the RSUs at the date of grant, ratably over the period during which the vesting restrictions lapse. Additionally, the Company grants RSUs that vest upon the achievement of a market condition. The fair value of RSUs with market-based vesting conditions is determined using a Monte Carlo simulation and the Company recognizes compensation expense over the derived service period.

The Company’s RSU activity for the six months ended June 30, 2015 is as follows (in thousands, except per share amounts):


	Number of RSUs			Weighted- Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (years)
Outstanding at December 31, 2014		266		$	33.49		2.2
Granted		368		$	24.03
Vested		(12	)	$	26.00
Forfeited/cancelled		(75	)	$	29.32

Outstanding at June 30, 2015		547		$	18.97		1.9

Stock-based Compensation Expense

The Company recorded stock-based compensation expense in the Company’s consolidated statements of operations as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
	( in thousands)
Stock-based compensation expense by line item:
Selling, general and administrative	$	6,139	$	6,672	$	12,308	$	13,931
Research and development		1,070		1,294		2,060		2,558

Total stock-based compensation expense included in costs and expenses	$	7,209	$	7,966	$	14,368	$	16,489


	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	( in thousands)
Stock-based compensation expense by type of award:
Stock options	$	6,732		$	7,906		$	13,424		$	16,479
Restricted stock and restricted stock units		592			208			1,162			259
Less stock-based compensation expense capitalized to inventories		(115	)		(148	)		(218	)		(249	)

Total stock-based compensation expense included in costs and expenses	$	7,209		$	7,966		$	14,368		$	16,489

Total unrecognized stock-based compensation cost related to unvested stock options and RSUs as of June 30, 2015 was approximately $49.5 million. This unrecognized cost is expected to be recognized over a weighted-average period of approximately 2.4 years. In addition, the Company has 597,351 shares of outstanding unvested stock options and RSUs that contain performance and market criteria that impact the vesting of the award. Of the 597,351 outstanding unvested stock options and RSUs, 553,953 options require judgment to assess whether the criteria is deemed probable to be achieved and for certain of the awards the number of options that will ultimately vest upon meeting the criteria. Total unrecognized compensation related to those awards was approximately $6.9 million at June 30, 2015.

10. Basic and Diluted Net Loss per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period.

In August 2014, in connection with the issuance of the Convertible Notes, the Company entered into convertible bond hedges. The convertible bond hedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges are generally expected, but not guaranteed, to reduce the potential dilution upon conversion of the Convertible Notes. See Note 6, “Debt Financing” for additional information.

Diluted net loss per common share is computed by dividing the net loss by the weighted-average number of unrestricted common shares and dilutive common share equivalents outstanding for the period, determined using the treasury-stock and if-converted methods. Since the Company has had net losses for all periods presented, all potentially dilutive securities are anti-dilutive. Accordingly, basic and diluted net loss per common share are equal.

The following table sets forth potential common shares issuable upon the exercise of outstanding options, warrants, the vesting of RSUs and the conversion of the Convertible Notes (prior to consideration of the treasury stock and if-converted methods), which were excluded from the computation of diluted net loss per share because such instruments were anti-dilutive (in thousands):


	As of June 30,
	2015		2014
Stock options		7,132		6,268
Unvested restricted stock units		547		102
Warrants		7,893		—
Convertible notes		7,893		—

Total		23,465		6,370

11. Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse. The Company provides a valuation allowance when it is more likely than not that deferred tax assets will not be realized.

The Company recorded a provision for income taxes in the three and six months ended June 30, 2015 of $0.3 million and $0.5 million, respectively. The provision for income taxes consists of current tax expense, which relates primarily to the Company’s profitable operations in its foreign tax jurisdictions, and deferred tax expense, which relates primarily to the amortization of tax deductible goodwill and indefinite-lived intangible assets associated with the MYALEPT acquisition.

The Company does not recognize a tax benefit for uncertain tax positions unless it is more likely than not that the position will be sustained upon examination by tax authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit that is recorded for these positions is measured at the largest amount of cumulative benefit that has greater than a 50 percent likelihood of being realized upon ultimate settlement. Deferred tax assets that do not meet these recognition criteria are not recorded and the Company recognizes a liability for uncertain tax positions that may result in tax payments. If such unrecognized tax benefits were realized and not subject to valuation allowances, the entire amount would impact the tax provision. As of June 30, 2015, the Company had no material uncertain tax positions.

12. Commitments and Contingencies

In late 2013, the Company received a subpoena from the U.S. Department of Justice, represented by the U.S. Attorney’s Office in Boston, requesting documents regarding the Company’s marketing and sale of JUXTAPID in the U.S, in connection with an investigation of its practices. As of the filing date of this Form 10-Q, the Company cannot determine if a loss is probable and whether the outcome will have a material adverse effect on its business and, as a result, the Company has not recorded any amounts for a loss contingency.

In January 2014, a putative class action lawsuit was filed against the Company and certain of its executive officers in the United States District Court for the District of Massachusetts alleging certain misstatements and omissions related to the marketing of JUXTAPID and the Company’s financial performance in violation of the federal securities laws. On March 11, 2015, the Court appointed co-lead plaintiffs and lead counsel. On April 1, 2015, the Court entered an order permitting and setting a schedule for co-lead plaintiffs to file an Amended Complaint within 60 days, and for defendants to file responsive pleadings, co-lead plaintiffs to file any opposition, and defendants to file reply briefs. Accordingly, co-lead plaintiffs filed an amended complaint on June 1, 2015. The amended complaint filed against the Company and certain of its former executive officers alleges that defendants made certain misstatements and omissions during the first three quarters of 2014 related to the Company’s revenue projections for JUXTAPID sales for 2014, as well as data underlying those projections, in violation of the federal securities laws. The Company filed a motion to dismiss the amended complaint for failure to state a claim on July 31, 2015. As of the filing date of this Form 10-Q, the Company cannot determine if a loss is probable and whether the outcome will have a material adverse effect on its business and, as a result, the Company has not recorded any amounts for a loss contingency.

In late 2014, the Company received a subpoena from the Securities and Exchange Commission requesting certain information related to the Company’s sales activities and disclosures related to JUXTAPID. The SEC also has requested documents and information on a number of other topics, including documents related to the subject matter of the previously disclosed investigations by government authorities in Brazil into whether the Company’s activities in Brazil violated Brazilian anti-corruption laws. The investigation is continuing. As of the filing date of this Form 10-Q, the Company cannot determine if a loss is probable and whether the outcome will have a material adverse effect on its business and, as a result, the Company has not recorded any amounts for a loss contingency.

13. Subsequent Events

On July 27, 2015, the Company announced that Sandford D. Smith, a member of the Company’s Board of Directors, has been appointed interim Chief Executive Officer and President of the Company, effective July 26, 2015. Mr. Smith replaces Marc Beer, who resigned as Chief Executive Officer and as a director of the Company effective July 26, 2015. The Board has initiated a search for a new Chief Executive Officer, and expects that Mr. Smith will serve as Chief Executive Officer until that process is complete. On July 27, 2015, the Company also announced the resignation of its Chief Operating Officer, effective July 26, 2015.

On August 7, 2015, we entered into a Sixth Loan Modification Agreement (the “Loan Amendment”) with Silicon Valley Bank to the Loan and Security Agreement, dated March 28, 2012. Pursuant to the Loan Amendment, Silicon Valley Bank consented to certain transactions pursuant to which we funded the operations of our Swiss subsidiary, Aegerion Pharmaceuticals SARL. In addition, pursuant to the Loan Amendment, the Loan and Security Agreement was amended to increase the limit on certain investments by the Company in its subsidiaries to $42,000,000 in the aggregate per fiscal year, provided that no event of default then exists or would be caused by any such investment. The foregoing description of the Loan Amendment is qualified in its entirety by reference to the complete terms and conditions of the Loan Amendment, a copy of which is filed herewith as Exhibit 10.3 and is incorporated herein by reference.

The Company has evaluated all events or transactions that occurred after June 30, 2015 through the date the Company issued these financial statements. There were no material events that impacted the unaudited condensed consolidated financial statements or disclosures.

Item 2.

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 financial statements and related notes included in our audited financial statements and notes thereto for the year ended December 31, 2014, and Management’s Discussion and Analysis of Financial Condition and Results of Operation included in our 2014 Form 10-K, to which the reader is directed for additional information. In addition to historical information, some of the information in this discussion and analysis contains forward-looking statements reflecting our current expectations and that are subject to risks and uncertainties. All statements included or incorporated by reference into this report other than statements or characterizations of historical fact, are forward-looking statements. Forward-looking statements are often identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “forecasts,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “guidance”, “continue,” “ongoing” and similar expressions, and variations or negatives of these words. For example, statements regarding the potential plans and strategy for our business; planned clinical, regulatory and commercial activities, and anticipated timing and outcomes of such activities; and our expectations with respect to future financial performance, revenues, expense categories and levels, cash needs and liquidity sources are forward-looking statements. Our actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under the “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Overview

We are a biopharmaceutical company dedicated to the development and commercialization of innovative therapies for patients with debilitating rare diseases.

Our first product, lomitapide, received marketing approval, under the brand name JUXTAPID^® (lomitapide) capsules (“JUXTAPID”), from the U.S. Food and Drug Administration (“FDA”) in late December 2012, as an adjunct to a low-fat diet and other lipid-lowering treatments, including low-density lipoprotein (“LDL”) apheresis where available, to reduce low-density lipoprotein cholesterol (“LDL-C”), total cholesterol (“TC”), apolipoprotein B (“apo B”) and non-high-density lipoprotein cholesterol (“non-HDL-C”) in adult patients with homozygous familial hypercholesterolemia (“HoFH”). We launched JUXTAPID in the U.S. in late January 2013. In July 2013, we received marketing authorization for lomitapide in the European Union (“EU”), under the brand name LOJUXTA ^® (lomitapide) hard capsules (“LOJUXTA”), as a treatment for adult patients with HoFH. Lomitapide is also approved for the treatment of adult patients with HoFH in Mexico, Canada, Taiwan and a small number of other countries. We sell lomitapide, on a named patient basis, in Brazil and in a limited number of other countries outside the U.S. as a result of the approval of lomitapide in the U.S. or the EU.

We acquired our second product, metreleptin, in January 2015, pursuant to an asset purchase agreement (the “Asset Purchase Agreement”) dated November 5, 2014 with Amylin Pharmaceuticals, LLC (“Amylin”) and AstraZeneca Pharmaceuticals LP, an affiliate of Amylin (together referred to as “AstraZeneca”). Metreleptin, a recombinant analog of human leptin, is currently marketed in the U.S. under the brand name MYALEPT^® (metreleptin) for injection (“MYALEPT”). MYALEPT received marketing approval from the FDA in February 2014 as an adjunct to diet as replacement therapy to treat the complications of leptin deficiency in patients with congenital or acquired generalized lipodystrophy (“GL”). Under the terms of the Asset Purchase Agreement, we paid AstraZeneca $325.0 million to acquire the global rights to develop, manufacture and commercialize metreleptin, subject to an existing distributor license with Shionogi & Co., Ltd. (“Shionogi”) covering Japan, South Korea and Taiwan. The distribution agreement with Shionogi was assigned to us as part of the transaction. We also assumed certain other assets and liabilities of AstraZeneca related to the metreleptin program.

We expect that our near-term efforts will be focused on:

•

maintaining market acceptance of JUXTAPID as a treatment for adult HoFH patients in the U.S., particularly in light of the introduction of PCSK9 inhibitor products, beginning in July 2015, which are expected to compete with JUXTAPID as a treatment for HoFH;

•

continuing to support sales of lomitapide as a treatment for HoFH in Brazil, on a named patient basis, and in other key countries where such sales are permitted, particularly in light of the potential availability of PCSK9 inhibitors on a named patient sale basis in such countries;

•

building and maintaining market acceptance for MYALEPT in the U.S. for the treatment of complications of leptin deficiency in GL patients, and supporting named patient sales of metreleptin in GL in Brazil and other key countries where such sales are permitted as a result of the U.S. approval;

•

gaining pricing and reimbursement approvals for lomitapide in key markets outside the U.S. where lomitapide is approved;

•

gaining regulatory and pricing and reimbursement approvals to market our products in countries in which the products are not currently approved, including filing a Marketing Authorization Application (“MAA”) with the European Medicines Agency (“EMA”) seeking marketing approval of metreleptin in the EU as a treatment for complications of leptin deficiency in GL patients following confirmation of our filing strategy with EU regulatory authorities, and commencing commercialization efforts in those markets where it makes commercial sense to do so if we are able to obtain all required approvals;

•

minimizing the number of patients who are eligible to receive, but decide not to commence, treatment with our products or who discontinue treatment, including with lomitapide, due to tolerability issues, and with metreleptin, due to its route of administration as an injection, through activities such as patient support programs, to the extent permitted in a particular country;

•

continuing clinical development and regulatory activities to support a potential marketing authorization application for lomitapide in HoFH in Japan;

•

evaluating the potential for future clinical development of metreleptin in additional indications; and

•

engaging in possible further development efforts related to our existing products, and assessment, and possible acquisition of, potential new product opportunities targeted at rare diseases where we believe we can leverage our infrastructure and expertise.

In the near-term, we expect that the majority of our revenues will continue to be derived from sales of our products in the U.S. We also expect to generate revenues from sales of lomitapide in those countries outside the U.S. in which we have or receive marketing approval, and are able to obtain pricing and reimbursement approval at acceptable levels, and from sales of both our products in a limited number of other countries where they are, or may in the future be, available on a named patient sale basis as a result of existing approvals. We expect that named patient sales of lomitapide in Brazil in the near term will continue to be our second largest source of revenues for lomitapide, on a country-by-country basis. We expect to begin generating revenues from named patient sales of metreleptin in Brazil based on U.S. approval, potentially commencing in the second half of 2015. We expect net product sales from named patient sales to fluctuate quarter-over-quarter significantly more than sales in the U.S. In some countries, including Brazil, orders for named patient sales are for multiple months of therapy which can lead to an unevenness in orders. For example in the first quarter of 2015, we recorded the largest order for lomitapide since launch in Brazil. As a result, the sales to Brazil in the second quarter of 2015 were significantly lower than in the first quarter of 2015. In addition, net product sales from named patient sales may fluctuate quarter-over-quarter as a result of government actions, economic pressures and political unrest. For example, with respect to named patient sales of lomitapide in Brazil in 2014, we experienced longer than expected turn-around times between price quotations and orders, including re-orders, from the federal government, and delays in receipt of orders and re-orders from the state government of São Paulo as a result of an ongoing São Paulo investigation focused on determining whether there has been any violation of Brazilian anti-corruption laws in connection with prescriptions written for lomitapide in São Paulo. A similar investigation has also been initiated by the federal government in Brazil. These delays may continue, and we may experience other delays or suspension of the ordering process. Similarly, we have faced, and may continue to face, a reluctance of some physicians to prescribe lomitapide, and some patients to take or stay on lomitapide, while the investigations are ongoing. In the second quarter, we observed a significant increase in patients discontinuing therapy in Brazil which we believe is due in part to ongoing investigations in the country. These discontinuations may negatively impact re-orders of lomitapide in Brazil in future quarters. Revenues from named patient sales in Brazil may also be negatively affected by the potential availability of PSCK9 inhibitor products on a named patient sale basis.

We have submitted documentation seeking pricing and reimbursement approvals for lomitapide from governmental authorities in key markets of the EU, and are in the process of seeking such approvals from governmental authorities, social funds and private payers in Mexico, Taiwan and Canada. We have entered into a one-year renewable agreement with the Italian Medicines Agency (AIFA) and have launched LOJUXTA in Italy in June 2015. Among other things, the agreement contains an annual cap on total spend by AIFA on LOJUXTA, which we would need to re-negotiate at the end of the initial twelve-month period in order to increase the cap. We anticipate reimbursement decisions in some other countries in 2015. In March 2014, the reimbursement authority in Germany, the G-BA (Gemeinsamer Bundesausschuss) deemed our dossier for LOJUXTA to be incomplete as a result of certain technical deficiencies. As a result of the technical deficiencies, LOJUXTA was automatically put into the category of “no additional benefit” under the G-BA process, without a review of the clinical merits, which limits the reimbursement level significantly. After the G-BA assessment, we withdrew LOJUXTA from the German market in July 2014. We re-filed our dossier for LOJUXTA with the G-BA in June 2015, which we expect would result in a final assessment by G-BA in December 2015. Similarly, in France, our dossier for lomitapide has twice received a “minor improvement” rating from Haute Autorite de Sante, the committee responsible for assessing the benefit of medicinal products in France before they can be approved for reimbursement. Such a rating, which was confirmed on appeal, may limit the potential reimbursement level for lomitapide in France significantly. In June 2015, Taiwan’s Pharmaceutical Benefit and Reimbursement Scheme (PBRS), which is responsible for assessing the

suitability of a pharmaceutical product for Taiwan’s National Health Insurance system, voted not to recommend our dossier for lomitapide for reimbursement in Taiwan, which aligned with a previous decision by Taiwan’s Expert Review Committee of the National Health Insurance Administration (NHIA). We intend to file an appeal of this decision in the third quarter of 2015, and plan to request an opportunity to present to the Expert Review Committee, which we expect will occur in the fourth quarter of 2015. In July 2015, the health authority in Mexico, the General Health Council (GHC), declined our request to include lomitapide in Mexico’s basic formulary, which is required in order to obtain reimbursement approval in Mexico. We intend to file an appeal of this decision, and will request a hearing with the GHC in the third quarter of 2015.

During the three and six months ended June 30, 2015, we generated approximately $64.2 million and $123.6 million, respectively, of revenues from net product sales of both lomitapide and metreleptin, of which $61.9 million and $111.9 million, respectively, was derived from prescriptions for lomitapide and metreleptin written in the U.S., and $2.3 million and $11.7 million, respectively, was derived from prescriptions for lomitapide written outside the U.S., primarily in Brazil. As of June 30, 2015, we had approximately $82.6 million in cash and cash equivalents.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.

We believe that our application of the following accounting policies, each of which requires significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results:

•

Revenue recognition;

•

Inventories;

•

Valuation of goodwill, purchased tangible assets and intangibles;

•

Accrued expenses; and

•

Stock-based compensation.

For a complete discussion of critical accounting policies, refer to “Critical Accounting Policies and Use of Estimates” within “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” included within our 2014 Form 10-K.

Revenue Recognition

We recognize revenue from product sales when there is persuasive evidence that an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collectability is reasonably assured and we have no further performance obligations.

Lomitapide

In the U.S., JUXTAPID is only available for distribution through a specialty pharmacy, and is shipped directly to the patient. JUXTAPID is not available in retail pharmacies. Prior authorization and confirmation of coverage level by the patient’s private insurance plan or government payer are currently prerequisites to the shipment of product to a patient in the U.S. Revenue from sales in the U.S. covered by the patient’s private insurance plan or government payor is recognized once the product has been received by the patient. For uninsured amounts billed directly to the patient, revenue is recognized at the time of cash receipt as collectability is not reasonably assured at the time the product is received by the patient. To the extent amounts are billed in advance of delivery to the patient, we defer revenue until the product has been received by the patient.

We also record revenue on sales in Brazil and other countries where lomitapide is available on a named patient basis and typically paid for by a government authority or institution. In many cases, these sales are facilitated through a third-party distributor that takes title to the product upon acceptance. Because of factors such as the pricing of lomitapide, the limited number of patients, the short period from product sale to delivery to the end-customer and the limited contractual return rights these distributors typically only hold inventory to supply specific orders for the product. We generally recognize revenue for sales under these named patient programs once the product is shipped through to the government authority or institution. In the event the payer’s creditworthiness has not been established, we recognize revenue on a cash basis if all other revenue recognition criteria have been met.

We record distribution and other fees paid to our distributors as a reduction of revenue, unless we receive an identifiable and separate benefit for the consideration and we can reasonably estimate the fair value of the benefit received. If both conditions are met, we record the consideration paid to the distributor as an operating expense. At this time, both conditions have not been met and therefore, these fees paid to distributors are recorded as a reduction of revenue. We record revenue net of estimated discounts and rebates, including those provided to Medicare, Medicaid, Tricare and other government programs in the U.S. Allowances are recorded as a reduction of revenue at the time revenues from product sales are recognized. Allowances for government rebates and discounts are established based on the actual payer information, which is reasonably estimated at the time of delivery. These allowances are adjusted to reflect known changes in the factors that may impact such allowances in the quarter those changes are known.

We provide financial support to a 501(c)(3) organization which assists patients in the U.S. in accessing treatment for HoFH. This organization assists HoFH patients according to eligibility criteria defined independently by the organization. We record donations made to the 501(c)(3) organization as selling, general and administrative expense. Any payments received from the 501(c)(3) organization on behalf of a patient who is taking lomitapide for the treatment of HoFH are recorded as a reduction of selling, general and administrative expense rather than as revenue. Beginning in 2015, we also offer a branded co-pay assistance program for certain patients in the U.S. with HoFH who are on JUXTAPID therapy. The branded co-pay assistance program assists commercially insured patients who have coverage for JUXTAPID, and is intended to reduce each participating patient’s portion of the financial responsibility for JUXTAPID’s purchase price up to a specified dollar amount of assistance. We record revenue net of amounts paid under the branded specific co-pay assistance program for each patient.

Metreleptin

In the U.S., MYALEPT is only available through an exclusive third-party distributor that takes title to the product upon shipment. MYALEPT is not available in retail pharmacies. The distributor may contractually only hold inventory for an agreed number of days of inventory, not to exceed 21 business days. We recognize revenue for these sales once the product is received by the patient as we are currently unable to reasonably estimate the rebates owed to certain government payers at the time of receipt by the distributor. Prior authorization and confirmation of coverage level by the patient’s private insurance plan or government payer are currently prerequisites to the shipment of product to a patient in the U.S. Revenue from sales in the U.S. covered by the patient’s private insurance plan or government payor is recognized once the product has been received by the patient.

We record distribution and other fees paid to our distributor as a reduction of revenue, unless we receive an identifiable and separate benefit for the consideration and we can reasonably estimate the fair value of the benefit received. If both conditions are met, we record the consideration paid to the distributor as an operating expense. At this time, both conditions have not been met and therefore, these fees paid to our distributor are recorded as a reduction of revenue. We record revenue from sales of MYALEPT net of estimated discounts and rebates, including those provided to Medicare and Medicaid in the U.S. Allowances for government rebates and discounts are established based on the actual payer information, which is reasonably estimable at the time of delivery, and the government-mandated discounts applicable to government-funded programs. These allowances are adjusted to reflect known changes in the factors that may impact such allowances in the quarter those changes are known. To date, such adjustments have not been significant.

We also offer co-pay assistance for patients in the U.S. with GL who are on MYALEPT therapy. The co-pay assistance program assists commercially insured patients who have coverage for MYALEPT, and is intended to reduce each participating patient’s portion of the financial responsibility for MYALEPT’s purchase price up to a specified dollar amount of assistance. We record revenue net of amounts paid under the MYALEPT co-pay assistance program for its patients.

The following table summarizes combined activity for lomitapide and metreleptin in each of the product revenue allowance and reserve categories during the six months ended June 30, 2015 (in thousands):


	Government Rebates			Contractual Discounts			Other Incentives			Total
Balance at December 31, 2014	$	3,311		$	100		$	—		$	3,411
Provision related to current period sales		8,615			1,270			875			10,760
Adjustments related to prior period sales		197			—			—			197
Payments made		(4,235	)		(1,370	)		(744	)		(6,349	)

Balance at June 30, 2015	$	7,888		$	—		$	131		$	8,019

Inventories

Inventories are stated at the lower of cost or market price with cost determined on a first-in, first-out basis. Inventories are reviewed periodically to identify slow-moving or obsolete inventory based on sales activity, both projected and historical, as well as product shelf-life. In evaluating the recoverability of inventories produced, we consider the probability that revenue will be obtained from the future sale of the related inventory and will write down inventory quantities in excess of expected requirements. Expired inventory is disposed of and the related costs are recognized as cost of product sales in the consolidated statements of operations.

We analyze our inventory levels to identify inventory that may expire prior to sale, inventory that has a cost basis in excess of its estimated realizable value, or inventory in excess of expected sales requirements. Although the manufacturing of our products is subject to strict quality controls, certain batches or units of product may no longer meet quality specifications or may expire, which would require adjustments to our inventory values.

In the future, reduced demand, quality issues or excess supply beyond those anticipated by management may result in an adjustment to inventory levels, which would be recorded as an increase to cost of product sales. The determination of whether or not inventory costs will be realizable requires estimates by our management. A critical input in this determination is future expected inventory requirements based on our internal sales forecasts which we then compare to the expiry dates of inventory on hand. To the extent that inventory is expected to expire prior to being sold, we will write down the value of inventory. If actual results differ from those estimates, additional inventory write-offs may be required.

Valuation of Goodwill, Purchased Intangibles and Tangible Assets

We have recorded goodwill as a result of the January 2015 acquisition of MYALEPT, purchased tangible assets and intangibles representing product rights, and in-process research and development assets. When identifiable intangible assets are acquired, we determine preliminary fair values of these assets as of the acquisition date. Any adjustments to the preliminary fair values are made as such information becomes available for up to a year from the acquisition date. Discounted cash flow models are typically used in these valuations and the models require the use of significant estimates and assumptions including but not limited to:

•

the probability of obtaining marketing approval and/or achieving relevant development milestones for a drug candidate;

•

projecting regulatory approvals;

•

estimating future cash flows from product sales resulting from completed products; and

•

developing appropriate discount rates and probability rates.

Purchased intangible assets with definite useful lives are amortized to their estimated residual values over their estimated useful lives and reviewed for impairment if certain events occur. Impairment testing and assessments of remaining useful lives are also performed when a triggering event occurs that could indicate a potential impairment. Such test first entails comparison of the carrying value of the intangible asset to the undiscounted cash flows expected from that asset. If impairment is indicated by this test, the intangible asset is written down by the amount by which the discounted cash flows expected from the intangible asset exceeds its carrying value.

In-process research and development assets are accounted for as indefinite-lived intangible assets and are maintained on our consolidated balance sheet until either the project underlying such an asset is completed or the asset becomes impaired. If the asset becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value, and an impairment charge is recorded in the period in which the impairment occurs. If a project is completed, the carrying value of the related intangible asset is amortized as a part of cost of product revenues over the remaining estimated life of the asset beginning in the period in which the project is completed. In-process research and development assets are tested for impairment on an annual basis as of October 31, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist.

Purchased tangible assets are accounted for as either inventory or clinical and compassionate use materials classified as other assets on our consolidated balance sheet. Inventory will be maintained on our consolidated balance sheet until the inventory is sold, donated as part of compassionate use program, used for clinical development, or determined to be in excess of expected requirements. Inventory that is sold or determined to be in excess of expected requirements will be recognized as cost of product sales in our consolidated statement of operations, inventory that is donated as part of our compassionate use program will be recognized as a selling, general and administrative expense in the consolidated statement of operations, and inventory used for clinical development will be recognized as research and development expense in the consolidated statement of operations. Other assets will be maintained on our consolidated balance sheet until these assets are consumed. If the asset becomes impaired or is abandoned, the carrying value is written down to its fair value, and an impairment charge is recorded in the period in which the impairment occurs.

Goodwill represents the excess of purchase price over fair value of net assets acquired in a business combination accounted for by the acquisition method of accounting and is not amortized, but subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. We test our goodwill annually for impairment each October 31 unless a triggering event occurs that could indicate a potential impairment. We are organized as a single reporting unit and therefore the goodwill impairment test is done using our overall market value, as determined by our traded share price, as compared to our book value of net assets.

Accrued Expenses

As part of the process of preparing our financial statements, we are required to estimate accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel as well as applicable vendor 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 actual cost. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements 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. Examples of estimated accrued expenses include fees paid to clinical research organizations and investigative sites in connection with clinical studies and professional service fees. If our previous estimates are 5% too high or too low, this may result in an adjustment to our accrued expenses in future periods of approximately $1.9 million.

Stock-Based Compensation

We issue stock options, restricted stock and restricted stock units (“RSUs”) with service conditions, which are generally the vesting periods of the awards. We also issue stock options that vest upon the satisfaction of certain performance conditions. We also issue stock options and RSUs that vest upon the satisfaction of certain market conditions.

We measure the fair value of stock options and other stock-based awards issued to employees and directors on the date of grant. The fair value of equity instruments issued to non-employees is remeasured as the award vests. For stock awards with service-based vesting conditions, compensation expense is recognized using the ratable method over the requisite service period, which is typically the vesting period. For stock awards that vest or begin vesting upon achievement of a performance condition, we begin recognizing compensation expense when achievement of the performance condition is deemed probable using an accelerated attribution model over the implicit service period. For stock awards that vest upon the achievement of a market condition, we recognize compensation expense over the derived service period. For stock awards that have been modified, any incremental increase in the fair value over the original award has been recorded as compensation expense on the date of the modification for vested awards or over the remaining service (vesting) period for unvested awards. The incremental compensation cost is the excess of the fair value of the modified award on the date of modification over the fair value of the original award immediately before the modification.

For stock awards subject to service-based and performance-based conditions, we calculate the estimated fair value of the awards using the Black-Scholes option-pricing model. We have 597,351 outstanding unvested stock options and RSUs that contain performance or market criteria that impacts the vesting of the award. Of the 597,351 outstanding unvested stock options and RSUs, 553,953 options require significant judgment to assess whether the criteria is deemed probable to be achieved and for certain of the awards the number of options that will ultimately vest upon meeting the criteria. The Black-Scholes option-pricing model requires the input of subjective assumptions, including stock price volatility and the expected life of stock options. For stock awards and RSUs that vest upon achievement of a market condition, we calculate the estimated fair value of the stock-based awards using a Monte Carlo simulation. A Monte Carlo simulation requires the input of assumptions, including our stock price, and the volatility of our stock price, and was developed to reflect the impact of the market condition on the value of the awards.

For RSUs with service-based vesting conditions, we determine the fair value of the RSUs to be the fair value of our common stock underlying the RSUs at the date of grant.

As a recent public company, we do not have sufficient history to estimate the volatility of our common stock price or the expected life of our options based on our specific evidence. Our expected stock price volatility is based on an average of our own historical volatility and that of several peer companies. We utilize a weighted average method using our own volatility data for the time that we have been public, along with similar data for peer companies that are publicly traded. For purposes of identifying peer companies, we considered characteristics such as industry, length of trading history, and stage of life cycle. We will continue to use a weighted average method until the historical volatility of our common stock is relevant to measure expected volatility for future option grants. The assumed dividend yield is based on our expectation of not paying dividends in the foreseeable future. We determine the average expected life of stock options according to the “simplified method” as described in Staff Accounting Bulletin (“SAB”) 110, which is the mid-point between the vesting date and the end of the contractual term. We determine the risk-free interest rate by reference to implied yields available from five-year and seven-year U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. We have performed a historical analysis of both options and awards that were forfeited prior to vesting and recorded total stock-based compensation expense that reflected this estimated forfeiture rate. Forfeitures are estimated each period and adjusted if actual forfeitures differ from those estimates.

The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Expected stock price volatility		61.5	%		58.2	%		61.5	%		58.0	%
Risk free interest rate		1.58	%		2.01	%		1.56	%		1.92	%
Expected life of options (years)		6.17			6.22			6.19			6.27
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%

Results of Operations

Comparison of the Three Months Ended June 30, 2015 and June 30, 2014

The following table summarizes the results of our operations for each of the three-month periods ended June 30, 2015 and 2014, together with the changes in those items in dollars and as a percentage:


	Three Months Ended June 30,						Change
	2015			2014			$			%
	(in thousands)
Net product sales	$	64,197		$	36,014		$	28,183			78	%
Cost of product sales		13,997			4,158			9,839			237	%
Operating expenses:
Selling, general and administrative		42,672			32,330			10,342			32	%
Research and development		12,471			8,942			3,529			39	%

Total operating expenses		55,143			41,272			13,871			34	%

Loss from operations		(4,943	)		(9,416	)		4,473			(48	)%
Interest expense, net		(7,069	)		(70	)		(6,999	)		10,000	%
Other income/(expense), net		1,116			(31	)		1,147			(3,700	)%

Loss before provision for income taxes		(10,896	)		(9,517	)		(1,379	)		14	%
Provision for income taxes		(254	)		(105	)		(149	)		142	%

Net loss	$	(11,150	)	$	(9,622	)	$	(1,528	)		16	%

Net Product Sales


	Three Months Ended June 30,
	2015		2014
	( in thousands)
Lomitapide	$	57,140	$	36,014
Metreleptin		7,057		—

Total net product sales	$	64,197	$	36,014

Lomitapide

We generated revenues from net product sales of lomitapide of $57.1 million in the three months ended June 30, 2015, an increase of $21.1 million, or 59%, as compared to the same period in 2014. The significant increase in net product sales in the quarter ended June 30, 2015 is primarily attributable to an increase in the number of patients on therapy in the U.S., an increase in patients on therapy in Canada and on a named patient basis in Colombia, and a higher average sales price of lomitapide in the U.S. as compared to the quarter ended June 30, 2014.

We expect revenues from net product sales of lomitapide in the U.S. to fluctuate throughout the remainder of 2015, depending on the extent of the expected negative impact that PCSK9 inhibitor products have after their launch, beginning in July 2015. We also expect the launch of higher strength capsules in the third quarter of 2015 to reduce net product sales in the second half of 2015 for sales to those patients who currently take more than one capsule of lomitapide per day in the absence of higher strength capsules utilized to achieve the higher daily dose. Net product sales from multiple bottle shipments of lomitapide to patients who currently take more than one capsule of lomitapide per day comprised approximately 4% of our net product sales in the U.S. for the three months ended June 30, 2015. We have factored the launch of higher strength capsules and this potential reduction in net product sales into our financial expectations for 2015.

We expect that prescriptions for named patient sales in Brazil will continue to be our largest source of revenues, on a country-by-country basis, outside the U.S. However, we expect that net product sales from named patient sales in Brazil will fluctuate quarter-over-quarter given that orders for named patient sales are typically for multiple months of therapy which can lead to an unevenness in orders. Future revenues from named patient sales in Brazil may also be negatively affected by the significant increase in discontinuations of patients on lomitapide that we observed in Brazil in the second quarter of 2015, and potentially by the availability of PCSK-9 inhibitor products on a named patient sale basis. In addition, net product sales from named patient sales may fluctuate quarter-over-quarter as a result of government actions, economic pressures and political unrest.

Metreleptin

We generated revenues from net product sales of metreleptin of approximately $7.1 million in the three months ended June 30, 2015. We expect net product sales of metreleptin to continue to increase throughout 2015 due to an expected increase in the number of patients and maintenance of patients on metreleptin. The expected increase in net product sales of metreleptin is highly dependent on our ability to find GL patients and to build market acceptance for metreleptin. In addition, given the significantly higher launch price of MYALEPT set by us in the first quarter of 2015 compared to AstraZeneca’s original launch price, we expect to pay significant Medicaid rebates for MYALEPT which will offset the majority of revenue from Medicaid and negatively impact net product sales in future quarters. The degree of such impact on our overall financial performance will depend on the percentage of MYALEPT patients that have Medicaid as their primary insurance coverage and the quantity of units ordered per patient.

Cost of Product Sales

We recorded cost of product sales of $14.0 million in the three months ended June 30, 2015, an increase of $9.8 million, or 237%, as compared to the same period in 2014. Cost of sales includes the cost of inventory sold, amortization of acquired product rights which result from product and business acquisitions, manufacturing and supply chain costs, product shipping and handling costs, reserves for excess and obsolete inventory, as well as estimated royalties payable related to the sale of lomitapide and metreleptin. The increase in cost of product sales is largely attributed to the $5.0 million of amortization of the acquired product right intangible asset associated with metreleptin, as well as attributed to the increase in net product sales from both lomitapide and metreleptin in the three months ended June 30, 2015 compared to the same period in 2014.

We expect cost of product sales of lomitapide to fluctuate throughout 2015 primarily due to the expected fluctuations of net product sales in the U.S. and named patient sales in Brazil. We expect cost of product sales of metreleptin to increase throughout 2015 due to the amortization of the acquired product right intangible asset associated with metreleptin, the stepped up value of cost of product sales related to the preliminary fair value of metreleptin inventory acquired, and expected increases in net product sales of metreleptin.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $42.7 million in the three months ended June 30, 2015, an increase of $10.3 million, or 32%, as compared to the same period in 2014. The $10.3 million increase was primarily attributed to a $4.6 million increase in salary and employee-related costs, a $3.0 million increase in legal fees, a $1.8 million increase in consulting and outside services, and a $0.9 million increase in infrastructure expenses. The increases in salary and employee-related costs and stock-based compensation costs are related to increased headcount in both the selling and administrative functions. The increase in legal fees is primarily related to the ongoing investigation of our U.S. sales and marketing practices by the U.S. Department of Justice and the ongoing investigation by the Securities and Exchange Commission (“SEC”). The remaining increases are related to the continued sales and marketing efforts to continue to build our JUXTAPID brand in the U.S. as well as costs related to our global expansion.

We expect that our selling, general and administrative expenses will increase throughout 2015 as compared to 2014 due to legal fees we expect to incur as we respond to various governmental investigations.

Research and Development Expenses

Research and development expenses were $12.5 million in the three months ended June 30, 2015, an increase of $3.5 million, or 39%, as compared to the same period in 2014. The $3.5 million increase was primarily attributable to a $1.7 million increase of clinical development expenses incurred to support a potential marketing authorization application for lomitapide in Japanese HoFH patients and for a

planned clinical study of lomitapide in pediatric HoFH patients as well as costs associated with the continuation of the observational cohort and vascular imaging post-marketing studies related to lomitapide initiated in 2014, a $1.1 million increase in outside service costs, and a $0.6 million increase in salary and employee-related costs.

We expect research and development expenses to increase throughout 2015 as compared to 2014 as a result of increases in headcount; our clinical development and regulatory activities to support a potential marketing authorization application for lomitapide in HoFH in Japan; continuation of the observational cohort and vascular imaging post-marketing studies related to lomitapide initiated in 2014; and initiation and continuation of certain post-marketing requirements related to MYALEPT. Due to the numerous risks and uncertainties associated with the timing and costs to conduct clinical trials and related activities, we cannot determine these future expenses with certainty and the actual amounts may vary significantly from our forecasts.

Interest Expense, net

Interest expense was $7.1 million in the three months ended June 30, 2015, an increase of $7.0 million as compared to the same period in 2014. The increase was primarily attributed to the amortization of the debt discount and interest incurred in relation to the issuance in August 2014 of $325.0 million in aggregate principal of 2.00% convertible senior notes due August 15, 2019 (the “Convertible Notes”), for which interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2015.

Other Income/(Expense), net

Other income/(expense), net was $1.1 million in the three months ended June 30, 2015, an increase of $1.1 million, as compared to the same period in 2014. Other income/ (expense), net relates to unrealized and realized foreign currency charges incurred related to our foreign operations.

Provision for Income Taxes

Our provision for income taxes was $0.3 million for the three month period ended June 30, 2015, an increase of $0.2 million for the same period in 2014. The provision for income taxes consists of current tax expense, which relates primarily to our profitable operations in our foreign tax jurisdictions, and deferred tax expense, which relates primarily to the amortization of tax deductible goodwill and indefinite-lived intangible assets associated with the MYALEPT acquisition.

Results of Operations

Comparison of the Six Months Ended June 30, 2015 and June 30, 2014

The following table summarizes the results of our operations for each of the six month periods ended June 30, 2015 and 2014, together with the changes in those items in dollars and as a percentage:


	Six Months Ended June 30,						Change
	2015			2014			$			%
	(in thousands)
Net product sales	$	123,581		$	62,987		$	60,594			96	%
Cost of product sales		25,835			6,822			19,013			279	%
Operating expenses:
Selling, general and administrative		89,600			64,109			25,491			40	%
Research and development		22,269			16,846			5,423			32	%

Total operating expenses		111,869			80,955			30,914			38	%

Loss from operations		(14,123	)		(24,790	)		10,667			(43	)%
Interest expense, net		(14,000	)		(141	)		(13,859	)		9,829	%
Other expense, net		1,601			(138	)		1,739			(1,260	)%

Loss before provision for income taxes		(26,522	)		(25,069	)		(1,453	)		6	%
Provision for income taxes		(453	)		(329	)		(124	)		38	%

Net loss	$	(26,975	)	$	(25,398	)	$	(1,577	)		6	%

Net Product Sales


	Six Months Ended June 30,
	2015		2014
	( in thousands)
Lomitapide	$	114,400	$	62,987
Metreleptin		9,181		—

Total net product sales	$	123,581	$	62,987

Lomitapide

We generated revenues from net product sales of lomitapide of $114.4 million in the six months ended June 30, 2015, an increase of $51.4 million, or 82%, as compared to the same period in 2014. The significant increase in net product sales in the six months ended June 30, 2015 is primarily attributable to an increase in the number patients on therapy in the U.S., an increase in named patient sales to patients in Brazil, and a higher average sales price of lomitapide as compared to the same period in 2014.

We expect revenues from net product sales of lomitapide in the U.S. to fluctuate throughout the remainder of 2015 depending on the extent of the expected negative impact that PCSK9 inhibitor products have after their launch beginning in July 2015. We also expect the launch of higher strength capsules in the third quarter of 2015 to reduce net product sales in the second half of 2015 for sales to those patients who currently take more than one capsule of lomitapide per day in the absence of higher strength capsules utilized to achieve the higher daily dose. Net product sales from multiple bottle shipments of lomitapide to patients who currently take more than one capsule of lomitapide per day comprised approximately 4% of our net product sales in the U.S. for the six months ended June 30, 2015. We have factored the launch of higher strength capsules and this potential reduction in net product sales into our financial expectations for 2015.

Metreleptin

We generated revenues from net product sales of metreleptin of $9.2 million in the six months ended June 30, 2015 subsequent to the completion of the acquisition in January 2015. We expect net product sales of metreleptin to continue to increase throughout 2015 due to an expected increase in the number of patients and maintenance of patients on metreleptin. The expected increase in net product sales of metreleptin is highly dependent on our ability to find GL patients and to build market acceptance for metreleptin. In addition, given the significantly higher launch price of MYALEPT set by us in the first quarter of 2015 compared to AstraZeneca’s original launch price, we expect to pay significant Medicaid rebates for MYALEPT which will offset the majority of revenue from Medicaid and negatively impact net product sales in future quarters. The degree of such impact on our overall financial performance will depend on the percentage of MYALEPT patients that have Medicaid as their primary insurance coverage and the quantity of units ordered per patient.

Cost of Product Sales

We recorded cost of product sales of $25.8 million in the six months ended June 30, 2015, an increase of $19.0 million, or 279%, as compared to the same period in 2014. Cost of sales includes the cost of inventory sold, amortization of acquired product rights which result from product and business acquisitions, manufacturing and supply chain costs, product shipping and handling costs, reserves for excess and obsolete inventory, as well as estimated royalties payable related to the sale of lomitapide and metreleptin. The increase in cost of product sales is largely attributed to the $10.2 million of amortization of the acquired product right intangible asset associated with metreleptin, as well as attributed to the increase in net product sales from lomitapide and metreleptin in the six months ended June 30, 2015 compared to the same period in 2014.

We expect cost of product sales of lomitapide to fluctuate throughout 2015, primarily due to the expected fluctuations of net product sales in the U.S. and named patient sales in Brazil. We expect cost of product sales of metreleptin to increase throughout 2015 due to the amortization of the acquired product right intangible asset associated with metreleptin, the stepped up value of cost of product sales related to the preliminary fair value of metreleptin inventory acquired, and expected increases in net product sales of metreleptin.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $89.6 million in the six months ended June 30, 2015, an increase of $25.5 million, or 40%, as compared to the same period in 2014. The $25.5 million increase was primarily attributed to a $6.6 million increase in outside services including a $2.9 million investment banking fee incurred upon the closing of the MYALEPT acquisition and an additional $1.3 million for other investment banking activities as well as outside services costs related to our continued sales and marketing activities for lomitapide, an $11.1 million increase in salary and employee-related costs, a $5.3 million increase in legal fees, and a $1.9 million increase in infrastructure expenses. The increases in salary and employee-related costs are related to increased headcount in both the selling and administrative functions. The increase in legal fees is primarily related to the ongoing investigation of our U.S. sales and marketing practices by the U.S. Department of Justice and the ongoing investigation by the Securities Exchange Commission. The remaining increases are related to the continued sales and marketing efforts to continue to build our JUXTAPID brand in the U.S. as well as costs related to our global expansion.

Research and Development Expenses

Research and development expenses were $22.3 million in the six months ended June 30, 2015, an increase of $5.4 million, or 32%, as compared to the same period in 2014. The $5.4 million increase was primarily attributable to a $3.3 million increase of clinical development expenses incurred to support a potential marketing authorization application for lomitapide in Japanese HoFH patients and a planned clinical study of lomitapide in pediatric HoFH patients as well as costs associated with the continuation of the observational cohort and vascular imaging post-marketing studies related to lomitapide initiated in 2014, a $1.5 million increase in contract manufacturing costs, and a $1.1 million increase in salary and employee-related costs.

Interest Expense, net

Interest expense was $14.0 million in the six months ended June 30, 2015, an increase of $13.9 million as compared to the same period in 2014. The increase was primarily attributed to the amortization of the debt discount and interest incurred in relation to the issuance in August 2014 of $325.0 million in aggregate principal of 2.00% convertible senior notes due August 15, 2019 (the “Convertible Notes”), for which interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2015.

Other Income/ (Expense), net

Other income/ (expense), net was $1.6 million in the six months ended June 30, 2015, an increase of $1.7 million, as compared to the same period in 2014. Other income/ (expense), net relates to unrealized and realized foreign currency charges incurred related to our foreign operations.

Provision for Income Taxes

Our provision for income taxes was $0.5 million for the six month period ended June 30, 2015 and $0.3 million for the six month period ended June 30, 2014. The provision for income taxes consists of current tax expense, which relates primarily to our profitable operations in our foreign tax jurisdictions, and deferred tax expense, which relates primarily to the amortization of tax deductible goodwill and indefinite-lived intangible assets associated with the MYALEPT acquisition.

Liquidity and Capital Resources

Since our inception in 2005, we have funded our operations primarily through proceeds from the issuance of convertible notes, public issuances of common stock, revenues from the sales of lomitapide, proceeds from our long-term debt and the private placement of convertible preferred stock. We have incurred losses since inception, and except for the third and fourth quarter of 2014 and the second quarter of 2015, have generated negative cash flows from operations each quarter since inception.

During the three months ended June 30, 2015, we generated $64.2 million of revenues from net product sales. As of June 30, 2015, we had $82.6 million in cash and cash equivalents on hand.

In January 2015, we amended our Loan and Security Agreement with Silicon Valley Bank (“SVB”) to provide for a $25.0 million term loan (the “2015 Term Loan Advance”), as well as a revolving line of credit of up to $15.0 million subject to a borrowing base. We used $4.0 million of the proceeds received from the 2015 Term Loan Advance to repay the aggregate of all amounts outstanding due to SVB under our existing financing arrangements.

Cash Flows

The following table sets forth the major sources and uses of cash and cash equivalents for the periods set forth below:


	Six months ended June 30,
	2015			2014
	(in thousands)
Net cash provided by/(used in):
Operating activities	$	9,773		$	(19,996	)
Investing activities		(325,619	)		5,138
Financing activities		22,846			550
Effect of exchange rates on cash		(375	)		(53	)

Net decrease in cash and cash equivalents	$	(293,375	)	$	(14,361	)

Net cash provided by operating activities was $9.8 million in the six months ended June 30, 2015. Net cash used in operating activities amounted to $20.0 million in the six months ended June 30, 2014. For the six months ended June 30, 2015, the cash provided by operations was related to the net loss of $27.0 million offset by non-cash expenses, including stock compensation of $14.4 million, non-cash interest expense of $10.4 million and the amortization of intangible assets acquired of $10.2 million. Additionally, for the six months ended June 30, 2015, the cash provided by operations included increases in account receivable of $6.8 million offset by increases in accrued expenses and other liabilities of $6.7 million. For the six months ended June 30, 2014, the cash used in operations was primarily related to the continued expansion of our global sales, marketing and general and administrative functions to support the commercialization of lomitapide

Cash used in investing activities for the six months ended June 30, 2015 of $325.6 million was primarily for the acquisition of MYALEPT for $325.0 million. Cash provided by investing activities for the six months ended June 30, 2014 of $5.1 million was primarily from the maturities of marketable securities of $44.9 million, offset by purchases of marketable securities of $38.4 million and additions of property and equipment of $1.3 million.

Cash provided by financing activities for the six months ended June 30, 2015 of $22.8 million primarily consisted of proceeds from long-term debt associated with amended term loan with SVB of $25.0 million and $2.0 million of proceeds from exercises of stock options offset by principal repayment of $4.0 million of long-term debt. Cash provided by financing activities for the six months ended June 30, 2014 of $0.5 million primarily consisted of $2.3 million of proceeds from exercises of stock options, offset by $1.8 million in principal repayments of our long-term debt.

Future Funding Requirements

In the future, we may need to raise additional capital to fund our operations. Our future capital requirements may be substantial, and will depend on many factors, including:

•

the level of physician, patient and payer acceptance of our products;

•

the success of our commercialization efforts and the level of revenues we generate from sales of our products in the U.S.;

•

the level of revenue we receive from named patient sales of our products in Brazil and other key countries where a mechanism exists to sell the product on a pre-approval basis in such country based on U.S. approval of such products or EU approval of lomitapide, particularly in light of the potential availability of PCSK9 inhibitor products on a named patient sales basis;

•

our ability to obtain pricing and reimbursement approval of lomitapide in the key countries in which lomitapide is approved, at acceptable prices, and on a timely basis, and without significant restrictions, discounts, caps or other cost containment measures;

•

the extent of the expected negative impact of the introduction of PCSK9 inhibitor products on sales of lomitapide, beginning in July 2015 in the U.S. and the EU;

•

the cost of continuing to build and maintain the sales and marketing capabilities necessary for the commercialization of our products for their targeted indications in the U.S., the EU, Mexico, Canada, and Taiwan, to the extent reimbursement and pricing approvals are obtained, and certain other key international markets, if approved;

•

the timing and cost of completion of our clinical study of lomitapide in HoFH in Japanese patients, the results of the trial, the timing of our potential application for marketing approval of lomitapide in adult HoFH in Japan, and the decision of regulatory authorities with respect to such application;

•

the timing and cost of our anticipated clinical trial to evaluate lomitapide for treatment of pediatric patients with HoFH;

•

the timing and costs of future business development opportunities;

•

the timing and cost of potential future clinical development of metreleptin in additional indications and possible lifecycle management opportunities for lomitapide;

•

the cost of filing, prosecuting and enforcing patent claims;

•

the costs of our manufacturing-related activities and the other costs of commercializing our products;

•

the costs associated with ongoing government investigations and lawsuits, including any damages, settlement amounts, fines or other payments that may result if we are unsuccessful in our efforts to defend ourselves or decide to settle;

•

the levels, timing and collection of revenue received from sales of our products in the future;

•

the timing and costs of satisfying our debt obligations, including interest payments and any amounts due upon the maturity of such debt;

•

the cost of our observational cohort studies and other post-marketing commitments to the FDA and EU, and the costs of post-marketing commitments in any other countries where our products are ultimately approved; and

•

the timing and cost of other clinical development activities.

On February 15, 2013, we filed an automatic shelf registration statement on Form S-3 ASR with the Securities and Exchange Commission, which became immediately effective. This shelf registration statement permits us to offer, from time to time, an unspecified amount of any combination of common stock, preferred stock, debt securities and warrants. We may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. The source, timing and availability of any future financing will depend principally upon equity and debt market conditions, interest rates and, more specifically, on the extent of our commercial success and our continued progress in our regulatory and development activities. There can be no assurance that external funds will be available on favorable terms, if at all. Through the period ended June 30, 2015, we have only generated revenues of $330.5 million, the majority of which are from net product sales of lomitapide. We expect the results of operations to allow for cash to be generated by operations in the year ended December 31, 2015, however we are evaluating the impact of moving certain development and regulatory activities into 2015 from 2016 which, depending on the scope and timing of such activities, may impact our ability to achieve this goal. In connection with the acquisition of MYALEPT in January 2015, as described further in Note 2 to the consolidated financial statements, we used a substantial amount of our existing cash and cash equivalents which may greatly accelerate our need to raise additional capital. If we are unable to obtain such financing at all or on acceptable terms, we may be required to reduce the scope of our planned activities which could harm our business, financial condition and operating results.

Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. Therefore, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

In August 2014, we issued $325.0 million of 2.0% Convertible Notes due August 15, 2019. The Convertible Notes have a fixed annual interest rate of 2.0% and we, therefore, do not have economic interest rate exposure on the Convertible Notes. However, the fair value of the Convertible Notes is exposed to interest rate risk. We do not carry the Convertible Notes at fair value but present the fair value of the principal amount for disclosure purposes. Generally, the fair value of the Convertible Notes will increase as interest rates fall and decrease as interest rates rise. These Convertible Notes are also affected by the price and volatility of our common stock and will generally increase or decrease as the market price of our common stock changes. As of June 30, 2015, the fair value of the Convertible Notes was estimated by us to be $256.6 million.

We are also exposed to market risk related to change in foreign currency exchange rates related to our international subsidiaries in which we continue to help support operations with financial contributions. We do not currently hedge our foreign currency exchange rate risk.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective, at the reasonable assurance level, in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.

As discussed above, we completed the acquisition of our second commercial product, MYALEPT on January 9, 2015, which was accounted for as a business combination. The results of operations of MYALEPT have been included in our financial results beginning on January 9, 2015. We are currently evaluating the impact of the business combination on our internal controls over financial reporting. In addition, we have a new principal executive officer and principal financial officer which may impact our internal controls over financial reporting.

Other than the continuing changes to our internal control processes resulting from the business combination and changes in our principal executive officer and principal financial officer, there were no changes in our internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f), during the quarter ended June 30, 2015, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings.

In late 2013, we received a subpoena from the U.S. Department of Justice, represented by the U.S. Attorney’s Office in Boston, requesting documents regarding our marketing and sale of JUXTAPID in the U.S, in connection with an investigation of our practices. We intend to continue to cooperate with the investigation. We cannot predict whether the outcome of this inquiry will have a material adverse effect on our business.

In January 2014, a putative class action lawsuit was filed against us and certain of our former executive officers in the United States District Court for the District of Massachusetts alleging certain misstatements and omissions related to the marketing of JUXTAPID and the Company’s financial performance in violation of the federal securities laws. On March 11, 2015, the Court appointed co-lead plaintiffs and lead counsel. On April 1, 2015, the Court entered an order permitting and setting a schedule for co-lead plaintiffs to file an Amended Complaint within 60 days, and for defendants to file responsive pleadings, co-lead plaintiffs to file any opposition, and defendants to file reply briefs. Accordingly, co-lead plaintiffs filed an amended complaint on June 1, 2015. The amended complaint filed against the Company and certain of its former executive officers alleges that defendants made certain misstatements and omissions during the first three quarters of 2014 related to the Company’s revenue projections for JUXTAPID sales for 2014, as well as data underlying those projections, in violation of the federal securities laws. The Company filed a motion to dismiss the amended complaint for failure to state a claim on July 31, 2015. As of the filing date of this Form 10-Q, the Company cannot determine if a loss is probable and whether the outcome will have a material adverse effect on its business and, as a result, the Company has not recorded any amounts for a loss contingency.

In late 2014, we received a subpoena from the SEC requesting certain information related to the Company’s sales activities and disclosures related to JUXTAPID. The SEC also has requested documents and information on a number of other topics, including documents related to the subject matter of the previously disclosed investigations by government authorities in Brazil into whether the Company’s activities in Brazil violated Brazilian anti-corruption laws. The investigation is continuing, and we are cooperating with the SEC. While we believe that we have the appropriate policies and procedures in place to ensure accurate financial reporting and compliance with SEC rules and regulations, we cannot predict when the SEC will conclude its investigation or the outcome of the investigation.

Item 1A.

Risk Factors

Risks Associated with Product Development and Commercialization

Our business depends primarily on the success of lomitapide. We may not be able to meet expectations with respect to sales of lomitapide and revenues from such sales, and if we are not able to meet such expectations, we may not be able to attain or maintain positive cash flow and profitability in the time periods we anticipate, or at all.

Our business primarily depends on the successful commercialization of lomitapide. Lomitapide was launched in the U.S. in late January 2013, under the brand name, JUXTAPID^® (lomitapide) capsules (“JUXTAPID”), as an adjunct to a low-fat diet and other lipid-lowering treatments, including low-density (“LDL”) apheresis where available, to reduce low-density lipoprotein cholesterol (“LDL-C”), total cholesterol (“TC”), apolipoprotein B (“apo B”) and non-high-density-lipoprotein cholesterol (“non-HDL-C”) in adult patients with homozygous familial hypercholesterolemia (“HoFH”). In July 2013, the European Commission (“EC”) authorized lomitapide for marketing in the EU, under the brand name, LOJUXTA^® (lomitapide) hard capsules, as an adjunct to a low-fat diet and other lipid-lowering medicinal products with or without LDL apheresis in adult patients with HoFH. Lomitapide is also approved for the treatment of HoFH in Mexico, Canada, Taiwan, Israel, Norway, Iceland, and Liechtenstein. We also sell lomitapide, on a named patient basis, in Brazil and in a limited number of other countries outside the U.S. and the EU where such a mechanism exists based on the U.S. or the EU approval. We expect that named patient sales in Brazil in the near term will continue to be our largest source of revenues from lomitapide sales on a country by country basis outside the U.S.; however, we expect net product sales from named patient sales in Brazil and other countries to continue to fluctuate quarter-over-quarter significantly more than sales in the U.S. We have also filed for marketing approval in certain other countries, and expect to file for marketing approval in additional countries where, in light of the potential size of the market and other relevant commercial and regulatory factors, it makes business sense to do so. We have a limited history of generating revenues from the sale of lomitapide. We anticipate that we will continue to incur significant costs associated with commercializing lomitapide and in connection with our ongoing clinical efforts and post-marketing commitments for lomitapide. Our ability to meet expectations with respect to sales of lomitapide and revenues from such sales, and to attain profitability and maintain positive cash flow from operations, in the time periods we anticipate, or at all, will depend on a number of factors, including the following:

•

our ability to continue to build, and to maintain, market acceptance for lomitapide among healthcare professionals and patients in the U.S. in the treatment of adult HoFH, and to gain such market acceptance in the other countries where lomitapide is approved, or may in the future receive approval;

•

the degree to which both physicians and HoFH patients determine that the safety and side effect profile of lomitapide are manageable, and that the benefits of lomitapide in reducing LDL-C levels outweigh the risks, including those risks set forth in the boxed warning and other labeling information for JUXTAPID in the U.S. and in the prescribing information and risk management plan for lomitapide where it is approved outside the U.S., which cite the risk of liver toxicity, and any other risks that may be identified in the course of commercial use;

•

the prevalence of HoFH being significantly higher than the historically reported rate of one person in one million, and more consistent with management’s estimates;

•

a safety and side effect profile for lomitapide in commercial use and in further clinical development that is not less manageable than that seen in our pivotal trial;

•

the degree to which HoFH patients are willing to agree to be treated with lomitapide after taking into account the potential benefits, the dietary restrictions recommended to reduce the risk of gastrointestinal (“GI”) side effects, the safety and side effect profile, and the availability of other therapies; the long-term ability of patients who use lomitapide to comply with the dietary restrictions, and to tolerate the drug and stay on the medication; and our ability to minimize the number of patients who discontinue lomitapide treatment, including due to tolerability issues;

•

the extent of the expected negative impact of the introduction of PCSK9 inhibitor products on sales of lomitapide, beginning in July 2015 in the U.S. and the EU, and the degree to which the introduction of PCSK9 inhibitor products in the U.S. and the EU, and the potential availability of named patient sales of PCSK9 inhibitor products outside the U.S. impacts named patient sales of lomitapide outside the U.S., particularly in Brazil;

•

our continued ability to be able to sell lomitapide on a named patient sales basis or through an equivalent mechanism in Brazil and other certain key markets where such sales are permitted based on U.S. or EU approval, and the amount of revenues generated from such sales;

•

the extent to which the diagnosis criteria for HoFH used by physicians in the countries of the EU and in other countries is similar to that used by physicians in the U.S.;

•

the willingness of insurance companies, managed care organizations, other private payers, and government entities that provide reimbursement for medical costs in the U.S. to continue to provide reimbursement for lomitapide at the prices at which we offer lomitapide without requiring genotyping for specific mutations that cause HoFH or a requirement that patients have not achieved an adequate response on PCSK9 inhibitor products, or imposing any additional major hurdles to access or other significant restrictions or limitations, and the ability and willingness of HoFH patients to commit to paying any co-pay amounts for lomitapide applicable under their insurance coverage;

•

the ability to obtain pricing approval and/or reimbursement required for selling lomitapide in key EU countries, Mexico, Canada, Taiwan and in other countries in which we or our distributors may receive approval to market lomitapide on a timely basis and at price levels that are acceptable to us without the applicable government agencies or other payers in such countries imposing onerous pricing caps, discounts, rebates, risk sharing, the provision of a significant amount of free product or other requirements which effectively and significantly lower the reimbursement rates for lomitapide, and without requiring genotyping, narrowing the diagnosis criteria for HoFH patients or imposing any additional major hurdles to access or other significant restrictions or limitations, such as requirements that patients not achieve an adequate response on other therapies, such as LDL apheresis or PCSK9 inhibitor products when they become available in such markets, before using lomitapide;

•

our ability to gain approval of risk management plans in any future markets where lomitapide may be approved and to subsequently comply with such plans;

•

the level of acceptance by physicians of the efficacy data from our pivotal trial of lomitapide, which is based on the surrogate endpoint of LDL-C lowering, and which was not designed to show clinical outcome data as to the effect of LDL-C lowering on cardiac outcomes in HoFH patients;

•

the mix of government and private payers providing coverage and reimbursement for JUXTAPID in the U.S.;

•

our ability to gain regulatory approval of lomitapide outside the countries in which we have already received approval without restrictions that are substantially more onerous or manufacturing specifications that are more difficult to consistently achieve than those imposed in the U.S. and EU;

•

our ability to accurately forecast revenues from sales of lomitapide and the metrics that impact revenues, such as prescription rate, short-term and long-term drop-out rate, conversion rate, reimbursement and pricing, the timing and availability of named patient sales, and the impact of PCSK9 inhibitors and future competition;

•

our ability to successfully defend ourselves in connection with the ongoing government investigation in the U.S. regarding JUXTAPID, and the investigations of certain employees in Brazil related to named patient sales of JUXTAPID, without incurring significant damages, fines or penalties; and the willingness of physicians to continue to prescribe JUXTAPID, and in the case of named patient sales in Brazil, the willingness of the state and federal governments to continue to process orders of JUXTAPID without significant delay, and patients to continue to use JUXTAPID, despite such investigations;

•

the impact of any data on lomitapide generated in the course of the Japanese or pediatric development programs or any post-approval studies, and the extent to which regulatory authorities agree with our assessment of such data;

•

our ability to successfully gain approval of lomitapide in Japanese HoFH patients on the timelines we have forecasted, and to gain pricing and reimbursement approval and generate revenues from sales in Japan, if approved;

•

our ability to complete validation batches and obtain regulatory approval of the manufacturing facility of our new contract manufacturer of lomitapide active pharmaceutical ingredient (“API”), including on a schedule sufficient to support approval of our new drug application in Japan on the timelines we expect, and our ability to manufacture, or have manufactured, sufficient bulk quantities of API and sufficient quantities of each strength of lomitapide to meet demand;

•

our ability to maintain the focus of the commercial organization in light of the recent departures within the senior leadership team, and the related transition to new leadership, and to minimize turnover within the commercial organization;

•

our ability to hire and retain key personnel necessary to optimize the lomitapide business;

•

our ability to continue to execute effectively on our commercial launch plan and other key activities related to lomitapide in the U.S., and to launch lomitapide successfully in those key markets outside the U.S. in which we receive pricing and reimbursement approval where it makes business sense to do so, and the level of cost required to conduct such activities; and

•

the degree to which generic competition will affect our business in the U.S., the EU and other key markets.

We may not be able to meet expectations with respect to sales of metreleptin and revenues from such sales, in the time periods we anticipate, or at all, which could harm our business operations and prospects.

We acquired our second product, metreleptin for injection, in January 2015. Metreleptin, a recombinant analog of human leptin, is marketed under the brand name MYALEPT^® (metreleptin) for injection (“MYALEPT”) in the U.S., and is indicated in the U.S. as an adjunct to diet as replacement therapy to treat the complications of leptin deficiency in patients with congenital or acquired generalized lipodystrophy (“GL”). MYALEPT has a boxed warning, citing the risk of anti-metreleptin antibodies with neutralizing activity and risk of lymphoma. MYALEPT is only available via a REMS program which is designed to educate physicians on its proper use and potential risks. We may not be able to successfully integrate MYALEPT without a significant expenditure of operating, financial and management resources, and even with these investments, we may still be unsuccessful in integrating or commercializing MYALEPT in the U.S. and in other jurisdictions. If

we are unsuccessful in our efforts with respect to MYALEPT, our financial condition and results of operations may be adversely affected. Our ability to meet our expectations with respect to revenues from sales of MYALEPT, and to realize the resulting positive impact on our business and overall financial results, is dependent on a number of factors, including the following:

•

our ability to commercialize MYALEPT without negatively impacting ongoing commercialization efforts related to lomitapide, and without incurring significant costs beyond amounts forecasted;

•

our ability to build and to maintain market acceptance for MYALEPT in the U.S. for the treatment of GL, including the degree to which both physicians and GL patients determine the benefits of MYALEPT outweigh the risks, including those risks set forth in the boxed warning and other labeling information for MYALEPT in the U.S.;

•

a side effect profile for MYALEPT observed in commercial use and in further clinical studies that is manageable and that is generally consistent, in scope and severity, with the side effect profile observed in the phase 3 study on which U.S. approval of MYALEPT was based;

•

the prevalence of GL being consistent with management’s estimates of approximately one in a million, which is based on assumptions which may prove not to be accurate;

•

the percentage of patients experiencing anti-metreleptin antibody formation with MYALEPT in commercial use being not significantly different than that observed in the phase 3 study;

•

our ability to sell MYALEPT for the treatment of GL on a named patient sales basis or through an equivalent mechanism in Brazil and other certain key markets outside the U.S., based on the U.S. approval, and the amount of revenues generated from such sales;

•

the willingness of insurance companies, managed care organizations, other private payers, and government entities in the U.S. that provide reimbursement for medical costs to continue to provide reimbursement for MYALEPT at the price at which we offer the product; the payor mix with respect to MYALEPT patients, particularly given the significant Medicaid rebate we will pay on MYALEPT, which we expect will have a continued significant negative impact on net product sales in future quarters; and the ability and willingness of GL patients to commit to paying any co-pay amounts for MYALEPT applicable under their insurance coverage;

•

our ability to gain regulatory approval for MYALEPT as a treatment for GL in the EU and other key countries outside the U.S. without restrictions that are substantially more onerous or manufacturing specifications that are more difficult to consistently achieve than those imposed in the U.S., and without the need to conduct further clinical studies, despite the limited number of patients studied in the pivotal clinical trial;

•

our ability to attain reimbursement for metreleptin in countries outside the U.S. in which metreleptin may be sold on a named patient basis or where it may be approved in the future at price levels that are acceptable to us without the applicable government agencies in such countries imposing onerous pricing caps, discounts, rebates, risk sharing, the provision of a significant amount of free product or other requirements which effectively and significantly lower the reimbursement rates for metreleptin, and without governmental authorities imposing any additional major hurdles to access or other significant restrictions or limitations;

•

the impact of any data on MYALEPT generated in the course of further anticipated clinical development;

•

our ability to successfully develop MYALEPT as a treatment for severe partial lipodystrophy (“PL”), which we expect will likely require further clinical development due to the FDA’s conclusion that the data in the pivotal trial did not provide adequate evidence of efficacy in patients with PL, and to gain regulatory approval of MYALEPT for such use in the U.S., the EU and other key countries;

•

our ability to manufacture, or have manufactured, sufficient bulk quantities of API and sufficient quantities of MYALEPT drug product to meet demand, in light of the susceptibility to product loss and contamination inherent in the process of manufacturing biologics;

•

the strength of the patent portfolio and marketing and data exclusivity for MYALEPT; the length of the patent term extension, if any, granted, with respect to MYALEPT; and our ability to defend any challenges to the patents or our claims of exclusivity; and

•

the continued lack of significant competitive challenges for MYALEPT in the treatment of GL and in indications in which we may elect to develop MYALEPT further, such as severe PL.

We may not be able to maintain or expand market acceptance for lomitapide and metreleptin in the U.S. or to gain market acceptance in markets outside the U.S., and, for lomitapide, we may continue to see a significant number of patients who choose not to start or stay on therapy.

The commercial success of lomitapide and metreleptin will depend upon our ability to maintain and expand the acceptance of these products by the medical community, including physicians and healthcare payers, and by the relevant patients in the U.S., and to gain and maintain such acceptance in countries outside the U.S.

Some physicians and HoFH patients may determine that the benefits of lomitapide in reducing LDL-C levels do not outweigh the risks, including those risks set forth in the boxed warning for JUXTAPID in the U.S., and in the prescribing information for lomitapide in the other countries in which it is approved, which warn physicians that lomitapide can cause hepatotoxicity as manifested by elevations in transaminases and increases in hepatic fat, and that physicians are recommended to measure alanine aminotransferase (“ALT”), aspartate aminotransferase (“AST”), alkaline phosphatase, and total bilirubin before initiating treatment and then to measure ALT and AST regularly during treatment. During the first year of treatment, physicians must conduct a liver-related test prior to each increase in the dose of lomitapide or monthly, whichever occurs first. After the first year, physicians are required to perform these tests every three months and before increases in dose. The prescribing information in the EU provides further recommendations for monitoring for hepatic steatohepatitis/fibrosis and the risk of progressive liver disease, including annual imaging for tissue elasticity, and measuring of biomarkers and/or scoring methods in consultation with a hepatologist. Likewise, some physicians and GL patients may determine that the benefits of metreleptin in treating complications of leptin deficiency in GL do not outweigh the risks, including those risks set forth in the boxed warning for MYALEPT in the U.S., which warns physicians of the risk of anti-metreleptin antibodies with neutralizing activity and the risk of lymphoma. The consequences of these neutralizing antibodies are not well characterized but could include inhibition of endogenous leptin action and/or loss of MYALEPT efficacy, and physicians are advised to test for these antibodies in patients with severe infections or loss of efficacy during MYALEPT treatment. T-cell lymphoma has been reported in patients with acquired GL, both treated and not treated with MYALEPT.

Because of the risks discussed above, each of JUXTAPID and MYALEPT is available in the U.S. only through a Risk Evaluation and Mitigation Strategy (“REMS”) program under which we must certify all qualified healthcare providers who prescribe JUXTAPID or MYALEPT and the pharmacies that dispense the medicine. The goals of each of the REMS Programs are:

•

to educate prescribers about the risks associated with the use of JUXTAPID or MYALEPT, as the case may be, and in the case of JUXTAPID, the need to monitor patients during treatment as per product labeling; and

•

in the case of JUXTAPID, to restrict access to therapy with JUXTAPID to patients with a clinical or laboratory diagnosis consistent with HoFH, and in the case of MYALEPT, to restrict access to therapy with MYALEPT to patients with a clinical diagnosis consistent with GL.

The FDA assesses on a periodic basis whether a REMS program is meeting its goals and whether the goals or elements of the plan should be modified. On June 16, 2015, we received a letter from the FDA expressing concern that the JUXTAPID REMS Program is not meeting its goals of educating healthcare professionals about the risks of hepatotoxicity and the need to periodically conduct liver tests to monitor patients during treatment with JUXTAPID per the product labeling. The letter also expressed concern about the difficulty in assessing whether the goal of restricting access to JUXTAPID to patients with a clinical or laboratory diagnosis consistent with HoFH was being met. The FDA is currently evaluating how best to address these issues. In response to the FDA’s concerns, we have proposed to the FDA modifications to the JUXTAPID REMS Program to improve prescriber awareness of the risk of hepatotoxicity associated with JUXTAPID and the need to monitor patients during treatment, and to reinforce the approved indication and the characteristics of HoFH. The FDA may not agree with our proposed modifications, and may impose more onerous obligations to be satisfied before JUXTAPID is prescribed or more stringent criteria in the diagnosis of HoFH for purposes of any prescription that may negatively affect the ability or willingness of a healthcare professional to prescribe JUXTAPID or a patient to be willing to initiate or continue on therapy.

Similarly, in the EU and other countries where we have obtained approval of lomitapide, we have adopted risk management plans to help educate physicians on the safety information for lomitapide and appropriate precautions to be followed by healthcare professionals and patients. Other countries that may approve lomitapide or metreleptin may require risk management plans that may be similar to or more onerous than those we have adopted to date. Physicians may be hesitant to prescribe lomitapide or metreleptin, and patients may be hesitant to take lomitapide or metreleptin, because of the boxed warning or warnings in the prescribing information, the requirements for liver testing and monitoring, in the case of lomitapide, or the existence of the REMS Program or risk management plan in connection with lomitapide or metreleptin. The prescribing information also describes a number of additional contraindications, warnings, and precautions, including those related to pregnancy and potential adverse interactions with other drugs, and other potential adverse reactions, that could limit the market acceptance of lomitapide and metreleptin. For example, GI adverse reactions are common with lomitapide, occurring in 27 out of 29 patients in our pivotal trial. GI adverse reactions lead to treatment discontinuation in a meaningful percentage of patients. To reduce the risk of GI adverse reactions, patients should adhere to a low-fat diet supplying less than 20% of calories from fat and the dosage of lomitapide should be increased gradually. A meaningful percentage of patients decide that they do not want to start or maintain the recommended diet. In the EU and in many other countries outside the U.S., we cannot communicate directly with or provide educational or supportive materials directly to patients. As a result, it may be more difficult to support patients in their efforts to adjust to the recommended dietary restrictions while taking lomitapide. Patients on lomitapide in the U.S. are also advised not to consume more than one alcoholic drink per day. The LOJUXTA prescribing information in the EU specifies that the use of alcohol during LOJUXTA treatment is not recommended. These requirements make it more difficult for some patients to decide to begin therapy or to stay on therapy. Elevated ALTs and ASTs and other concerns also lead to treatment discontinuation in some lomitapide patients. With respect to metreleptin, concerns related to the route of administration of metreleptin, as an injection, may deter some patients from beginning therapy or staying on therapy. As a result, even if a physician prescribes one of our products, the prescription may not result in a patient beginning therapy or staying on therapy.

The degree of market acceptance of our products will also depend on a number of other factors, including:

•

physicians’ views as to the scope of the approved indication and limitations on use and warnings and precautions contained in the approved labeling or prescribing information for our products;

•

the efficacy, safety and tolerability of competitive therapies, including, in the case of lomitapide, PCSK9 inhibitor products;

•

pricing and the perception of physicians and payers as to cost effectiveness of our products in relation to other therapies that treat HoFH and GL, respectively, including therapies with a price substantially lower than that of our products, which, in the case of lomitapide, includes PCSK9 inhibitor products and apheresis;

•

the existence of sufficient private payer, government or other third-party coverage or reimbursement and the availability of co-pay assistance; and

•

the effectiveness of our sales, marketing and distribution strategies.

If we are not able to achieve a high degree of market acceptance of lomitapide in the treatment of adult patients with HoFH and metreleptin in the treatment of GL, we may not be able to achieve our revenue goals or other financial goals or to achieve profitability or to maintain cash-flow positive operations in the time periods we expect, or at all.

The number of patients suffering from the diseases for which our products are approved is small, and has not been established with precision. We believe that the patient populations may be significantly larger than historically reported. Our assumptions and estimates regarding prevalence may be wrong. If the actual number of patients is smaller than we estimate or if any approval outside the U.S., EU and the other countries where lomitapide is approved or outside the U.S. for metreleptin, is based on a narrower definition of these patient populations, our revenue and ability to achieve profitability and to maintain cash-flow positive operations from our product businesses will be adversely affected, possibly materially.

There is no patient registry or other method of establishing with precision the actual number of patients with HoFH in any geography. Medical literature has historically reported the prevalence rate of HoFH as one person in a million, based on a prevalence rate for heterozygous familial hypercholesterolemia (“HeFH”) of one person in 500. Other viewpoints on prevalence have been evolving over the years culminating in recent published medical literature which suggests that the actual prevalence of HoFH may be significantly higher than the historical estimate of one person in a million. For example, in 2014, the European Atherosclerosis Society (EAS) Consensus Panel on Familial Hypercholesterolaemia (FH) published an article citing research that would result in an estimate of the prevalence of HoFH in the range of between one person in 300,000 and one person in 160,000 or 3.33 persons per million to 6.25 persons per million, which is consistent with estimates that can be derived from other publications from the last few years. In addition, rare diseases may be found to have a higher than expected prevalence rate once products available to treat the disease are introduced. There is also a founder effect for familial hypercholesterolemia that may increase the prevalence of HoFH in certain populations. Given these factors and the evolving medical literature, the prevalence of HoFH may be higher than cited in the current literature. There is no guarantee that the prevalence of HoFH is actually higher than the current medical literature suggests or is even actually higher than the historical literature has reported. The number of patients with HoFH could actually be closer to the historically reported rate of one person in a million. Ultimately the actual size of the total addressable HoFH market in the U.S. will be determined only after we and others have substantial commercial history selling products for the treatment of HoFH. Lomitapide is indicated solely for HoFH. We are not permitted to promote lomitapide for HeFH or any other indication other than HoFH. As part of the prescriber authorization form under the JUXTAPID REMS Program in the U.S., the prescriber must affirm that the patient has a clinical or laboratory diagnosis consistent with HoFH.

We believe that the prevalence rate of HoFH in countries outside the U.S. is likely to be consistent with the prevalence rate in the U.S.; however, we expect that our net product sales in countries outside the U.S. are likely to be significantly lower than in the U.S. given significant patient and payment caps in some countries and the likelihood of other reimbursement restrictions in ex-U.S. countries as a result of economic pressures to reduce healthcare costs, the more widespread availability of apheresis in certain countries, particularly in the EU, and the possibility that genotyping, despite its limitations, will be required in some countries causing some HoFH patients to be missed.

There is no patient registry or other method of establishing with precision the actual number of patients with GL in any geography. Based on a review of an analysis of several insurance claims databases in the U.S., we have estimated that the prevalence of GL is approximately one in a million. We calculated this rate by first estimating the prevalence of lipodystrophy using data from the selected claims databases. Using this data, we calculated an estimated prevalence range for patients diagnosed with lipodystrophy (based on the ICD-9 Code and other relevant diagnostic codes). We then used diagnostic codes and other lab values to try to exclude forms of lipodystrophy other than GL and PL. Our research with key opinion leaders suggests that 30% of the pool of patients who have been identified as having GL or PL have GL. Due to the severity and presumed higher diagnosis rate of GL specifically, we estimated that GL represents 40% of the total population in the selected claims databases that we assumed had GL or PL, which led us to the estimated prevalence of GL of approximately one in a million. We believe that the prevalence rate of GL in countries outside the U.S. is likely to be consistent with the prevalence rate in the U.S. There is no guarantee that our assumptions and beliefs are correct, or that our use of these selected databases and our methology have generated an accurate estimate. Medical literature has historically estimated the prevalence of GL significantly lower than our estimates. The actual prevalence of GL may be significantly lower than we expect. Ultimately, the actual size of the total addressable market in the U.S. will be determined only after we have substantial commercial history selling MYALEPT.

If the total addressable market for our products in the U.S. and other key markets is smaller than we expect, then it may be more difficult for us to achieve our revenue goals and estimates and to attain profitability and meet our expectations with respect to cash flow operations.

As a result of the side effects observed in the Phase 3 clinical study and other clinical and preclinical studies for each of lomitapide and metreleptin, the prescribing information for both lomitapide and metreleptin contains significant limitations on use and other important warnings and precautions, including boxed warnings in the U.S. labeling. Our products may continue to cause such side effects or have other properties that could impact market acceptance and drop-out rates, result in adverse limitations in any approved labeling or other adverse regulatory consequences, including delaying or preventing additional marketing approval in territories outside the U.S., EU and other countries where lomitapide is approved or, in the case of metreleptin, marketing approval outside the U.S.

The prescribing information for lomitapide in the U.S. and the EU and in the other countries in which lomitapide is approved contains significant limitations on use and other important warnings and precautions, including a boxed warning in the JUXTAPID labeling, and warnings in the LOJUXTA prescribing information citing concerns over liver toxicity associated with use of lomitapide. Lomitapide can cause elevations in liver transaminases. In our pivotal trial of lomitapide, ten of the 29 patients (34%) treated with lomitapide had at least one elevation in ALT or AST greater than or equal to three times the upper limit of normal (“ULN”), including four patients who experienced liver enzymes greater than or equal to five times the ULN. There were no concomitant clinically meaningful elevations of total bilirubin, international normalized ratio (“INR”), or alkaline phosphatase. Lomitapide also has been shown to increase hepatic fat, with or without concomitant increases in transaminases. The median absolute increase in hepatic fat during the pivotal trial was 6% after both 26 and 78 weeks of treatment, from 1% at baseline, measured by magnetic resonance spectroscopy. Hepatic steatosis associated with lomitapide treatment may be a risk factor for progressive liver disease, including steatohepatitis and cirrhosis.

The most common adverse reactions in our pivotal trial of lomitapide were GI adverse reactions, reported by 27 of 29 patients (93%). Adverse reactions reported by greater than or equal to eight patients (28%) in the HoFH pivotal clinical trial included diarrhea, nausea, vomiting, dyspepsia and abdominal pain. Other common adverse reactions, reported by five to seven (17-24%) patients, included weight loss, abdominal discomfort, abdominal distension, constipation, flatulence, increased ALT, chest pain, influenza, nasopharyngitis and fatigue.

In a two-year dietary carcinogenicity study of lomitapide in mice, statistically significant increased incidences of tumors in the small intestine and liver were observed. The relationship of these findings in mice is uncertain with regard to human safety for a number of reasons, including the fact that they did not occur in a dose-related manner, and liver tumors are common spontaneous findings in the strain of mice used in this study. In a two-year oral carcinogenicity study of lomitapide in rats, there were no statistically significant increases in the incidences of any tumors, but there can be no assurance that long-term usage of lomitapide in humans will not be determined to cause an increase in tumors.

As part of our post-marketing commitment to the FDA, the European Medicines Agency (“EMA”), the Taiwan Food and Drug Administration (“TFDA”), and Health Canada, we have initiated an observational cohort study to generate more data on the long-term safety profile of lomitapide, the patterns of use and compliance and the long-term effectiveness of controlling LDL-C levels. The commitment to the FDA is to target enrollment of 300 HoFH patients worldwide, and to study enrolled patients for a period of ten years. The EMA has required that all patients taking lomitapide in the EU be encouraged to participate in the study, and that the study period be open-ended. The TFDA has required that all patients taking lomitapide in Taiwan who meet the study’s protocol requirements participate in the study. In the study, investigators will follow each patient to track malignancies, tumors, teratogenicity, hepatic effects, GI adverse reactions, events associated with coagulopathy, major adverse cardiovascular events and death. The EMA has also required that we conduct a vascular imaging study to determine the impact of lomitapide on vascular endpoints, which we have initiated. In addition, we have conducted certain drug-drug interactions studies. Post-marketing commitments imposed by regulatory authorities outside the U.S. and the EU may be more onerous and/or different than those imposed by the FDA and the EU, which could result in increased costs to us. A failure to meet post-marketing commitments to the FDA, the EMA or other regulatory authorities could impact our ability to continue to market lomitapide in countries where we are unable to meet such commitments.

In the pivotal trial of metreleptin, the most frequent adverse drug reactions reported in the GL study population were headache, hypoglycemia, and decreased weight (each reported by six patients; 13%) and abdominal pain (reported by five patients; 10%). Two cases of peripheral T-cell lymphoma and one case of a localized anaplastic lymphoma kinase (ALK)-positive anaplastic large cell lymphoma (a type of T-cell lymphoma) were reported, all in patients with acquired GL. Lymphoma is known to be associated with autoimmune disease. As the boxed warning for MYALEPT states, T-cell lymphoma has been reported in patients with acquired GL, both treated and not treated with MYALEPT. There was evidence of pre-existing lymphoma and/or bone marrow abnormalities in the two patients with peripheral T-cell lymphoma before metreleptin therapy, and the third case of anaplastic large cell lymphoma occurred in the context of a specific chromosomal translocation.

As part of our post-marketing commitments to the FDA for metreleptin, we will initiate a long-term, prospective, observational study in 100 patients treated with metreleptin to evaluate serious risks related to the use of the product. The registry will continue for ten years from the date of last patient’s enrollment. In addition, we have initiated the first of three sequential programs to expand the understanding of the immunogenicity of metreleptin, and we have initiated certain studies related to the manufacturing of metreleptin.

In addition, as part of our observational cohort studies or in the conduct of additional clinical studies or in post-marketing surveillance of our products we or others may identify additional safety information on known side effects or new undesirable side effects caused by our products, or the data may raise other issues with respect to our products, and, in that event, a number of potentially significant negative consequences could result, including:

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we may experience a negative impact on market acceptance and drop-out rates;

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regulatory authorities may suspend or withdraw their approval of the relevant product;

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regulatory authorities may require the addition of labeling statements, such as warnings or contraindications or distribution and use restrictions;

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regulatory authorities may require us to issue specific communications to healthcare professionals, such as “Dear Doctor” letters;

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regulatory authorities may issue negative publicity regarding the relevant product, including safety communications;

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we may be required to change the way the relevant product is administered, conduct additional preclinical studies or clinical trials or restrict the distribution or use of the relevant product;

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we could be sued and held liable for harm caused to patients;

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the regulatory authorities may require us to amend the relevant REMS or risk management plan; and

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our reputation may suffer.

As part of the development of the commercial manufacturing process of lomitapide, we tightened specifications for lomitapide drug substance such that the commercial drug substance differs from the material used in our Phase 3 trial in certain physical parameters and specifications that we assessed not to be clinically meaningful. Exposure measurements collected in the Japanese pharmacokinetic and pharmacodynamic (“PK/PD”) study using material meeting current commercial specifications, however, do not align with certain earlier data generated under different circumstances using pre-commercial materials. Importantly, there was no evidence of a relationship between increases in dose or exposure and elevations in ALT or AST levels in the PK/PD study. While we do not expect the differences between our commercial material and our clinical material to have adverse efficacy or safety consequences, there is a risk that we may see unexpected differences in the type or severity of side effects with the commercial product from those observed in our Phase 3 trial. There is also the risk that regulatory authorities may not agree with our assessment of the differences between the materials or the potential impact of such differences or may require changes in the prescribing information.

Any known safety concerns for lomitapide or metreleptin or any unknown safety issues that may develop could prevent us from achieving or maintaining market acceptance of the respective product, could affect our ability to obtain or retain marketing approval of the respective product in one or more countries, or result in onerous restrictions on such approval, or could affect our ability to achieve our financial goals.

If we are unable to establish and maintain effective sales, marketing and distribution capabilities, we will be unable to successfully commercialize our drug products.

We are marketing and selling JUXTAPID and MYALEPT directly in the U.S. using our own marketing and sales resources. We are marketing and selling, or plan to market and sell, lomitapide directly, using our own marketing and sales resources, in certain key countries in the EU and in several other countries in which lomitapide is, or may be, approved, or where we can make lomitapide available on a named patient sales basis, in either case where it makes business sense to do so. We also plan to market and sell metreleptin directly in key countries outside of the U.S., if approved in such countries. We use, and plan to use, third parties to provide warehousing, shipping, third-party logistics, invoicing, collections and other distribution services on our behalf in the U.S. and in other countries throughout the world. We have entered into, or may selectively seek to establish, distribution and similar forms of arrangements to reach patients in certain geographies that we do not believe we can cost-effectively address with our own sales and marketing capabilities. If we are unable to establish and maintain the capabilities to sell, market and distribute our drug products, either through our own capabilities or through arrangements with others, or if we are unable to enter into distribution agreements in those countries that we do not believe we can cost-effectively address with our own sales and marketing capabilities, we may not be able to successfully sell lomitapide or metreleptin. We cannot guarantee that we will be able to establish and maintain our own capabilities or to enter into and maintain favorable distribution agreements with third-parties on acceptable terms, if at all.

We have built sales, marketing, medical, regulatory, supply chain, managerial, patient support and other non-technical capabilities in the U.S., and have more limited commercial capabilities, and in some cases, medical, regulatory and other non-technical capabilities infrastructure, in the EU, Mexico, Canada, Argentina, Brazil, Japan, Taiwan, and South Korea. The building of our commercial infrastructure will continue to be expensive and time-consuming. We anticipate developing a commercial infrastructure across additional jurisdictions.

Doing so will require a high degree of coordination and compliance with laws and regulations in such jurisdictions. If we are unable to effectively coordinate such activities or comply with such laws and regulations, our ability to commercialize our products, if approved, in those jurisdictions will be adversely affected. Our sales force in countries outside the U.S. may not be successful in commercializing lomitapide in the countries in which it is approved. Furthermore, our expenses associated with building up and maintaining the sales force and distribution capabilities around the world may be substantial compared to the revenues we may be able to generate on sales of our products. If we are unable to establish and maintain adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue consistent with our expectations and may not become profitable or maintain cash flow positive operations.

We have evaluated markets outside the U.S. and major market countries in the EU to determine in which geographies we might choose to commercialize our products ourselves, if approved, and in which geographies we might choose to collaborate with third parties. To the extent we rely on third parties to commercialize our products, if marketing approval is obtained in the relevant country, we may receive less revenue than if we commercialized the product ourselves. In addition, we would have less control over the sales efforts of any third parties involved in our commercialization efforts, including, in some countries, pricing. Use of a third party can also make it more difficult to ensure that commercialization activities are conducted in a manner compliant with applicable laws. In the event we are unable to collaborate with third parties to commercialize our products, for certain geographies, if approved, our ability to generate product revenue may be limited internationally.

We only have regulatory approval for commercial distribution and reimbursement of lomitapide in a small number of countries. We are only permitted to market metreleptin in the U.S. We may not receive the requisite regulatory approvals for commercialization and reimbursement of our products in other countries. We also rely on named patient sales, but there is no assurance that named patient sales of lomitapide will continue at current levels, or at all, or that we will be able to achieve significant levels of named patient sales of metreleptin in any country, or at all.

We are currently permitted to market lomitapide in only a small number of countries on a commercial basis, and to market metreleptin in the U.S. Shionogi holds a marketing authorization for metreleptin in Japan under a distribution agreement assigned to us as part of the our acquisition of the metreleptin assets. There is no assurance that we will be able to obtain marketing authorizations for either product in additional countries. To obtain marketing approval in other countries, we must establish, and comply with, numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, pricing, promotion and distribution of the respective product. Approval procedures vary among countries, and can involve additional product testing and additional administrative review periods. Marketing approval in one country does not ensure such approval in another. Regulatory authorities in countries where we seek approval for lomitapide or metreleptin may not be satisfied with the design, size, end-point or efficacy and safety results of the pivotal trial of the product, or the risk/benefit profile of the product, and may reject our applications for approval. For example, we filed to register JUXTAPID as a marketed product in Brazil, and, in May 2014, appealed a rejection of the registration by the Brazilian Health Surveillance Agency (ANVISA), the Brazilian regulatory authority. We subsequently withdrew our appeal, and intend to resubmit our marketing application with additional data and information. Even if we do resubmit our application, we may not be successful in receiving regulatory approval to market JUXTAPID in Brazil. It is also possible that regulatory authorities in countries where we are seeking, or may in the future seek, approval may disagree with our assessment that certain changes made to lomitapide’s physical parameters and specifications as compared to the material used in the pivotal trial are not clinically meaningful. If regulatory authorities require additional studies or trials for either of our products or changes to specifications, we would incur increased costs and delays in the marketing approval process and may not be able to obtain approval. For example, Japanese regulatory authorities are requiring a small therapeutic study of lomitapide in adult Japanese HoFH patients, which is fully enrolled and ongoing and for which the primary endpoint of the 26-week efficacy phase has been achieved. We expect to file a Japanese new drug application for lomitapide in adult HoFH patients with the 26-week data late in the fourth quarter of 2015 or in the first quarter of 2016, and to submit the 56-week data during the review cycle, with a decision anticipated approximately nine months post-filing. There is no assurance that we will be successful in our efforts to file a marketing authorization application in Japan or to achieve regulatory approval in Japan on a reasonable timeline, or at all.

In addition, regulatory authorities in countries outside the U.S. and EU are increasingly requiring risk management plans and post-marketing commitments which may be more onerous than those required in the U.S. and EU. In certain countries, if the post-marketing commitment is a post-marketing study that would qualify as an interventional or similar form of study, we may be required to provide free product to participants in the study in such country even if our products are reimbursed there. The time required to obtain approval in other countries may differ from that required to obtain FDA approval or marketing authorization in the EU. In many countries outside the U.S., including most EU countries, Mexico, Canada and Taiwan, a product must also receive pricing and reimbursement approval before it can be commercialized broadly. This can result in substantial delays in commercializing products in such countries, and the price that is ultimately approved may be lower than the price for which we expect to offer, or would be willing to offer, lomitapide or metreleptin, in such countries, and may impact pricing in other countries. Pricing and reimbursement approval in one country does not ensure such approvals in another. Failure to obtain the approvals necessary to commercialize lomitapide or metreleptin in other countries at reimbursement levels that are acceptable to us or any delay or setback in obtaining such approvals would impair our ability to develop foreign markets for lomitapide and metreleptin. For example, the reimbursement authority in Germany, the G-BA (Gemeinsamer Bundesausschuss), deemed our dossier for lomitapide to be incomplete as a result of certain technical deficiencies. As a result of the technical deficiencies, lomitapide was automatically

put into the category of “no additional benefit” under the G-BA process, without a review of its clinical merits, which limits the reimbursement level significantly. After the G-BA assessment, we withdrew LOJUXTA from the German market in July 2014. We re-filed our dossier for lomitapide in June 2015, which we expect will result in an assessment by the G-BA in late 2015. There can be no assurances that the G-BA, in reviewing this submission, will make an assessment that would result in our ability to negotiate a reimbursement level that is acceptable to us. Similarly, in France, our dossier for lomitapide has twice received a “minor improvement” rating from Haute Autorite de Sante (HAS), the committee responsible for assessing the benefit of medicinal products in France before they can be approved for reimbursement. Such a rating, which was re-affirmed by HAS at a hearing early in the third quarter of 2015, may limit the potential reimbursement level for lomitapide in France significantly and may therefore prevent us from obtaining a reimbursement level for lomitapide in France that is acceptable to us. In June 2015, Taiwan’s Pharmaceutical Benefit and Reimbursement Scheme (PBRS), which is responsible for assessing the suitability of a pharmaceutical product for Taiwan’s National Health Insurance system, voted not to recommend our dossier for lomitapide for reimbursement in Taiwan, which aligned with a previous decision by Taiwan’s Expert Review Committee of the National Health Insurance Administration (NHIA). We intend to file an appeal of this decision in the third quarter of 2015, and plan to request an opportunity to present to the Expert Review Committee, which we expect will occur in the fourth quarter of 2015. If we are not successful in obtaining a recommendation for the reimbursement of lomitapide after our presentation to the expert review committee or our planned appeal, we may not be able to obtain a reimbursement level for lomitapide in Taiwan that is acceptable to us. In July 2015, the health authority in Mexico, the General Health Council (GHC), declined our request to include lomitapide in Mexico’s basic formulary, which is required in order to obtain reimbursement approval in Mexico. We intend to file an appeal of this decision, and will request a hearing with the GHC in the third quarter of 2015. If we are not successful in obtaining GHC’s approval to include lomitapide in the formulary after our planned appeal, we may not be able to obtain reimbursement for lomitapide in Mexico.

In Brazil and in a limited number of other countries where pre-approval sales are permitted based on U.S. or EU approval of lomitapide, we are making lomitapide available on a named patient sales or equivalent basis. We expect to begin generating revenues from named patient sales of metreleptin in Brazil in the second half of 2015. There is no assurance that named patient sales will continue to be authorized in any particular country. Government action, economic pressures, political unrest, the availability of competitive products and other factors in a country may adversely affect the availability or level of named patient sales of lomitapide in such country. For example, we are aware that federal and São Paulo authorities in Brazil are each conducting an investigation to determine whether there have been any violations of Brazilian anti-corruption laws in connection with prescriptions for lomitapide written in Brazil. The investigations have resulted in a slower turn-around between price quotation and orders, including re-orders, from the federal government, and delays in orders and re-orders from the government of São Paulo after a patient has obtained access to JUXTAPID through the judicial process. These delays may continue, and we may experience other delays or suspension of the ordering process. Similarly, we have faced, and may continue to face, a reluctance of some physicians to prescribe JUXTAPID, and some patients to take or stay on JUXTAPID, while the investigations are ongoing. Recently, we have observed an increase in the drop-out rate of patients on JUXTAPID in Brazil, and we believe that part of the reason for the increase is due to the investigations. These issues could negatively affect our ability to generate product revenue consistent with our expectations, and may impact our ability to achieve and maintain profitability or maintain cash-flow positive operations.

We do not yet know the impact that the approval of PCSK9 inhibitor products in the U.S. will have on our named patient sales of lomitapide in Brazil or any other country. We also do not know whether we will be permitted to sell metreleptin on a named patient basis in Brazil or in any other country. In certain countries, we may decide not to pursue named patient sales even if permitted to do so. Even if named patient sales or their equivalent sales are permitted in a certain country, and we elect to make lomitapide or metreleptin available on such basis in such country, there is no guarantee that physicians in such country will prescribe the product, and that patients will be willing to start therapy, or that the country will agree to pay for the product at all or at a level that is acceptable to us or, after access is granted, will continue to pay for the product at the levels initially approved, without delay or imposing other hurdles on payment, or at all. There is no guarantee that we will generate sales or substantial revenue from such sales.

If named patient sales do not meet our expectations in key named patient sales markets, particularly Brazil, we may not be able to meet our expectations with respect to sales of lomitapide and metreleptin or revenues from such sales, maintain cash flow positive operations, or meet our expectations with respect to profitability in the time periods we anticipate or at all. There are also countries where we choose to make lomitapide and metreleptin available under an expanded access program at no cost prior to approval in such country. This program may result in significant expenses, and could impact our financial results.

We recently transferred manufacturing for lomitapide drug substance to a new contract manufacturer which does not yet have regulatory approval for the production of lomitapide, and we depend on a single third-party manufacturer to produce our drug product. We also depend on single third-party manufacturers to produce our metreleptin drug substance and drug product. This may increase the risk that we will not have sufficient quantities of our products or will not be able to obtain such quantities at an acceptable cost, which could negatively impact commercialization of our products or delay, prevent or impair our clinical development programs.

We currently have no manufacturing facilities and limited personnel with manufacturing experience. We rely on contract manufacturers to produce drug substance and drug product for commercial supplies and for our clinical trials. We have completed technology transfer and are manufacturing validation batches at a new contract manufacturer for lomitapide drug substance because the contract manufacturer that produced our current supply of lomitapide drug substance closed, in September 2014, the facility at which such drug substance was

manufactured. We expanded our inventory of lomitapide drug substance to maintain a sufficient supply throughout the transition of our manufacturing operations to our new contract manufacturer. In April 2015, our new contract manufacturer began manufacturing a new validation campaign after informing us that the initial validation campaign had not been completed successfully. We will have to complete the validation batches to obtain regulatory approval of our new contract manufacturer’s facility, which may include an inspection by the FDA, the EMA, and other regulatory authorities. If we are unsuccessful in completing the manufacture of validation batches at our new contract manufacturer, or are significantly delayed in doing so, or are unable to obtain timely regulatory approvals of our new contract manufacturer’s facility, we may not have sufficient quantities of lomitapide drug substance, which could delay, prevent or impair our development and commercialization of lomitapide. For example, the date of potential regulatory approval of lomitapide in Japan may be delayed if the new validation campaign at our contract manufacturer is not completed in a reasonable time, or at all.

We have a letter of intent with the new contract manufacturer for long-term supply of lomitapide drug substance, and a long-term supply agreement with the lomitapide drug product manufacturer. We also have supply agreements with our metreleptin drug substance and drug product manufacturers, which were assigned to us in connection with the acquisition of metreleptin in January 2015. We do not have agreements in place for redundant supply or a second source for drug substance or drug product for either of our products. Any failure to enter into an agreement with the new contract manufacturer for lomitapide drug substance, or termination or non-renewal of our agreements with our other contract manufacturers, including by reason of merger and acquisition activities, performance failure, bankruptcy filing, plant closing or strategic shift in their business could impact availability of lomitapide or metreleptin for commercial sale in any country where such product is approved for commercial sale or sold on a named patient basis, or may delay further clinical development or marketing approval of such product in additional countries. If for some reason our contract manufacturers cannot or will not perform as agreed, we may be required to replace such manufacturer. If we are unable to maintain arrangements for third-party manufacturing, or are unable to do so on commercially reasonable terms, or are unable to obtain timely regulatory approvals in connection with our contract manufacturers, we may not be able to successfully commercialize our products or complete development of our products. Although we believe there are a number of third-party manufacturers that could manufacture the clinical and commercial supply of drug substance or drug product for our products, we may incur significant added costs and substantial delays in identifying and qualifying any such replacements, and in obtaining regulatory approval to use such manufacturer in the manufacture of our products. Furthermore, although we generally do not begin a clinical trial unless we have a sufficient supply of a product candidate for the trial, any significant delay in the supply of a product candidate for an ongoing trial due to the need to replace a third-party manufacturer could delay completion of the trial. If for any reason we are unable to obtain adequate supplies of lomitapide, metreleptin or any other product candidate that we develop or acquire, or the drug substances used to manufacture it, it will be more difficult for us to compete effectively, generate revenue, meet our expectations for financial performance and further develop our products. In addition, if we are unable to assure a sufficient quantity of the drug for patients with rare diseases or conditions, we may lose any orphan drug exclusivity to which the product otherwise would be entitled.

We have limited experience manufacturing commercial supplies of lomitapide, and only became responsible for the manufacture of metreleptin in January 2015. We rely on our contract manufacturers to utilize processes that consistently produce drug substance and drug product to their required specifications, including those imposed by the FDA, the EMA and other regulatory authorities, as applicable. There can be no assurance that our contractors will consistently be able to produce commercial supplies of drug substance or drug product meeting the approved specifications. A number of factors could cause production interruptions at the facilities of our contract manufacturers, including equipment malfunctions, facility contamination, labor problems, raw material shortages or contamination, natural disasters, disruption in utility services, terrorist activities, human error or disruptions in the operations of our suppliers. Any failure by our third-party manufacturers to produce product that meets specifications could lead to a shortage of lomitapide or metreleptin.

The manufacture of biologic pharmaceuticals, such as metreleptin, is more difficult and more risky than the manufacture of small molecule pharmaceuticals, such as lomitapide. Biologics are produced in living systems and are inherently complex due to naturally-occurring molecular variations. Highly specialized knowledge and extensive process and product characterization are required to transform laboratory-scale processes into reproducible commercial manufacturing processes. The process of manufacturing biologics is highly susceptible to product loss due to contamination, oxidation, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered in metreleptin or the facilities of our contract manufacturer, we may need to cease manufacturing for an extended period of time to investigate and remediate the contaminant. A contamination, recall, raw material shortage, or other supply disruption could adversely impact or disrupt commercial manufacturing of metreleptin or could result in a withdrawal of metreleptin from the market. This, in turn, could adversely affect our ability to satisfy demand for metreleptin, which could materially and adversely affect our operating results and expectations for financial performance.

The FDA, the EMA and other regulatory authorities require that product candidates and drug products be manufactured according to current good manufacturing practice (“cGMP”). Any failure by our third-party manufacturers to comply with cGMP could lead to a shortage of our products. In addition, such failure could be the basis for action by the FDA, the EMA or regulatory authorities in other territories or countries to withdraw approvals previously granted to us and for other regulatory action, including seizure, injunction or other civil or criminal penalties. We are aware, for example, that the manufacturer of metreleptin drug product has issued numerous recalls, including at the site that manufactures metreleptin, in each case for the manufacture of products other than metreleptin, but which could impact the manufacturer’s operations with respect to all products at the affected sites. The failure by our third-party manufacturers to respond adequately

to any concerns raised by the FDA could lead to plant shutdown or the withholding of product approval by the FDA in additional indications, or by foreign regulators in any indication. Certain countries may impose additional requirements on the manufacturing of drug products or drug substance, and on our third-party manufacturers, as part of the regulatory approval process for our products in such countries. The failure by us or our third-party manufacturers to satisfy such requirements could impact our ability to obtain or maintain approval of our products in such countries.

Our market is subject to intense competition. If we are unable to compete effectively, we may not be able to achieve our revenue goals or achieve profitability or maintain cash-flow positive operations in the time periods we expect, or at all, and lomitapide, metreleptin or any other product candidate that we develop or acquire may be rendered noncompetitive or obsolete.

Our industry is highly competitive and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. All of these competitors currently engage in, have engaged in or may engage in the future in the development, manufacturing, marketing and commercialization of new pharmaceuticals, some of which may compete with lomitapide, metreleptin or other products or product candidates we may acquire, license or develop. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Key competitive factors affecting the commercial success of lomitapide, metreleptin and any other products that we develop or acquire are likely to be efficacy, safety and tolerability profile, reliability, convenience of dosing, price and reimbursement.

The market for cholesterol-lowering therapeutics is large and competitive with many drug classes. Lomitapide is approved in the U.S., the EU and in certain other countries as an adjunct to a low-fat diet and other lipid-lowering treatments to reduce LDL-C in adult HoFH patients. As a treatment for HoFH, JUXTAPID competes directly in the U.S. and certain other countries with Kynamro, which is being commercialized by Genzyme, a Sanofi company, under a collaboration with Isis Pharmaceuticals Inc. (“Isis”). Kynamro is an antisense apolipoprotein B-100 inhibitor which is taken as a weekly subcutaneous injection. We expect JUXTAPID to also face competition in the treatment of adult HoFH patients with a class of drugs known as PCSK9 inhibitors. In July 2015, Regeneron Pharmaceuticals, Inc. (“Regeneron”) and Sanofi announced that the FDA had approved the Biologics License Application for their PCSK9 inhibitor candidate, alirocumab, for use in addition to diet and maximally tolerated statin therapy in adult HeFH patients and in patients with clinical atherosclerotic cardiovascular disease who require additional lowering of LDL-C. In July 2015, the Committee for Medicinal Products for Human Use (“CHMP”) of the EMA adopted a positive opinion for the marketing authorization of alirocumab, recommending its approval for use in certain adult patients with hypercholesterolemia. Amgen filed for U.S. approval of its anti-PCSK9 antibody, evolocumab, in August 2014, and expects approval in the U.S. in August 2015. In June 2015, the Endocrinologic and Metabolic Drugs Advisory Committee (“EMDAC”) of the FDA voted to recommend evolocumab to lower LDL-C, in one or more patient populations, including in patients with HoFH. In July 2015, following the recommendation of the CHMP, the European Commission approved the marketing authorization of evolocumab as a treatment for certain patients with high cholesterol, including patients aged 12 years and over with HoFH in combination with other lipid-lowering therapies. Other companies such as Pfizer, Roche Holding AG, and Alnylam, in collaboration with The Medicines Company, are also developing PCSK9 inhibitor products.

We expect that the introduction of PCSK9 inhibitors to the commercial market will have a short to medium term negative impact on sales of lomitapide. Once PCSK9 inhibitor products become available in a given market, healthcare professionals may consider switching some existing lomitapide patients to a PCSK9 inhibitor product, and are likely to try most new HoFH patients on a PCSK9 inhibitor product before trying lomitapide. In addition, PCSK9 inhibitor products are expected to have more manageable tolerability and a lower price than we charge for lomitapide, which may affect reimbursement, pricing and access decisions made by government and private payers worldwide. Insurance companies, managed care organizations and other private payers may require that HoFH patients have not achieved an adequate response on PCSK9 inhibitor products before providing reimbursement for lomitapide, or may impose other major hurdles to access or other significant restrictions or limitations on reimbursement. PCSK9 inhibitor products may also be viewed as an alternative to lomitapide in countries where named patient sales of lomitapide are permitted. We expect physicians will continue to consider use of lomitapide for those adult HoFH patients for whom PCSK9 inhibitor products are not sufficiently effective. We also expect the negative impact of the introduction of PCSK9 inhibitor products may be offset, in whole or in part, over the long term by the possible identification of more adult HoFH patients who may be candidates for lomitapide as a result of the greater disease awareness likely to follow introduction of PCSK9 inhibitors. If the anticipated impact of PCSK9 inhibitors is greater than we expect, it may make it more difficult for us to generate revenues, achieve profitability and maintain cash-flow positive operations from the lomitapide business. Also, although there are no other MTP-I compounds currently approved by the FDA for the treatment of hyperlipidemia, there may be other MTP-I compounds in development.

In addition, in the EU, patients with HoFH who are unable to reach their recommended target LDL-C levels on conventionally used drug therapies are commonly treated using LDL apheresis, in which cholesterol is removed from the body through mechanical filtration. Although levels of LDL-C are reduced acutely using apheresis, there is a rapid rebound. Because apheresis provides only temporary reductions in LDL-C levels, it must be repeated frequently, typically one or two times per month. The widespread use and availability of apheresis as a treatment for HoFH in the EU, combined with the lower cost of apheresis as compared to LOJUXTA, makes it more difficult for us to obtain commercially acceptable pricing and reimbursement approvals for lomitapide in the key markets of the EU and, even where commercially acceptable approvals are obtained, may limit the use of LOJUXTA as a treatment for HoFH patients.

MYALEPT is the first and only product approved in the US for the treatment of complications of leptin deficiency in patients with GL. There are, however, a number of therapies approved to treat these complications independently that are not specific to GL. Certain of the clinical complications of GL, including diabetes and hypertriglyceridemia, may be treated with insulin and/or oral medications, such as metformin, insulin secretagogues, fibrates, or statins.

We may also face future competition from companies selling generic alternatives of lomitapide or metreleptin in countries where we do not have patent coverage, orphan drug status or another form of data or marketing exclusivity or where patent coverage or data or marketing exclusivity has expired, is not enforced, or may, in the future, be challenged.

Many of our potential competitors have substantially greater financial, technical and human resources than we do, and significantly greater experience in the discovery and development of drug candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining marketing approvals for drugs and achieving and maintaining widespread market acceptance.

Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize, and may render lomitapide, metreleptin or any other product or product candidate that we acquire, license or develop obsolete or non-competitive before we can recover the expenses of developing and commercializing the product. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render lomitapide, metreleptin or any other product or product candidate that we acquire, license or develop non-competitive or obsolete.

We may face resistance from certain private, government and other third-party payers and from healthcare professionals and patients given the prices we charge for lomitapide and metreleptin. We may not be able to achieve our revenue goals or achieve profitability or maintain cash-flow positive operations from the lomitapide or metreleptin businesses in the time periods we expect, or at all, if reimbursement for these products is limited or delayed.

Market acceptance and sales of lomitapide and metreleptin will continue to depend on insurance coverage and reimbursement policies, and may be affected by healthcare reform measures. Government authorities and third-party payers, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment and predictability. Government authorities and these third-party payers have attempted to control costs by limiting coverage and limiting the amount of reimbursement for particular medications.

Given that HoFH and GL are rare diseases with small patient populations, we have set prices for JUXTAPID and MYALEPT in the U.S. that are significantly higher than that of most pharmaceuticals in order to generate enough revenue to fund our operating costs and become profitable. We also expect to increase the price of lomitapide and metreleptin from time to time in the future. Certain payers in the U.S. may resist providing adequate coverage and reimbursement for JUXTAPID and/or MYALEPT. Some payers in the U.S. have imposed requirements, conditions or limitations as conditions to coverage and reimbursement for JUXTAPID, or have required the patient to try a less expensive alternative therapy first. More payers may decide to do so in response to the recent launch of the first PCSK9 inhibitor product in July 2015, and with the anticipated launch of a second PCSK9 inhibitor product in August 2015. These conditions to coverage may include a requirement that HoFH patients have not achieved an adequate response on PCSK9 inhibitor products before trying lomitapide. We acquired the rights to metreleptin in January 2015, and, as a result, have only limited experience as to coverage and reimbursement issues with MYALEPT in the U.S., but we do not expect significant impediments. The cost of JUXTAPID and MYALEPT in the U.S. may result in co-pay amounts for some patients that are prohibitive, and prevent these patients from being able to commence therapy on JUXTAPID or MYALEPT, respectively. We support an independent 501(c)(3) patient foundation in the U.S. that assists HoFH patients determined solely by the foundation to be eligible with certain co-payments or co-insurance requirements for their drug therapies, which may include lomitapide. We also support an independent 501(c)(3) patient foundation in the U.S. that assists GL patients determined solely by the foundation to be eligible with certain co-payments or co-insurance requirements for their drug therapies, which may include metreleptin. We do not have control or input into the decisions of these foundations. In November 2014, we adopted a direct co-pay assistance program that provides support to eligible commercial patients for certain drug co-pays and co-insurance obligations for lomitapide. We also provide support to eligible commercial patients for certain drug co-pays and co-insurance obligations for MYALEPT treatment. Our support of any 501(c)(3) foundation and our own co-pay assistance programs could result in significant costs to us, and reduce our net product sales.

In the EU, Mexico, Canada, Taiwan and other countries outside the U.S. where lomitapide is or may be approved, we are seeking or expect to seek a price that, like the U.S. price, is at a level that is significantly higher than that of most pharmaceuticals, and which reflects the rare nature of HoFH. There is no assurance that government agencies in such countries that are responsible for reimbursement of healthcare costs or other third-party payers in such countries will agree to provide coverage for lomitapide at the prices we propose, or at all. In the EU, and in many other countries outside the U.S., the proposed pricing for a drug must be approved by governmental authorities before it may be lawfully sold. The requirements governing drug pricing vary widely from country to country. The EU Member States and such other countries are free to restrict the range of medicinal products for which the national health insurance systems provide reimbursement, and to control the prices and/or reimbursement levels of medicinal products for human use. Such countries may approve a specific price or level of reimbursement for the medicinal product, or alternatively adopt a system of direct or indirect controls on the profitability of the

company responsible for placing the medicinal product on the market, including volume-based arrangements, payment or patient caps, reference pricing mechanisms, and the use of other therapies prior to the use of a medicinal product. For example, in March 2015, as part of negotiating a price agreement for lomitapide in Italy with the Italian Medicines Agency (AIFA), we, among other things, agreed to an annual payment cap for the first twelve months after the final publication of the agreement, which took place in June 2015, which we would need to re-negotiate at the end of the initial twelve-month period in order to increase the cap. We expect other countries will seek price and patient number caps. In some countries in the EU and other countries outside the U.S., we have faced, and will continue to face significant delays or impediments to obtaining reimbursement due to lengthy pricing negotiations with governmental authorities or the decisions of pricing authorities or authorities that indirectly impact pricing or reimbursement. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies, which may not be possible for us to do.

We are in the process of seeking to obtain pricing and reimbursement approvals for lomitapide in France, Germany, Spain, Mexico, Canada, Taiwan, and other markets. There is no assurance that we will receive such approvals or, if we do, that the price and terms will be acceptable to us. For example, the reimbursement authority in Germany, the G-BA (Gemeinsamer Bundesausschuss), deemed our dossier for LOJUXTA to be incomplete as a result of certain technical deficiencies. As a result of the technical deficiencies, LOJUXTA was automatically put into the category of “no additional benefit” under the G-BA process, without a review of its clinical merits, which limits the reimbursement level significantly. After the G-BA assessment, we withdrew LOJUXTA from the German market in July 2014. We re-filed our dossier for LOJUXTA in June 2015, which we expect will result in an assessment by the G-BA in late 2015. There can be no assurances that the G-BA, in reviewing this submission, will make an assessment that would result in our ability to negotiate a reimbursement level acceptable to us. Similarly, in France, our dossier for lomitapide has twice received a “minor improvement” rating from Haute Autorite de Sante (HAS), the committee responsible for assessing the benefit of medicinal products in France before they can be approved for reimbursement. Such a rating, which was re-affirmed by HAS at a hearing early in the third quarter of 2015, may limit the potential reimbursement level for lomitapide in France significantly and may therefore prevent us from obtaining a reimbursement level for lomitapide in France that is acceptable to us. In June 2015, Taiwan’s Pharmaceutical Benefit and Reimbursement Scheme (PBRS), which is responsible for assessing the suitability of a pharmaceutical product for Taiwan’s National Health Insurance system, voted not to recommend our dossier for lomitapide for reimbursement in Taiwan, which aligned with a previous decision by Taiwan’s Expert Review Committee of the National Health Insurance Administration (NHIA). We intend to file an appeal of this decision in the third quarter of 2015, and plan to request an opportunity to present to the Expert Review Committee, which we expect will occur in the fourth quarter of 2015. If we are not successful in obtaining a recommendation for the reimbursement of lomitapide after our presentation to the expert review committee or our planned appeal, we may not be able to obtain a reimbursement level for lomitapide in Taiwan that is acceptable to us. In July 2015, the health authority in Mexico, the General Health Council (GHC), declined our request to include lomitapide in Mexico’s basic formulary, which is required in order to obtain reimbursement approval in Mexico. We intend to file an appeal of this decision, and will request a hearing with the GHC in the third quarter of 2015. If we are not successful in obtaining GHC’s approval to include lomitapide in the formulary after our planned appeal, we may not be able to obtain reimbursement for lomitapide in Mexico.

Outside the U.S., the continuing effects of the debt crisis and the macroeconomic climate in the EU and other countries, or local regulations or practices, may adversely affect our ability to set and charge a sufficiently high price to generate adequate revenue in those markets. The price of lomitapide, or metreleptin if approved, in one country may adversely affect the price in other countries. We may elect not to launch our products in any country where it does not make commercial sense to do so given the approved price or other conditions. In addition, while we do not expect to obtain approval of our products outside of rare disease indications, in the future if we were to obtain such approval for new indications with a higher prevalence rate than our existing indications, it may be more difficult for us to obtain or maintain our current price levels and targets for lomitapide and metreleptin. For example, due to the broader indication for MYALEPT in Japan, MYALEPT is sold by Shionogi in Japan at a price significantly lower than the U.S. price.

Even if we are successful in obtaining pricing and reimbursement approval for lomitapide in a country, such countries may impose onerous conditions on reimbursement, which may include genotyping or the use of other therapies, such as apheresis, prior to the use of lomitapide.

In addition, in certain of the EU Member States and other countries, products that have orphan designation may be exempted or waived from having to provide certain clinical, cost-effectiveness and other economic data in connection with their filings for pricing/reimbursement approval or filings for therapeutic reviews which impact pricing and reimbursement approvals or negotiations. In the EU, LOJUXTA was not granted orphan designation by the EMA for treatment of HoFH and is thus not eligible for such automatic exemptions or waivers. We may not be able to provide all of the data required to obtain pricing/reimbursement approvals in certain EU Member States or we may not satisfactorily meet the technical or substantive requirements of such submissions or receive ratings from pricing or other regulatory authorities commensurate with our expectations or that would support the price levels we want for our products, which could result in further delays of pricing/reimbursement approvals for LOJUXTA, LOJUXTA not obtaining pricing/reimbursement approval at all, or LOJUXTA obtaining approvals at less than acceptable levels or with significant restrictions on use or reimbursement. We may also face pricing and reimbursement pressure in the U.S., EU and other countries as a result of prices charged for competitive products or therapies.

We are making lomitapide and metreleptin available, or plan to do so, in countries that allow use of a drug, on a named patient basis or under a compassionate use or other type of so-called expanded access program, before marketing approval has been obtained in such countries. We obtain reimbursement for lomitapide for authorized pre-approval uses in some of these countries to the extent permitted by applicable law and local regulatory authorities, and plan to seek reimbursement of metreleptin in the treatment of complications of GL in certain of these countries in the second half of 2015. In other countries or under certain circumstances, we are providing our products free of charge for permitted pre-approval uses. We do not yet know the impact that the availability in the U.S. of PCSK9 inhibitor products will have on our named patient sales in Brazil and in other countries where we currently sell lomitapide on a named patient sale basis. There is no assurance that we will be able to obtain reimbursement at all or at acceptable levels or to maintain reimbursement for our products in any country under an expanded access program. In certain countries where we seek reimbursement for the product during the pre-approval phase, we are able to establish the price for the product, while in other countries we need to negotiate the price. Such negotiations may not result in a price acceptable to us, in which case we may elect not to distribute our products in such country prior to approval or we may curtail distribution. In addition, in certain countries such as Brazil, the price we are able to charge for named patient sales prior to approval may be higher than the price that is approved by governmental authorities after approval.

If we fail to successfully secure and maintain reimbursement coverage for our products at levels that are acceptable to us or are significantly delayed in doing so or if onerous conditions are imposed by private payers, government authorities or other third-party payers on such reimbursement, we will have difficulty achieving or maintaining market acceptance of our products and our business and ability to achieve our financial expectations will be harmed.

The amount of reimbursement for JUXTAPID and MYALEPT and the manner in which government and private payers in the U.S. may reimburse for our potential future products are uncertain.

Beginning April 1, 2013, Medicare payments for all items and services under Part A and B, including drugs and biologicals, and most payments to plans under Medicare Part D were reduced by 2% under the sequestration (i.e., automatic spending reductions) required by the Budget Control Act of 2011 (“BCA”) as amended by the American Taxpayer Relief Act of 2012. The BCA requires sequestration for most federal programs, excluding Medicaid, Social Security, and certain other programs. The BCA caps the cuts to Medicare payments for items and services and payments to Part D plans at 2%. Subsequent legislation extended the 2% reduction, on average, to 2024. As long as these cuts remain in effect, they could adversely impact payment for JUXTAPID or MYALEPT. Payers also are increasingly considering new metrics as the basis for reimbursement rates, such as average sales price (“ASP”), average manufacturer price (“AMP”) or actual acquisition cost (“AAC”). The existing data for reimbursement based on these metrics is relatively limited, although certain states have begun to survey acquisition cost data for the purpose of setting Medicaid reimbursement rates. The Centers for Medicare & Medicaid Services (“CMS”) has begun posting drafts of this retail survey price information on at least a monthly basis in the form of draft National Average Drug Acquisition Cost (“NADAC”) files, which reflect retail community pharmacy invoice costs, and National Average Retail Price (“NARP”) files, which reflect retail community pharmacy prices to consumers. In July 2013, CMS suspended the publication of draft NARP data pending funding decisions. In November 2013, CMS moved to publishing final rather than draft NADAC data and has since made updated NADAC data publicly available on a weekly basis. It is difficult to project the impact of these evolving reimbursement mechanics on the willingness of providers to furnish JUXTAPID or MYALEPT, and the prices we can command for them and other products we may market. Legislative changes to the Public Health Service Section 340B drug pricing program (the “340B program”), the Medicaid Drug Rebate Program, and the Medicare Part D prescription drug benefit also could impact our revenues. If reimbursement is not available or available only to limited levels or if the mix of patients for our products is more heavily weighted to patients reimbursed under government programs, we may not be able to generate sufficient revenue to meet our operating costs or to achieve our revenue and profitability goals and to achieve and maintain positive cash flow in the timeframe that we expect, or at all. Price reductions and other discounts we offer or may offer for our products, or significant price increases over AMP, such as the price increase for MYALEPT in February 2015, typically result in increasing the rebates we are required to pay under the Medicaid Drug Rebate Program or state Medicaid supplemental rebate programs and discounts we are required to offer under the 340B program. For example, given the significantly higher launch price of MYALEPT set by us in the first quarter of 2015 compared to AZ’s original launch price, we expect to pay significant Medicaid rebates for MYALEPT which will offset the majority of revenue from Medicaid and negatively impact net product sales in future quarters. The degree of such impact on our overall financial performance will depend on the percentage of MYALEPT patients that have Medicaid as their primary insurance coverage and the quantity of units ordered per patient.

The FDA, the EU Member States and other regulatory agencies outside the U.S. and the EU actively enforce laws and regulations prohibiting the promotion of off-label uses. If we are found to have promoted off-label uses, we may be subject to significant liability.

The FDA, the competent authorities of the EU Member States and other regulatory agencies outside the U.S. and the EU strictly regulate the promotional claims that may be made about prescription drug products. In particular, a drug product may not be promoted in a jurisdiction prior to approval or for uses that are not approved by the FDA, the EC, the competent authorities of the EU Member States or such other regulatory agencies, as applicable, as reflected in the product’s approved prescribing information or SmPC. In the U.S., promotion of drug products for unapproved (or off-label) uses may result in enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA. Promotion of drug products for off-label uses in the U.S. can also result in false claims litigation under federal and state statutes, which can lead to consent decrees, civil money penalties, restitution, criminal fines and imprisonment, and exclusion from participation in Medicare, Medicaid and other federal and state healthcare programs. Even if it is later determined we are not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our position and have to divert significant management resources from other matters.

We received a subpoena in late 2013 from the U.S. Department of Justice, represented by the U.S. Attorney’s Office in Boston, Massachusetts, requesting documents and other information pertaining to our promotion, marketing, and sale of JUXTAPID in the U.S. in connection with a government investigation of our practices. We are in the process of responding to the subpoena, and intend to continue to cooperate with the investigation. This investigation, if resolved adversely to us, including by settlement, could result in civil and/or criminal sanctions being levied against us or our employees, including significant fines or other penalties, or in other negative consequences that could have a material adverse effect on our business, financial condition, or results of operations. Even if we can resolve this matter without incurring significant penalties, responding to the subpoena has been, and is expected to continue to be, costly and time-consuming. Moreover, this investigation could adversely impact our reputation, and may have a material adverse effect on our business, financial condition, results of operations, and stock price, and has diverted, and may continue to divert, the attention of our management from operating our business, or be disruptive to our employees, possibly resulting in employee attrition. In addition, the existence of the investigation and related activities has impacted, and may continue to impact, the willingness of some physicians prescribe JUXTAPID.

Our relationships with customers and payers in the U.S. will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, and reputational harm and could diminish future earnings and prevent us from achieving our forecasted financial results.

Healthcare providers and others play an important role in the recommendation and prescription of our products. Our arrangements with third-party payers and customers in the U.S. expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products. Restrictions under applicable federal and state healthcare laws and regulations in the U.S. include the following:

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The federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, paying, or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward the purchasing, leasing, ordering, or arranging or recommending for the purchase, lease or order of any healthcare item or service, for which payment may be made, in whole or in part, by federal healthcare programs such as Medicare and Medicaid. This statute has been interpreted to apply to, among others, arrangements between pharmaceutical companies, on the one hand, and prescribers, purchasers, formulary managers and organizations that provide financial assistance to patients, on the other. Further, the Patient Protection and Affordable Care Act, amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Healthcare Reform Act”), among other things, clarified that liability may be established under the federal Anti-Kickback Law without proving actual knowledge of this statute or specific intent to violate it. In addition, the Healthcare Reform Act amended the Social Security Act to provide that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common manufacturer business arrangements and activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration may be subject to scrutiny if they do not qualify for an exemption or safe harbor. We intend to comply with the exemptions and safe harbors whenever possible, but our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability, and may be subject to scrutiny.

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The federal civil False Claims Act prohibits any person from, among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. There are also criminal penalties, including imprisonment and criminal fines, for making or presenting a false, fictitious or fraudulent claim to the federal government. Many pharmaceutical and other healthcare companies have been investigated and have reached substantial financial settlements with the federal government under the federal Anti-Kickback Statute and the civil False Claims Act for a variety of alleged marketing activities, including providing free product to customers with the expectation that the customers would bill federal programs for the product; providing consulting fees, grants, free travel, and other benefits to physicians to induce them to prescribe the company’s products; and inflating prices reported to private price publication services, which are used to set drug payment rates under government healthcare programs. Companies have been prosecuted for causing false claims to be submitted because of the marketing of their products for unapproved uses. Pharmaceutical and other healthcare companies have also been prosecuted on other legal theories of Medicare and Medicaid fraud.

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The federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires certain pharmaceutical manufacturers to engage in extensive tracking of payments and other transfers of value to physicians and teaching hospitals and to submit data to CMS, which will then make all of this data publicly available on the CMS website. Pharmaceutical manufacturers, such as us, with products for which payment is available under Medicare, Medicaid, or the State Children’s Health Insurance Program are required to track reportable payments and transfers of value during each calendar year and must submit a report on or before the 90th day of each calendar year disclosing reportable payments made in the previous calendar year. Failure to comply with the reporting obligations may result in civil monetary penalties.

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Analogous state laws and regulations, such as state anti-kickback and false claims laws may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by Medicaid or other state programs or, in several states, apply regardless of the payer. Several states now require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products in those states and to report gifts and payments to certain healthcare providers in those states. Some of these states also prohibit certain marketing-related activities including the provision of gifts, meals, or other items to certain healthcare providers. In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes. Efforts to ensure that our business arrangements with third parties will continue to comply with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including activities conducted by our sales team, are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.

We are also subject to laws and regulations covering data privacy and the protection of health-related and other personal information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which may affect our business, including recently enacted laws in all jurisdictions where we operate. Numerous federal and state laws, including state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, govern the collection, use and disclosure of personal information. In addition, we obtain patient health information from most healthcare providers who prescribe our products and research institutions we collaborate with, and they are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HIPAA”). Although we are not directly subject to HIPAA other than with respect to providing certain employee benefits, we could potentially be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

In late 2013, we received a subpoena from the U.S. Department of Justice, represented by the U.S. Attorney’s Office in Boston, Massachusetts, requesting documents and other information pertaining to our promotion, marketing, and sale of JUXTAPID in the U.S. in connection with a government investigation of our practices. We could become subject to other government investigations and related subpoenas. Subpoenas are often associated with previously filed qui tam actions, or lawsuits filed under seal under the federal civil False Claims Act. Qui tam actions are brought by private plaintiffs suing on behalf of the federal government for alleged federal civil False Claims Act violations. We are in the process of responding to the subpoena, and intend to continue to cooperate fully with the investigation. The time and expense associated with responding to subpoenas, and any related qui tam or other actions, may be extensive, and we cannot predict the results of our review of the responsive documents and underlying facts or the results of such actions. This investigation, if resolved adversely to us, including by settlement, could result in civil and/or criminal sanctions being levied against us or our employees, including significant fines, sanctions, or other negative consequences that could have a material adverse effect on our business, financial condition, or results of operations. Even if we can resolve this matter without incurring significant penalties, responding to the subpoena has been, and is expected to continue to be, costly and time-consuming. Moreover, responding to this investigation or any other government investigations, defending any claims raised, and any resulting fines, restitution, damages and penalties, settlement payments or administrative actions, as well as any related actions brought by stockholders or other third parties, could also have a material adverse impact on our reputation, business, financial condition, results of operations, and stock price, and has diverted, and may continue to divert, the attention of our management from operating our business, or be disruptive to our employees, possibly resulting in employee attrition. In addition, the existence of the investigation and related activities has impacted, and may continue to impact, the willingness of some physicians to prescribe JUXTAPID.

The number and complexity of both federal and state laws continues to increase, and additional governmental resources are being added to enforce these laws and to prosecute companies and individuals who are believed to be violating them. In particular, the Healthcare Reform Act includes a number of provisions aimed at strengthening the government’s ability to pursue anti-kickback and false claims cases against pharmaceutical manufacturers and other healthcare entities, including substantially increased funding for healthcare fraud enforcement activities, enhanced investigative powers, and amendments to the False Claims Act that make it easier for the government and whistleblowers to pursue cases for alleged kickback and false claim violations. While it is too early to predict what effect these changes will have on our business, we anticipate that government scrutiny of pharmaceutical sales and marketing practices will continue for the foreseeable future and subject us to the risk of government investigations and enforcement actions. Responding to a government investigation or enforcement action would be expensive and time-consuming, and could have a material adverse effect on our business and financial condition and growth prospects.

Enacted and future legislation and related implementing regulations may increase the difficulty and cost for us to commercialize lomitapide, metreleptin or any other product candidate for which we obtain marketing approval, and may affect the prices we are able to obtain for lomitapide.

In the U.S., there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that restrict or regulate post-approval activities, and may affect our ability to profitably sell JUXTAPID, MYALEPT or any other product candidate for which we obtain marketing approval. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes for JUXTAPID or MYALEPT may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may subject us to more stringent product labeling and post-marketing testing and other requirements.

In the U.S., most outpatient prescription drugs, including JUXTAPID and MYALEPT, may be covered under Medicare Part D. Medicare Part D prescription drug plans are authorized to use formularies where they can limit the number of drugs that will be covered in any therapeutic class and/or impose differential cost sharing or other utilization management techniques. This places pressure on us to contain and reduce costs. Changes to Medicare Part D that give plans more freedom to limit coverage or manage utilization, and/ or other cost reduction initiatives in the program could decrease the coverage and price that we receive for any approved products, and could seriously harm our business.

In March 2010, President Obama signed into law the Healthcare Reform Act, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Healthcare Reform Act made significant changes to the Medicaid Drug Rebate program, including changes to the definition of AMP, and contains a number of provisions that are expected to impact our business and operations. Changes that may affect our business in the U.S. include those governing expanded enrollment in federal and private healthcare programs, changes to Medicare Part D, increased rebates and taxes on pharmaceutical products, expansion of the 340B program, and revised fraud and abuse and enforcement requirements.

Additional provisions of the Healthcare Reform Act, some of which have already taken effect, may negatively affect our future revenues. For example, the Healthcare Reform Act requires pharmaceutical manufacturers of branded prescription drugs to pay a branded prescription drug fee to the federal government. Each individual pharmaceutical manufacturer pays a prorated share of the branded prescription drug fee of $3.0 billion in 2015, based on the dollar value of its branded prescription drug sales to certain federal programs identified in the law. Branded drugs approved only for an orphan indication where the manufacturer has claimed the U.S. orphan drug tax credit under Section 45C of the Internal Revenue Code, which allows a credit against tax of up to 50 percent of certain clinical testing expenses related to the use of a drug for a rare disease or condition after it is designated as an orphan drug, are exempt from the calculation; we have claimed the orphan drug tax credit and are thus exempt from the branded prescription drug fee calculation. As part of the Healthcare Reform Act’s provisions closing a coverage gap that currently exists in the Medicare Part D prescription drug program (commonly known as the “donut hole”), manufacturers are required to provide a 50% discount on branded prescription drugs dispensed to beneficiaries within this donut hole. The Healthcare Reform Act also made changes to the Medicaid Drug Rebate Program, including revising the definition of AMP and increasing the minimum rebate from 15.1% to 23.1% of the AMP for most innovator products, and from 11% to 13% for non-innovator products. The increased minimum rebate of 23.1% applies to JUXTAPID and MYALEPT. We do not know the full effects that the Health Care Reform Act will have on our sales of JUXTAPID or MYALEPT, our business and operations, but the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

In 2012, CMS issued proposed regulations to implement the changes to the Medicaid Drug Rebate program under the Healthcare Reform Act but has not yet issued final regulations. CMS is currently expected to release the final regulations in the second half of 2015. Moreover, in the future, Congress could enact legislation that further increases Medicaid drug rebates or other costs and charges associated with participating in the Medicaid Drug Rebate program. The issuance of regulations and coverage expansion by various governmental agencies relating to the Medicaid Drug Rebate program has and will continue to increase our costs and the complexity of compliance, has been and will be time-consuming, and could have a material adverse effect on our results of operations.

Federal law requires that any company that participates in the Medicaid Drug Rebate program also participate in the 340B program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program requires participating manufacturers to agree to charge statutorily-defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. The Healthcare Reform Act expanded the 340B program to include additional entity types: certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, each as defined by the Healthcare Reform Act. The Healthcare Reform Act exempts “orphan drugs”—those designated under section 526 of the Federal Food, Drug, and Cosmetic Act (“FDCA”), such as JUXTAPID and MYALEPT—from the ceiling price requirements for these newly-eligible entities. In July 2014, the Health Resources and Services Administration (“HRSA”), the agency which administers the 340B program, issued an “interpretive” rule to implement the orphan drug exception which interprets the orphan drug exception narrowly. It exempts orphan drugs

from the ceiling price requirements for the newly-eligible entities only when the orphan drug is used for its orphan indication. Under the interpretive rule, the newly-eligible entities are entitled to purchase orphan drugs at the ceiling price when the orphan drug is not used for its orphan indication. A manufacturer trade group has filed a lawsuit challenging the interpretive rule as inconsistent with the statutory language. The challenge remains ongoing. The uncertainty regarding how the statutory orphan drug exception will be applied will increase the complexity of compliance, will make compliance more time-consuming, and could negatively impact our results of operations. If HRSA’s narrow interpretation of the scope of the orphan drug exemption prevails, it could potentially negatively impact the price we are paid for certain of our products by certain entities for some uses and increase the complexity of compliance with the 340B program.

The Healthcare Reform Act also obligates HRSA to create regulations and processes to improve the integrity of the 340B program and to update the agreement that manufacturers must sign to participate in the 340B program to obligate a manufacturer to offer the 340B price to covered entities if the manufacturer makes the drug product available to any other purchaser at any price and to report the ceiling prices for its drugs to the government. HRSA has issued a proposed regulation and is currently expected to issue an additional proposed regulation and proposed guidance in the second half of 2015 that will address many aspects of the 340B program. Any final regulations and guidance could affect our obligations under the 340B program in ways we cannot anticipate. Further, legislation may be introduced that, if passed, would further expand the 340B program to additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in the inpatient setting.

Countries outside the U.S. may make changes to their healthcare systems which may in the future affect the revenues we generate from sales of lomitapide and, if approved outside of the U.S., metreleptin and other product candidates for which we obtain approval.

We face extensive regulatory requirements, and may still face future development and regulatory difficulties.

Even after marketing approval, a regulatory authority may still impose significant restrictions on a product’s indications, conditions for use, distribution or marketing or impose ongoing requirements for post-marketing surveillance, post-approval studies or clinical trials. JUXTAPID is available in the U.S. only through the JUXTAPID REMS Program. We must certify all healthcare providers who prescribe JUXTAPID and the pharmacies that dispense the medicine. The FDA has also required that we periodically assess the effectiveness of the JUXTAPID REMS Program. The FDA itself assesses on a periodic basis whether a REMS program is meeting its goals and whether the goals or elements of the plan should be modified. On June 16, 2015, we received a letter from the FDA expressing concern that the JUXTAPID REMS Program is not meeting its goals of educating healthcare professionals about the risks of hepatotoxicity and the need to monitor patients during treatment with JUXTAPID per the product labeling. The letter also expressed concern about the difficulty in assessing whether the goal of restricting access to JUXTAPID to patients with a clinical or laboratory diagnosis consistent with HoFH was being met. The FDA is currently evaluating how best to address these issues. In response to the FDA’s concerns, we have proposed to the FDA modifications to the JUXTAPID REMS Program to improve prescriber awareness of the risk of hepatotoxicity associated with JUXTAPID and the need to monitor patients during treatment, and to reinforce the approved indication and the characteristics of HoFH. The FDA may not agree with our proposed modifications, and may impose more onerous obligations to be satisfied before JUXTAPID is prescribed or more stringent criteria in the diagnosis of HoFH for purposes of any prescription that may negatively affect the ability or willingness of a healthcare professional to prescribe JUXTAPID or a patient to be willing to initiate or continue on therapy.

In the EU and in the other countries outside the U.S. in which lomitapide is approved, we have adopted risk management plans to help educate physicians on the safety information for lomitapide and appropriate precautions to be followed by healthcare professionals and patients.

MYALEPT is also available only through the MYALEPT REMS Program, due to potential for development of anti-metreleptin antibodies and the associated risks of serious adverse sequelae (such as severe infections, excessive weight gain, glucose intolerance, diabetes mellitus) and risk of lymphoma. As a part of this program, we must certify all healthcare providers who prescribe MYALEPT, certify the pharmacies that dispense the medicine, and obtain prescriber attestation that each patient has a diagnosis consistent with GL. We are responsible for maintaining, monitoring and evaluating the implementation of the MYALEPT REMS Program.

Regulatory authorities have significant post-marketing authority, including, for example, the authority to require labeling changes based on new safety information, and to require post-marketing studies or clinical trials to evaluate serious safety risks related to the use of a drug or biologic. Part of our post-marketing commitment to the FDA and EMA with respect to lomitapide is to conduct an observational cohort study, which we have initiated, to generate more data on the long-term safety profile of lomitapide in the treatment of patients with HoFH, the patterns of use and compliance and the long-term effectiveness of controlling LDL-C levels. The EMA has also required that we conduct a vascular imaging study to determine the impact of lomitapide on vascular endpoints, which has been initiated. As part of our post-marketing commitments to the FDA for metreleptin, we will initiate a long-term, prospective, observational study (product exposure registry) of 100 patients treated with metreleptin to evaluate serious risks related to the use of the product. We are also required to conduct programs to expand the understanding of the immunogenicity of metreleptin and to conduct certain studies related to the manufacturing of metreleptin, which we have initiated. We expect that the regulatory authorities in certain other countries outside the U.S. and EU where our products are, or may be, approved may impose post-approval obligations, including patient registries, and requirements that may in some countries be more onerous than those imposed by the FDA and EMA. Depending on the nature of these post-marketing studies, we may be required to provide our products free of charge to participants in the studies in certain countries even if we have pricing and reimbursement approval in such countries, which would negatively impact our level of revenues.

In the EU, because we were not able to provide comprehensive clinical data on the efficacy and safety of lomitapide under normal conditions of use due to the rarity of HoFH, and in light of our commitments to conduct an appropriate risk-mitigation program, LOJUXTA was approved under exceptional circumstances. This type of marketing authorization will require an annual reassessment of the risk/benefit of LOJUXTA by the CHMP. Any changes in known safety concerns for lomitapide or any unknown safety issues that may develop could cause the EC to decline to renew our market authorization for lomitapide in the EU which could affect our ability to achieve our financial goals.

We will also be subject to other ongoing regulatory requirements in each of the countries in which our products are approved governing the labeling, packaging, storage, advertising, distribution, promotion, recordkeeping and submission of safety and other post-marketing information, including adverse reactions, and any changes to the approved product, product labeling, or manufacturing process. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA, the EMA, the competent authorities of the EU Member States and other regulatory authorities for compliance with cGMP, and other regulations.

If we, or our drug substance or drug product or the manufacturing facilities for our drug substance or drug product, fail to comply with applicable regulatory requirements, a regulatory agency may:

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issue warning letters or untitled letters;

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seek an injunction or impose civil or criminal penalties or monetary fines;

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suspend, vary or withdraw or alter the conditions of our marketing approval;

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require us to provide corrective information to healthcare practitioners;

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suspend any ongoing clinical trials;

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require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;

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refuse to approve pending applications or supplements to applications submitted by us;

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suspend or impose restrictions on operations, including costly new manufacturing requirements;

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seize or detain products, refuse to permit the import or export of products or request that we initiate a product recall; or

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refuse to allow us to enter into supply contracts, including government contracts.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and candidate products and to generate revenue.

If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the U.S., we could be subject to additional reimbursement requirements, penalties, sanctions and fines which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We participate in the Medicaid Drug Rebate Program and a number of other Federal and state government pricing programs in the U.S., and we may participate in additional government pricing programs in the future. These programs are described in detail under “Business—Regulatory Matters” section of our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on March 2, 2015, and generally require us to pay rebates or provide discounts to government payers in connection with our products, dispensed to beneficiaries of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing and rebate calculations that we report on a monthly and quarterly basis to the government agencies that administer the programs. The terms, scope and complexity of these government pricing programs change frequently. Responding to current and future changes may increase our costs and the complexity of compliance, will be time-consuming, and could have a material adverse effect on our results of operations.

Pricing and rebate calculations vary among products and programs. The calculations are complex and are often subject to interpretation by governmental or regulatory agencies and the courts. For example, the Medicaid rebate amount is computed each quarter based on our submission to the CMS of our AMP and best price for the quarter. If we become aware that our reporting for prior quarters was incorrect, or has changed as a result of recalculation of the pricing data, we will be obligated to resubmit the corrected data for a period not to exceed twelve quarters from the quarter in which the data originally were due. Such restatements and recalculations would serve to increase our costs for complying with the laws and regulations governing the Medicaid rebate program. Any corrections to our rebate calculations could result in an overage or underage in our rebate liability for past quarters, depending on the nature of the correction. Price recalculations also may affect the price that we will be required to charge certain safety net providers under the Public Health Service 340B drug discount program.

In February 2015, we significantly increased the U.S. wholesale acquisition cost per 10mg vial of MYALEPT. As a result of this substantial price increase, we continue to expect a significant gross-to-net adjustment for Medicaid rebates which will offset the majority of revenue from Medicaid and negatively impact net product sales in future quarters, since Medicaid rebates directly reduce our net product sales. The degree of such impact on our overall financial performance will depend on the percentage of MYALEPT patients that have Medicaid as their primary insurance coverage and the quantity of units ordered per patient. To date, approximately 30% to 40% of patients prescribed MYALEPT were Medicaid beneficiaries. The number of patients prescribed MYALEPT in the future who are Medicaid beneficiaries could be higher than historical rates.

We are liable for errors associated with our submission of pricing data and for overcharging government payers. For example, in addition to retroactive rebates and the potential for 340B program refunds, if we are found to have knowingly submitted false AMP or best price information to the government, we may be liable for civil monetary penalties in the amount of $100,000 per item of false information. Our failure to submit monthly/quarterly AMP and best price data on a timely basis could result in a civil monetary penalty of $10,000 per day for each day the submission is late beyond the due date. In the event that CMS were to terminate our rebate agreement, no federal payments would be available under Medicaid or Medicare Part B for our products, such as JUXTAPID. In addition, if we overcharge the government in connection with our Federal Supply Schedule (“FSS”) contract or under any other government program, we will be required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges could result in allegations against us under the federal civil False Claims Act and other laws and regulations.

In order to be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by four federal agencies (noted below) and certain federal grantees, we are required to participate in the Department of Veterans Affairs (“VA”) FSS pricing program, established by Section 603 of the Veterans Health Care Act of 1992. Under this program, we are obligated to make JUXTAPID and MYALEPT available for procurement on an FSS contract and charge a price to four federal agencies—VA, Department of Defense (“DoD”), Public Health Service, and Coast Guard—that is no higher than the statutory Federal Ceiling Price (“FCP”). The FCP is based on the non-federal average manufacturer price (“Non-FAMP”), which we calculate and report to the VA on a quarterly and annual basis. If a company misstates Non-FAMPs or FCPs it must restate these figures. Pursuant to the VHCA, knowing provision of false information in connection with a Non-FAMP filing can subject a manufacturer to penalties of $100,000 for each item of false information.

FSS contracts are federal procurement contracts that include standard government terms and conditions, separate pricing for each product, and extensive disclosure and certification requirements. In addition to the four agencies described above, all other federal agencies and some non-federal entities are authorized to access FSS contracts. FSS contractors are permitted to charge FSS purchasers other than the four federal agencies “negotiated pricing” for covered drugs that is not capped by the FCP; instead, such pricing is negotiated based on a mandatory disclosure of the contractor’s commercial “most favored customer” pricing. Moreover, all items on FSS contracts are subject to a standard FSS contract clause that requires FSS contract price reductions under certain circumstances where pricing to an agreed “tracking” customer is reduced.

Prior to entering into an FSS contract, new manufacturers enter into an Interim Agreement, which is a truncated version of the FSS contract that allows the manufacturer to sell to FSS purchasers while it goes through the lengthy process of negotiating an FSS contract. We currently have an Interim Agreement in place for JUXTAPID. Under our Interim Agreement, we offer one single FCP-based FSS contract price to all FSS purchasers for JUXTAPID.

As part of the acquisition of metreleptin in January 2015, AstraZeneca agreed to maintain MYALEPT on its FSS contract and TRICARE contract until we have added MYALEPT to our FSS contract and Tricare contract. Until these transitions are complete, we will reimburse AstraZeneca for any related rebates or chargebacks incurred for MYALEPT.

In addition, pursuant to regulations issued by the DoD Defense Health Agency (“DHA”) to implement Section 703 of the National Defense Authorization Act for Fiscal Year 2008, we expect that DoD will claim entitlement to rebates on covered drug prescriptions dispensed to TRICARE beneficiaries by TRICARE network retail pharmacies. The formula for determining the rebate is established in the regulations and our Section 703 Agreement and is based on the difference between annual Non-FAMP and the FCP.

If we overcharge the government in connection with VA FSS pricing program or TRICARE Retail Pharmacy Program, whether due to a misstated FCP or otherwise, we are required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges could result in allegations against us under the False Claims Act and other laws and regulations.

Unexpected refunds to the U.S. government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Commercialization of our products requires third-party relationships, and our dependence on these relationships may have an adverse effect on our business.

Lomitapide, our first marketed product, was launched in 2013. We acquired metreleptin in January 2015. As a result, we do not have a long history commercializing pharmaceutical products. To maximize the commercial potential of lomitapide and metreleptin, we utilize, and plan to continue to use, distributors and other third parties to help distribute and, in some cases, to commercialize our products. We currently have a contract with a single specialty pharmacy distributor in the U.S. for the distribution of lomitapide, a single distributor in Brazil, a single logistics provider in the EU and single distributors, importers and/or specialty pharmacies in certain other countries. We also have a contract with a single specialty pharmacy distributor in the U.S. for the distribution of metreleptin. Any performance failure, inability or refusal to perform on the part of our specialty pharmacy distributors in the U.S., our logistics provider in the EU, or our single third-party service providers in other countries, or any failure to renew existing agreements or enter into new agreements when these relationships expire, could impair our marketing, sales or named patient supply of lomitapide or metreleptin, as the case may be. In those countries outside the U.S. where we plan to use our own personnel to commercialize lomitapide, we have, or plan to have, agreements with local wholesalers or logistics providers to provide logistics and distribution support. In those geographic locations in which we are using third parties to commercialize lomitapide, we will be reliant on such third parties to generate revenue on our behalf. If we enter into arrangements with third parties to perform sales, marketing or distribution services, our product revenues or the profitability of these product revenues to us are likely to be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our products or in doing so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our products. Furthermore, our expenses associated with building up and maintaining the sales force and distribution capabilities around the world may be substantial compared to the revenues we may be able to generate on sales of our products. We cannot guarantee that our success in commercializing lomitapide or metreleptin will meet our expectations.

Failures or delays in the completion or commencement of any of our ongoing or planned clinical trials of lomitapide or metreleptin could result in increased costs to us and delay, prevent or limit our ability to generate revenue with respect to the relevant product in a new territory or indication.

The commencement and completion of clinical trials may be delayed or prevented for a number of reasons, including:

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difficulties obtaining regulatory clearance to commence a clinical trial or complying with conditions imposed by a regulatory authority regarding the scope or term of a clinical trial;

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delays in reaching or failing to reach agreement on acceptable terms with prospective clinical research organizations (“CROs”) and trial sites, and problems with the performance of CROs;

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insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct our clinical trials, or other manufacturing issues;

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difficulties obtaining institutional review board (“IRB”) approval or Ethics Committee’s positive opinion to conduct a clinical trial at a prospective site;

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challenges recruiting and enrolling patients to participate in clinical trials for a variety of reasons, including the size and nature of a patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the nature of trial protocol, the availability of approved treatments for the relevant disease and the competition from other clinical trial programs for similar indications;

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severe or unexpected drug-related side effects experienced by patients in a clinical trial; and

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difficulties retaining patients who have enrolled in a clinical trial but may be prone to withdraw due to the rigors of the trials, lack of efficacy, side effects or personal issues, or who are lost to further follow-up.

For example, in the first quarter of 2015, the FDA issued a Written Request for a study to evaluate lomitapide in pediatric HoFH patients, which, if completed as described, would provide for 6 months of pediatric exclusivity under the FDCA. In the second quarter of 2015, we decided to decline the FDA’s Written Request regarding our planned study in pediatric HoFH patients, because we believe that the size and complexity of the requested trial created a considerable barrier to the feasibility of the study. We have redesigned the protocol for the trial and are seeking agreement from the EMA’s Pediatric Committee (“PDCO”) on the revised study design. There is no guarantee that we will be able to agree with the PDCO on a new protocol. Failure to reach agreement on a protocol could result in a further delay in the commencement of the trial. Even if we conduct a study in pediatric patients, we may not be able to show, to the satisfaction of the EMA, the FDA, or regulatory authorities in other countries that lomitapide is safe and effective in pediatric patients, particularly since we are not using the clinical study design requested by the FDA for such purpose, and we may never receive approval for this indication in any country. The lack of approval to market lomitapide for the pediatric HoFH population may limit our product revenue potential. In addition, given that we have declined to conduct the study requested by the FDA, we will not be entitled to the six months of additional exclusivity available for conducting a study that is the subject of a Written Request issued by the FDA.

Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results or the results of other clinical, preclinical or nonclinical studies. In addition, a clinical trial may be suspended or terminated by us, the FDA, the competent authorities of the EU Member States and other countries, the IRBs or the Ethics Committees at the sites, or a data safety monitoring board overseeing the clinical trial at issue, or other regulatory authorities due to a number of factors, including:

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failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

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inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities;

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unforeseen safety issues or lack of effectiveness; and

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lack of adequate funding to continue the clinical trial.

Positive results in preclinical studies and earlier clinical trials of our products or product candidates may not be replicated in later clinical trials, which could result in development delay or a failure to obtain marketing approval or affect market acceptance.

Positive results in preclinical or clinical studies of lomitapide, metreleptin or any other product candidate that we acquire, license or develop may not be predictive of similar results in humans during further clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, there is, for example, a possibility that our clinical program to support approval of lomitapide in Japan in adult patients with HoFH, our planned clinical study of lomitapide in pediatric HoFH patients, or any potential future clinical development of metreleptin in new indications may generate results that are not consistent with the results of the Phase 3 clinical study for the product or other relevant studies. The results of such clinical trials may not be sufficient to gain approval of lomitapide for adult HoFH patients in Japan or for pediatric HoFH patients, particularly, in the case of the pediatric trial, since we are not using the clinical study design requested by the FDA for such purpose, or for metreleptin in any new indication. In addition, given that we have declined to conduct the study requested by the FDA, we will not be entitled to the six months of additional exclusivity available for conducting a study that is the subject of a Written Request issued by the FDA. Our preclinical studies or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials. Moreover, preclinical and clinical data can be susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain FDA or other regulatory approval for their products.

Changes in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, as a result of which we may need to amend clinical trial protocols. Amendments may require us to resubmit our clinical trial protocols to the FDA, IRBs, Ethics Committees or the competent authorities of the EU Member States for review and approval, which may impact the cost, timing or successful completion of a clinical trial. If we experience delays in completion of, or if we terminate, any of our previous clinical trials of our products or generate results that differ from earlier clinical trial results, the commercial prospects for lomitapide or metreleptin may be harmed.

If we fail to obtain or maintain orphan drug exclusivity for our products in any country where exclusivity is available, we will have to rely on our data and marketing exclusivity, if any, and on our intellectual property rights, to the extent there is coverage in such country, which may reduce the length of time that we can prevent competitors from selling generic versions of our products.

We have obtained orphan drug exclusivity for JUXTAPID in the U.S. for the treatment of HoFH. We also have orphan drug exclusivity for MYALEPT in the U.S. for the treatment of GL. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewer than 200,000 in the U.S. In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application for the “same drug” for the same orphan indication during the exclusivity period, except in very limited circumstances. For small molecule drugs, the FDA defines “same drug” as a drug that contains the same active moiety and is intended for the same use as the drug in question. For biologic drugs, the FDA defines “same drug” as a drug that contains the same principal molecular structural features (but not necessarily all of the same structural features) and is intended for the same use as a previously approved drug. A designated orphan drug may

not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

Metreleptin also qualifies for 12 years of exclusivity from the date of approval under the Biologics Price Competition and Innovation Act of 2009 (“BPCI Act”). Under the BPCI Act, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original reference product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing reference product. While it is uncertain when such processes intended to implement the BPCI Act may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for metreleptin. There is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider metreleptin to be a reference product for competing products, potentially creating the opportunity for competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for metreleptin in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

The EC, following an opinion by the EMA, grants orphan designation to promote the development of products that may offer therapeutic benefits for life-threatening or chronically debilitating conditions affecting not more than five in 10,000 people in the EU. Metreleptin has received orphan drug designation in the EU for the treatment of acquired GL, congenital GL, familial partial lipodystrophy, and acquired partial lipodystrophy. Medicinal products benefiting from orphan designation are, following grant of marketing authorization, provided ten years of marketing exclusivity. This exclusivity may be reduced to six years if the designation criteria are no longer met. Despite the prevalence rate, we do not have orphan drug exclusivity for lomitapide in the treatment of HoFH in the EU since the EMA views the relevant condition, for orphan designation purposes, to include both HoFH and HeFH. Our failure to obtain orphan designation for lomitapide for the treatment of HoFH in the EU means that we will not have the benefit of the orphan market exclusivity for this indication in the EU, and, as a result, will need to rely on our intellectual property rights and other exclusivity provisions. Lomitapide qualifies as an innovative medicinal product in the EU. We believe that metreleptin will also qualify as an innovative medicinal product if it is approved in the EU. Innovative medicinal products authorized in the EU on the basis of a full marketing authorization application (as opposed to an application for marketing authorization of a generic medicinal product that relies on the results of pre-clinical and clinical trials in the marketing authorization dossier for another, previously approved innovative medicinal product) are entitled to eight years’ data exclusivity. During this period, applicants for approval of generics of these innovative products cannot rely on data contained in the marketing authorization dossier submitted for the innovative medicinal product. Innovative medicinal products are also entitled to ten years’ market exclusivity, which runs concurrently with the data exclusivity period. During this ten-year period no generic medicinal product can be placed on the EU market. The ten-year period of market exclusivity can be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder for the innovative product obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. If we do not obtain data exclusivity for our products, our business may be materially harmed.

In Mexico, COFEPRIS, the regulatory authority in Mexico, granted JUXTAPID approval as an orphan drug because HoFH is a disease that affects less than five in 10,000 people in Mexico. Applicable Mexican legislation also provides five years post-approval data protection to approved products. In addition, we have received orphan drug designation for lomitapide in the treatment of HoFH from Japan’s Ministry of Labour, Health and Welfare and from South Korea’s Ministry of Food and Drug Safety. We have also received rare disease designation from Taiwan’s Ministry of Health and Welfare for lomitapide in the treatment of HoFH. Pharmaceuticals approved as orphan drugs in Taiwan are granted ten years of post-approval marketing exclusivity. Metreleptin also has orphan drug exclusivity in Japan where Shionogi has rights to market metreleptin under a distribution agreement assigned to us as part of our acquisition of metreleptin assets and rights. Shionogi received marketing and manufacturing approval in Japan for metreleptin for lipodystrophy in March 2013.

There are many other countries, including some key markets for lomitapide, like Brazil, in which we do not have intellectual property coverage for our products, and where neither orphan drug exclusivity nor data and marketing exclusivity is available.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. In the U.S., even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.

Recent federal legislation and actions by state and local governments may permit re-importation of drugs from foreign countries into the U.S., including foreign countries where the drugs are sold at lower prices than in the U.S. Similarly, purchasers in the EU are permitted to purchase products in one EU Member State and import it into another EU Member State where the price may be higher. These practices could materially adversely affect our operating results and our overall financial condition.

The Medicare Prescription Drug, Improvement and Modernization Act contains provisions that may change importation laws and expand pharmacists’ and wholesalers’ ability to import lower priced versions of an approved drug and competing products from Canada, where there are government price controls. These changes to U.S. importation laws, which will not take effect unless and until the Secretary of Health and Human Services certifies that the changes will pose no additional risk to the public’s health and safety, may result in a significant reduction in the cost of products to consumers. While the Secretary of Health and Human Services has not yet announced any plans to make this required certification, we may ultimately face the risk that a distributor or other purchaser of JUXTAPID or MYALEPT in the U.S. will be permitted to import lower priced product from a country outside the U.S. that places price controls on pharmaceutical products. This risk may be particularly applicable to JUXTAPID and MYALEPT as drugs that currently command premium prices, and especially to JUXTAPID, as a drug that is formulated for oral delivery. In addition, some states and local governments have implemented importation schemes for their citizens and, in the absence of federal action to curtail such activities, other states and local governments may launch importation efforts.

In the EU, a purchaser cannot be restricted from purchasing a medicine in one EU Member State and importing the product into another EU Member State in which it is also subject to marketing authorization, which is called parallel importing. As a result, a purchaser in one EU Member State may seek to import lomitapide from another EU country where lomitapide is sold at a lower price.

The re-importation of lomitapide or metreleptin into the U.S. market from a foreign market and the parallel importation of lomitapide, and, if approved, metreleptin, among countries of the EU could negatively impact our revenue and anticipated financial results, possibly materially.

We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.

The use of any product in clinical trials and the sale of any product for which we have or obtain marketing approval expose us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers or others selling or otherwise coming into contact with our product and product candidates. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:

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decreased demand for our products and any product candidate for which we obtain marketing approval;

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impairment of our business reputation and exposure to adverse publicity;

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increased warnings on product labels;

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withdrawal of clinical trial participants;

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costs as a result of related litigation;

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distraction of management’s attention from our primary business;

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substantial monetary awards to patients or other claimants;

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loss of revenue; and

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the inability to successfully commercialize our products or any product candidate for which we obtain marketing approval.

We have obtained product liability insurance coverage for both our clinical trials and our commercial exposures with a $25.0 million annual aggregate coverage limit. However, our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. On occasion, large judgments have been awarded in class action lawsuits relating to drugs that had unanticipated side effects or warnings found to be inadequate. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial. A product liability claim or series of claims brought against us could harm our reputation and cause our stock price to decline and, if the claim is successful and judgments exceed our insurance coverage, could have a material adverse impact on our business, financial condition, results of operations and prospects.

A variety of risks associated with our international business operations could materially adversely affect our business.

In each country outside the U.S. in which lomitapide is approved, or where we are making lomitapide or metreleptin available on a named patient or compassionate use basis before it has obtained marketing approval, we are subject to additional risks related to entering into international business operations, including:

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differing regulatory requirements for drug approvals in foreign countries;

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pricing, pricing deals and reimbursement approvals that have a negative impact on our global pricing strategy;

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potentially reduced protection for intellectual property rights;

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the potential for parallel importing;

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unexpected changes in tariffs, trade barriers and regulatory requirements;

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economic weakness, including inflation, or political instability in particular foreign economies and markets;

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compliance with foreign or U.S. laws, rules, regulations or industry codes, including data privacy requirements, labor relations laws, anti-competition regulations, import, export and trade restrictions, and required reporting of payments to healthcare professionals and others;

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negative consequences from changes in applicable tax laws;

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foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

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workforce uncertainty in countries where labor unrest is more common than in the U.S.;

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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

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dependence upon third parties to perform distribution, quality control testing, collections and other aspects of the distribution, supply chain and commercialization of our products that are required to be performed in order to conduct such activities in international markets, and our ability to effectively manage such third parties; and

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business interruptions resulting from geopolitical and economic events or actions, including social unrest, economic crises, war, terrorism, or natural disasters.

In addition to the foregoing, we are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (the “FCPA”) and various other anti-corruption laws. The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business and/or other benefits. While we have certain training programs, policies and guidelines for our employees and third parties to promote compliance with laws prohibiting corrupt business conduct, we continue to review the effectiveness of our programs, policies and guidelines and seek ways as we grow and our business becomes more complex to further strengthen our compliance controls in this area.

Our activities outside the U.S. or those of our employees, licensees, distributors, manufacturers, CROs, or other third parties who act on our behalf or with whom we do business could subject us to investigation or prosecution under such foreign or U.S. laws. For example, federal and São Paulo authorities in Brazil are each conducting an investigation to determine whether there have been any violations of Brazilian anti-corruption laws in connection with prescriptions of lomitapide written in Brazil. If our activities in Brazil or in any other country outside the U.S. are found as part of these investigations or any other investigation to be in violation of any laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages or fines, or, under certain circumstances, we could be barred from further named patient sales in such country. In addition, the investigations in Brazil have resulted in a slower turn-around between price quotation and orders, including re-orders, from the federal government, and, in some cases, delays in orders and re-orders from the government of São Paulo after a patient has obtained access to JUXTAPID through the judicial process. These delays may continue, and we may experience other delays or suspension of the ordering process. Similarly, we have faced, and may continue to face, a reluctance of physicians to prescribe JUXTAPID, and some patients to take or stay on JUXTAPID, while the investigations are ongoing. Recently, we have observed an increase in the drop-out rate of patients on JUXTAPID in Brazil, and we believe that part of the reason for the increase is due to the investigations. These issues could negatively affect our ability to generate product revenue consistent with our expectations, and may impact our ability to achieve and maintain profitability or maintain cash-flow positive operations.

Despite our ongoing efforts to ensure compliance with foreign and domestic laws, our employees, agents, and companies with which we do business may nevertheless take actions in violation of our policies, for which we may be ultimately held responsible. If so, we may be subject to criminal or civil penalties or other punitive measures, including restrictions on our ability to continue selling in certain markets. Any such outcome, or any allegation or investigation regarding such actions involving us, could harm our reputation and have a material adverse impact on our business, financial condition, results of operations and prospects.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers, business partners, healthcare professionals and patients. This includes, where required or permitted by applicable laws, personally identifiable information. The secure maintenance of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation which could adversely affect our business.

Risks Related to Our Intellectual Property

If our patent position does not adequately protect our product and product candidates, others could compete against us more directly, which would harm our business, possibly materially.

Our lomitapide patent portfolio consists of five issued U.S. patents and issued patents in Europe, Canada, Israel, Australia, New Zealand, South Korea and Japan and pending applications in the U.S., Australia, Japan, Canada, and India, all of which have been licensed to us in a specific field. We have filed an application seeking a five year patent term extension for our U.S. patent covering the composition of matter of lomitapide, which was originally scheduled to expire in early 2015. The U.S. Patent and Trademark Office (the “PTO”) has not yet completed its process with respect to the application for patent term extension for this patent, but it granted an interim extension of the patent to early 2016 to provide sufficient time for the PTO and the FDA to make a final determination regarding the patent term extension. The non-U.S. patents directed to the composition of matter of lomitapide issued in certain jurisdictions of the EU, Canada, Israel and Japan are scheduled to expire in 2016. Our two method-of use-patents in the U.S., covering certain dosing regimens for lomitapide, expire in 2027 and 2025, respectively. The non-U.S. patents directed to methods-of-use issued in certain jurisdictions of the EU, Japan, and South Korea are scheduled to expire in 2025. The method of use patent may be eligible for up to three years of supplemental protection in certain European countries, and we are seeking such protection in the countries in which LOJUXTA is approved, on a country-by-country basis. An opposition was filed by a third-party with respect to the European method-of-use patent, but such opposition has since been revoked.

Our metreleptin patent portfolio consists of three issued U.S. patents and issued patents in Europe, Canada, Israel, Australia, New Zealand, Mexico, China, South Korea and Japan, all of which have been licensed to us. The U.S. patent covering the composition of matter of metreleptin is scheduled to expire in 2016. The non-U.S. patents directed to the composition of matter of metreleptin issued in certain European countries, Canada, Israel, Australia, New Zealand, China, South Korea and Japan are scheduled to expire in August 2015. The patent family covering metreleptin methods of use, directed to treating human lipoatrophy, is co-owned by Amgen, University of Texas and the National Institutes of Health, and is sublicensed to us from Amgen. We are in discussions with one of the co-owners to obtain the co-owner’s consent to the sublicense granted by Amgen, and plan to commence discussions regarding in-license of the co-owners’ rights. We do not have a direct license from this co-owner. If we do not obtain consent to Amgen’s sublicense from each other co-owner or obtain a direct license, we may be limited in our ability to market metreleptin in certain foreign jurisdictions or in granting further sublicenses. Further, if we are unable to acquire, license or maintain license and/or enforcement rights from each of the co-owners, we may be prevented from enforcing these patent rights against a competitor in the U.S. or in foreign jurisdictions. The two method of use patents in the U.S. expire in 2022 and 2023, and the non-U.S. patents issued in certain European countries, Canada, and Australia, and pending in Japan, expire in 2022. An application for a patent term extension in the U.S. with respect to MYALEPT has been filed which, if granted, we will apply to either the U.S. composition of matter patent or the method of use patent, to extend one of these patents by 1,206 days.

Our commercial success with respect to lomitapide and metreleptin will depend significantly on our ability to protect our existing patent position with respect to lomitapide and metreleptin, as well as our ability to obtain and maintain adequate protection of other intellectual property for our technologies, product candidates and any future products in the U.S. and other countries. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve our expected financial results. Our ability to use the patents and patent applications licensed to us to protect our business will also depend on our ability to comply with the terms of the applicable licenses and other agreements and to obtain requisite licenses. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the U.S., and we may encounter significant problems in protecting our proprietary rights in these countries.

There are many countries, including some key markets for lomitapide and metreleptin, like Brazil, in which we do not have intellectual property coverage, and where neither orphan drug exclusivity nor data and marketing exclusivity is available.

The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable, invalidated or circumvented. U.S. patents and patent applications may also be subject to interference proceedings, ex parte reexamination, inter partes review and post-grant review proceedings and supplemental examination and may be challenged in district court. Patents granted in certain other countries may be subjected to opposition or comparable proceedings lodged in various national and regional patent offices. These proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, re-examination, opposition, post-grant review, inter partes review, supplemental examination or revocation proceedings may be costly. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies, product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

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we will be able to successfully commercialize our product before some or all of our relevant patents expire, or in countries where we do not have patent protection;

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we or our licensors were the first to make the inventions covered by each of our pending patent applications;

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we or our licensors were the first to file patent applications for these inventions;

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others will not independently develop similar or alternative technologies or duplicate any of our technologies;

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any of our pending patent applications or those we have licensed will result in issued patents;

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any of our patents or those we have licensed will be valid or enforceable;

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any patents issued to us or our licensors and collaborators will provide a basis for any additional commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

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we will develop additional proprietary technologies or product candidates that are patentable; or

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the patents of others will not have an adverse effect on our business.

If we do not obtain protection under the Hatch-Waxman Act, the BPCI Act and similar foreign legislation by extending the patent terms and obtaining regulatory exclusivity for our products or product candidates, our business may be materially harmed.

The Hatch-Waxman Act established a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. We have filed for an application seeking a five year patent term extension for our U.S. patent covering the composition of matter of lomitapide, which was originally scheduled to expire in early 2015. The PTO process has not yet been completed with respect to the application for patent term extension for this patent, but the PTO granted an interim extension of the patent to early 2016 to provide sufficient time for the PTO and the FDA to make a final determination regarding the patent term extension. An application for a patent term extension in the U.S. with respect to MYALEPT has been filed which, if granted, we will apply to either the U.S. composition of matter patent or the method of use patent, to extend one of these patents by 1,206 days. We are also seeking three years of supplemental protection for our EPO method-of-use patent in certain EPO countries in which LOJUXTA is approved. However, we may not be granted an extension in a particular country if we, for example, fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the applicable time period of the extension or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration of the term of any such extension is less than we request, our competitors, including manufacturers of generic alternatives, may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

In addition, the FDA has classified lomitapide as a new chemical entity (“NCE”) in the U.S. and it is therefore eligible for data exclusivity under the Hatch-Waxman Act. A drug can be classified as a NCE if the FDA has not previously approved any other new drug containing the same active moiety. An NCE that is granted marketing approval may, even in the absence of patent protection, be eligible for five years of data exclusivity in the U.S. following marketing approval. This data exclusivity precludes submission of 505(b)(2) applications or Abbreviated New Drug Applications (“ANDA”) that reference the NCE application for four years if certain patents covering the NCE or its method-of-use expire or are challenged by a generic applicant.

With the enactment of the BPCI Act as part of the Patient Protection and Affordable Care Act, an abbreviated pathway for the approval of biosimilar and interchangeable biological products was created. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing reference product. Under the BPCI Act, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original reference product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement the BPCI Act may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for metreleptin.

While metreleptin, which is approved under a BLA, qualifies for the 12-year period of exclusivity, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider metreleptin to be a reference product for competing products, potentially creating the opportunity for competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for metreleptin in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Innovative medicinal products authorized in the EU on the basis of a full marketing authorization application (as opposed to an application for marketing authorization that relies on data in the marketing authorization dossier for another, previously approved medicinal product) are entitled to eight years’ data exclusivity. During this period, applicants for approval of generics of these innovative products cannot rely on data contained in the marketing authorization dossier submitted for the innovative medicinal product. Innovative medicinal products are also entitled to ten years’ market exclusivity. During this ten-year period no generic medicinal product can be placed on the EU market. The ten-year period of market exclusivity can be extended to a maximum of 11 years if, during the first eight years of those ten years, the Marketing Authorization Holder for the innovative product obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. If we are not able to gain or exploit the period of data exclusivity, we may face significant competitive threats to our commercialization of these compounds from other manufacturers, including the manufacturers of generic alternatives. Further, even though

our compounds are considered to be NCEs and we were able to gain the period of data exclusivity, another company nevertheless could also market another version of the drug if such company submits a full NDA or a full application for marketing authorization in the EU with a complete human clinical trial program and obtains marketing approval of its product.

If we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology, products and any product candidates could be significantly diminished.

We may rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA is currently considering whether to make additional information publicly available on a routine basis, and the EMA is planning to amplify its disclosure rules. These changes could mean that information that we may consider to be trade secrets or other proprietary information may be disclosed, and it is not clear at the present time how the FDA’s and EMA’s disclosure policies may change in the future, if at all. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing our products and any product candidates.

Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. There could be issued patents of which we are not aware that our products or product candidates infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found to infringe. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products or product candidates infringe. For example, pending applications may exist that provide support or can be amended to provide support for a claim that results in an issued patent that our product infringes.

The pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may obtain patents in the future and allege that our products or product candidates or the use of our technologies infringes these patent claims or that we are employing their proprietary technology without authorization. Likewise, third parties may challenge or infringe upon our existing or future patents.

Proceedings involving our patents or patent applications or those of others could result in adverse decisions regarding:

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the patentability of our inventions relating to our product or any product candidates; and

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the enforceability, validity or scope of protection offered by our patents relating to our product or any product candidates.

Even if we are successful in these proceedings, we may incur substantial costs and divert management’s time and attention in pursuing these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion.

In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have infringed patents declared invalid, we may:

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incur substantial monetary damages;

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encounter significant delays in bringing our product candidates to market; and

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be precluded from manufacturing or selling our product candidates.

In such event, our business could be adversely affected, possibly materially.

If we fail to comply with our obligations in our license agreements for our product candidates, we could lose license rights that are important to our business.

Our existing license agreements with respect to lomitapide and metreleptin impose, and we expect any future license agreements that we enter into will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with such obligations, we could lose license rights that are important to our business.

In addition, our license agreement with The Trustees of the University of Pennsylvania (“UPenn”) limits the field of use for lomitapide as a monotherapy or in combination with other dyslipidemic therapies for treatment of patients with HoFH, or for the treatment of patients with severe hypercholesterolemia unable to come within 15% of the National Cholesterol Education Program (“NCEP”) LDL-C goal on maximal tolerated oral therapy, as determined by the patient’s prescribing physician, or with severe combined hyperlipidemia unable to come within 15% of the NCEP non-HDL-C goal on maximal tolerated oral therapy, as determined by the patient’s prescribing physician, or with severe hypertriglyceridemia unable to reduce triglycerides (“TG”) levels to less than 1,000 mg/dL on maximal tolerated therapy. If we fail to comply with the obligations and restrictions under our license agreements, including the limited field of use under our license agreement with UPenn, the applicable licensor may have the right to terminate the license, in which case we might not be able to market any product that is covered by the licensed patents. Any breach or termination of our license agreement with UPenn would have a particularly significant adverse effect on our business because of our reliance on the commercial success of lomitapide. Although we intend to comply with the restrictions on field of use in our license agreement with UPenn by seeking product labels for lomitapide that are consistent with the license field, we may still be subject to the risk of breaching the license agreement if we are deemed to be promoting or marketing lomitapide for an indication not covered by any product label that we are able to obtain. In addition, because this restriction on the field of use limits the indications for which we can develop lomitapide, the commercial potential of lomitapide may not be as great as without this restriction.

Risks Related to Our Dependence on Third Parties

We rely on third parties to conduct our clinical trials and registry studies and to perform related services, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such clinical trials. We may become involved in commercial disputes with these parties.

We do not have the ability to independently conduct clinical trials or registry studies, and we rely on third parties such as CROs, medical institutions, academic institutions, and clinical investigators to perform this function. Our reliance on these third parties for clinical development activities reduces our control over these activities. However, if we sponsor clinical trials, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA and the competent authorities in the EU and Japan require us to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties does not relieve us of these responsibilities and requirements. Furthermore, these third parties may have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data they provide is compromised due to the failure to adhere to regulatory requirements or our clinical trial protocols, or for other reasons, our development programs may be extended, delayed or terminated, additional marketing approvals for lomitapide, metreleptin or any other product candidate may be delayed or denied in the targeted indication or jurisdiction, and we may be delayed or precluded in our efforts to successfully commercialize lomitapide, metreleptin or any other product for targeted indications or in the targeted jurisdiction.

In addition, we may from time to time become involved in commercial disputes with these third parties, for example regarding the quality of the services provided by these third parties or our ultimate liability to pay for services they purported to provide, or the value of such services. In some cases, we may be required to pay for work that was not performed to our specifications or not utilized by us, and these obligations may be material.

We do not have drug research or discovery capabilities, and will need to acquire or license existing drug compounds from third parties to expand our product candidate pipeline.

We currently have no drug research or discovery capabilities. Accordingly, if we are to expand our product candidate pipeline, we will need to acquire or license existing compounds from third parties. We will face significant competition in seeking to acquire or license promising drug compounds. Many of our competitors for such promising compounds may have significantly greater financial resources and more extensive experience in preclinical testing and clinical trials, obtaining regulatory approvals and manufacturing and marketing pharmaceutical products, and thus, may be a more attractive option to a potential licensor than us. In addition, our intellectual property rights under our license agreement with UPenn with respect to lomitapide are limited to specified patient populations, such as patients with HoFH, severe hypercholesterolemia or severe hypertriglyceridemia. Accordingly, if we wish to expand the development of lomitapide to address indications that are outside of the specified patient populations, we would need to expand our license agreement with UPenn and potentially acquire rights from Bristol-Myers Squibb Company (“BMS”). If we are unable to acquire or license additional promising drug compounds or expand our rights to lomitapide should we wish to do so, we will not be able to expand our product candidate pipeline, which may adversely impact our future profitability or growth prospects.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to hire and retain our key executives and to attract, retain, and motivate qualified personnel.

Our success depends upon the principal members of our executive, commercial, medical, development, and regulatory teams. We have entered into employment agreements with certain members of our executive, commercial, medical, development, and regulatory teams, but any employee may terminate his or her employment with us at any time. The loss of the services of any of these persons might impede the achievement of our development and commercialization objectives.

In July 2015, we announced the resignation of our Chief Executive Officer and Chief Operating Officer and appointment of Sandford D. Smith, a director of the Company, to act as Chief Executive Officer while the Board of Directors conducts a search to identify a successor. With any change in leadership, there is a risk to retention of employees, including other members of senior management, as well as the potential for disruption to business operations, initiatives, plans and strategies.

Recruiting and retaining qualified personnel will be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel.

In addition, we need to continue to establish and maintain effective disclosure and financial controls, particularly as our business grows and continues to expand internationally. Failure to maintain adequate controls could impact the quality and integrity of our financial statements and cause us reputational harm.

In addition, we rely on consultants and advisors, including scientific, manufacturing, clinical, regulatory, pharmacovigilance and sales and marketing advisors, to assist us in formulating our development, manufacturing and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

We will need to grow our organization, and we may encounter difficulties in managing this growth, which could disrupt our operations.

As of June 30, 2015, we had 307 employees, and we expect to continue to experience significant growth in the number of our employees and the scope of our operations. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and develop additional qualified personnel. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities, and devote a substantial amount of time to managing these growth activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and develop additional qualified personnel, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs, and may divert financial resources from other projects. If our management is unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize lomitapide and metreleptin successfully, and to compete effectively will depend, in part, on our ability to effectively manage any future growth.

Risks Related to Our Financial Position and Capital Requirements

We have incurred significant operating losses since our inception, and have not yet achieved profitability for any fiscal year.

We have a limited operating history. To date, we have primarily focused on developing and commercializing lomitapide, and since January 2015, we have also focused on the integration of metreleptin operations and commercialization of MYALEPT. We have funded our operations to date primarily through proceeds from our initial public offering and the proceeds from our public common stock offerings and our August 2014 convertible debt offering, revenues from JUXTAPID, proceeds from our long-term debt and our private placement of convertible preferred stock. We have incurred losses in each year since our inception in February 2005. As of June 30, 2015, we had an accumulated deficit of approximately $322.4 million. Substantially all of our operating losses resulted from costs incurred in connection with our development programs and from selling, general and administrative costs associated with our operations. The losses we have incurred to date, combined with potential future losses, have had and may continue to have an adverse effect on our stockholders’ equity and working capital. We expect our expenses to substantially increase in the near-term as a result of continued spending on the commercialization of lomitapide and metreleptin in the U.S. and in the key countries in which lomitapide is currently approved, or in which lomitapide or metreleptin may be approved in the future, and expected distribution of our products in Brazil and certain other countries as part of named patient supply or compassionate use; manufacturing costs for both metreleptin and lomitapide; hiring of additional key personnel in the U.S. and other countries; an ongoing clinical study to support a potential application for marketing approval of lomitapide in Japan in adult patients with HoFH; a planned clinical study of lomitapide in the treatment of pediatric patients with HoFH; the conduct of our observational cohort studies and other post-marketing commitments to the FDA for lomitapide and metreleptin, and to the EMA for lomitapide; the conduct of any post-marketing commitments imposed by regulatory authorities in countries outside the U.S. and EU where our products are or may be approved; other possible clinical development activities for our products; required regulatory activities for our products; and business development activities. We expect to incur significant royalties, sales, marketing, and outsourced manufacturing expenses, as well as continued research and development expenses. In addition, we have incurred, and expect to continue to incur, additional costs associated with operating as a public company and in connection with ongoing government investigations and a securities class action lawsuit, as described in detail in Part II, Item 1—“Legal Proceedings.”

The MYALEPT transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill. We have preliminarily valued the acquired assets and liabilities based on their estimated fair value. These estimates are subject to change as additional information becomes available. The completion of the valuation of the acquired assets and liabilities may result in adjustments to the carrying value of MYALEPT’s assets and liabilities, revision of useful lives of intangible assets, the determination of any residual amount that will be allocated to goodwill and the related tax effects. The related amortization of acquired assets is also subject to revision based on the final valuation. Any adjustments to the preliminary fair values will be made as such information becomes available but no later than January 9, 2016, and may affect our financial statements materially.

Because of the numerous risks and uncertainties associated with developing and commercializing pharmaceutical products, we are unable to predict with certainty the extent of any future losses or when we will become profitable, if at all.

We do not have a long history of generating revenue from sales of our products, and may never be profitable.

Our ability to become profitable depends upon our ability to generate significant revenue. We do not have a long history of generating revenue from lomitapide, and we had no history of generating revenue from MYALEPT before January 2015. We may never generate substantial revenues from the sale of MYALEPT. Our ability to generate revenues sufficient to achieve profitability currently depends on a number of factors, including our ability to:

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effectively market, sell and distribute lomitapide and metreleptin in the U.S.;

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continue to have named patient sales of lomitapide in Brazil and other key countries where such sales can occur as a result of the FDA approval or of the marketing authorization granted for lomitapide in the EU;

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obtain named patient sales of metreleptin in Brazil and other key countries where such sales can occur as a result of the FDA approval;

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obtain timely pricing and reimbursement approval of lomitapide in the key countries outside the U.S. where lomitapide is approved at acceptable prices and without significant restrictions, discounts, caps or other cost containment measures, and to effectively launch lomitapide in those countries;

•

obtain timely approval of lomitapide in other key international markets as a treatment for patients with HoFH, and obtain timely approval of metreleptin in the EU and other key international markets as a treatment for patients with GL, without onerous restrictions or limitations in the resulting label, and successfully obtain timely pricing approval for the relevant product in such markets at acceptable prices and without onerous restrictions or caps;

•

obtain and maintain market acceptance by patients, physicians and payers for our products as a treatment for the approved indication; and minimize the number of patients who are eligible to receive but decide not to commence treatment with our products, or who discontinue treatment, including with lomitapide, due to tolerability issues, and with metreleptin, due to its route of administration as an injection, through activities such as patient support programs, to the extent permitted in a particular country;

•

effectively estimate the size of the total addressable market for our products;

•

maintain reimbursement policies for JUXTAPID and MYALEPT in the U.S. that do not impose significant restrictions on reimbursement and a payor mix that does not include significantly more Medicaid patients than the current payor mix; and

•

minimize the expected negative impact on sales of lomitapide given the introduction of PCSK9 inhibitors starting in July 2015 in the U.S. and the EU.

Our products may not gain or maintain long-term market acceptance or achieve or maintain commercial success. In addition, we anticipate incurring significant costs associated with commercializing our products, and meeting our post-marketing commitments, in connection with our on-going clinical efforts related to our products and in connection with defense against government investigations and other legal actions. We may not continue to generate substantial revenue from sales of lomitapide, or generate substantial revenue from sales of metreleptin. We may not achieve profitability. If we are unable to continue to generate significant product revenue, we will not become profitable, and may be unable to continue operations without additional funding.

We may need to raise substantial additional capital in the future. If additional capital is not available when we need it, we will have to delay, reduce or cease operations.

The metreleptin acquisition significantly diminished the capital we had to fund anticipated and unanticipated expenses. We may seek additional capital through debt or equity financing to strengthen our cash position and fund our operations. We may not be able to obtain additional capital when we need it or such capital may not be available on terms that are favorable to us. We may also pursue opportunities to obtain additional external financing in the future through lease arrangements related to facilities and capital equipment, collaborative research and development agreements, and license agreements, in order to, among other things, finance additional potential product acquisitions and maintain sufficient resources for unanticipated events. Any such additional financing may not be available when we need it or may not be available on terms that are favorable to us. Our need to raise additional capital in the future will depend on many factors including:

•

the level of physician, patient and payer acceptance of our products;

•

the success of our commercialization efforts and the level of revenues we generate from sales of our products in the U.S.;

•

the extent of the expected negative impact of the introduction of PCSK9 inhibitor products on sales of lomitapide, beginning in July 2015 in the U.S. and the EU;

•

the timing and cost of an anticipated clinical trial to evaluate lomitapide for treatment of pediatric patients with HoFH;

•

the timing and cost of completion of our clinical study of lomitapide in HoFH in Japanese patients, the results of the trial, the timing of our potential application for marketing approval in Japan, and the decision of regulatory authorities with respect to such application;

•

the timing and costs of future business development opportunities;

•

the timing and cost of potential future clinical development of metreleptin in additional indications and possible lifecycle management opportunities for lomitapide;

•

the cost of filing, prosecuting and enforcing patent claims;

•

the costs of our manufacturing-related activities and the other costs of commercializing our products;

•

the costs associated with ongoing government investigations and lawsuits, including legal expenses and any damages, settlement amounts, fines or other payments that may result if we are unsuccessful in our efforts to defend ourselves, or decide to settle;

•

the levels, timing and collection of revenue received from sales of our products in the future;

•

the timing and costs of satisfying our debt obligations, including interest payments and any amounts due upon the maturity of such debt;

•

the timing and cost of other clinical development activities.

We have incurred significant indebtedness, which may affect our ability to raise additional capital in the future. In August 2014, we issued $325.0 million of 2.00% convertible senior notes due August 15, 2019 (the “Convertible Notes”). Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2015. In June 2015, at the Annual Meeting of Stockholders, our stockholders voted to approve the Company’s option to settle conversions of the Convertible Notes in cash, shares of our common stock or through a combination of cash and common stock, at our election. In connection with the issuance of the Convertible Notes, we entered into convertible bond hedges, which are generally expected, but not guaranteed, to reduce the potential dilution and/or offset the cash payments we may elect to make upon conversion of the Convertible Notes. We may not have sufficient capital to elect to make cash payments upon conversion of the Convertible Notes. Electing to settle conversions of our Convertible Notes in shares would have a dilutive effect on our shareholders.

On January 9, 2015, the Loan and Security Agreement we originally entered into with Silicon Valley Bank in 2012 was amended to provide for a $25.0 million term loan (the “2015 Term Loan Advance”) with per annum interest of 3.0% and a revolving line of credit of up to $15.0 million, subject to a borrowing base of 80% of eligible accounts minus certain reserves. The amendment provides for interest-only payments on the 2015 Term Loan Advance through January 31, 2017, and, starting on February 1, 2017, payment of principal in 30 equal monthly installments. The maturity date of the 2015 Term Loan Advance is the earlier of (a) July 1, 2019 and (b) the maturity date of our convertible notes. In addition, the 2015 Term Loan Advance is subject to a final payment of $1.25 million upon maturity or prior payment thereof. The Loan and Security Agreement provides for us to achieve certain covenants, including a specified level of liquidity and either a minimum quarterly revenue level or a minimum free cash flow level. We believe that we are currently in compliance with our covenants under the Loan and Security Agreement. If it is determined that we have in the past breached, or we breach in the future, a covenant under the Loan and Security Agreement, Silicon Valley Bank may have the right to accelerate the outstanding loans and take other remedies that would have a material adverse impact on our business.

We anticipate that our existing cash and cash equivalents will be sufficient to enable us to maintain our currently planned operations, including our continued development of lomitapide and metreleptin. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and, in light of the acquisition of metreleptin, we have significantly less capital to fund such unanticipated expenses.

If we are unable to obtain additional financing, including for purposes of settling conversions of the Convertible Notes, we may be required to reduce the scope of our planned development, sales and marketing efforts, which could harm our business, financial condition and operating results. The source, timing and availability of any future financing will depend principally upon equity and debt market conditions, interest rates and, more specifically, on the extent of our commercial success and the results of our future development efforts. Any additional sources of financing could involve the issuance of our equity securities, which would have a dilutive effect on our shareholders. There can be no assurance that external funds will be available on favorable terms, if at all.

We face certain litigation and government enforcement risks that could harm our business.

A federal securities class action lawsuit filed in January 2014 and amended in June 2015 alleges that the Company and certain of its former executive officers made certain misstatements and omissions during the first three quarters of 2014 related to the Company’s revenue projections for JUXTAPID sales for 2014, as well as data underlying those projections, in violation of the federal securities laws. An unfavorable outcome or settlement of this or any similar stockholder lawsuits that may be filed against us could have a material adverse effect on our financial position, liquidity or results of operations. Even if this lawsuit is not resolved against us, the uncertainty and expense associated with an unresolved lawsuit could adversely impact our business, financial condition and reputation. Litigation is costly, time-consuming and disruptive to normal business operations. The continued costs of defending this lawsuit could be significant. While we maintain directors’ and officers’ liability insurance that we believe to be applicable to this claim, certain costs, such as those below a retention amount, are not covered by our insurance policies. In addition, our insurance carriers could refuse to cover some or all of these claims in whole or in part. The continued defense of this lawsuit may also result in continued diversion of our management’s time and attention away from business operations, which could harm our business.

In late 2013, we received a subpoena from the United States Department of Justice, represented by the U.S. Attorney’s Office in Boston, requesting documents and other information pertaining to our promotion, marketing, and sale of JUXTAPID in connection with a government investigation of our practices. We are in the process of responding to the subpoena, and intend to continue to cooperate with the investigation. This investigation, if resolved adversely to us, including by settlement, could result in civil and/or criminal sanctions being levied against us or our employees, including significant fines, settlement amounts, sanctions, or other negative consequences that could have a material adverse effect on our business, financial condition, or results of operations. Even if we are able to resolve this matter without incurring significant payments or penalties, responding to the subpoena has been, and is expected to continue to be, costly and time-consuming. Moreover, this investigation could adversely impact our reputation, and may have a material adverse effect on our business, financial condition, results of operations, and stock price, and has diverted, and may continue to divert, the attention of our management from operating our business, or be disruptive to our employees, possibly resulting in employee attrition. In addition, the existence of the investigation and related activities has impacted, and may continue to impact, the willingness of some physicians to prescribe JUXTAPID. We are aware that federal and São Paulo authorities in Brazil are each conducting an investigation to determine whether there have been any violations of Brazilian anti-corruption laws in connection with prescriptions for lomitapide written in Brazil. If our operations in Brazil or in any other country in which we sell lomitapide through an expanded access program are found as part of this or any other investigation to be in violation of any laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, and fines, or under certain circumstances, we could be barred from further named patient sales in such country. In addition, the investigations in Brazil have resulted in a slower turn-around between price quotation and orders, including re-orders, from the federal government, and delays in orders or re-orders from the government of São Paulo after a patient has obtained access to JUXTAPID through the judicial process. These delays may continue, and we may also experience other delays or suspension of the ordering process. Similarly, we have faced, and may continue to and face, a reluctance of some physicians to prescribe JUXTAPID, and some patients to take or stay on JUXTAPID, while the investigations are ongoing. Recently, we have observed an increase in the number of patients discontinuing JUXTAPID in Brazil, and we believe that part of the reason for the increase is due to the investigations. These issues could negatively affect our ability to generate product revenue consistent with our expectations, and may impact our ability to achieve and maintain profitability or maintain cash-flow positive operations.

In late 2014, we received a subpoena from the SEC requesting certain information related to our sales activities and disclosures related to JUXTAPID. The SEC also has requested documents and information on a number of other topics, including documents related to the subject matter of the previously disclosed investigations by government authorities in Brazil into whether our activities in Brazil violated Brazilian anti-corruption laws. The investigation is continuing, and we are cooperating with the SEC. While we believe that we have the appropriate policies and procedures in place to ensure accurate financial reporting and compliance with SEC rules and regulations, we cannot predict when the SEC will conclude its investigation or the outcome of the investigation. We are also aware that the SEC has issued a request for information to our specialty pharmacy and to an independent 501(c)(3) entity to which we provided financial support for use by the entity in assisting eligible HoFH patients in accessing treatments. The requests generally seek documents related to interactions between us and the entity with respect to lomitapide, and, in the case of the 501(c)(3) entity, assistance offered by the 501(c)(3) entity to lomitapide patients.

During the first three quarters of 2013, we recorded approximately $300,000 of payments received from the 501(c)(3) entity on behalf of lomitapide patients as revenue, based on our evaluation of and consultations regarding the applicable accounting guidance. Upon further review of the applicable accounting guidance and additional consultations, we concluded in the fourth quarter of 2013 that such amounts should be recorded as a reduction to selling, general and administrative expenses rather than as revenue. We concluded that the amounts previously recorded as revenue during the first three quarters of 2013 were immaterial to our financial statements.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. For example, our existing stockholders may be diluted if the Convertible Notes we issued in August 2014 are converted by their holders. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.

Our limited operating history makes it difficult to evaluate our business and prospects.

We were incorporated in February 2005. Our operations to date have been limited to organizing and staffing our company and conducting product development activities, commercial-build and activities related to commercialization of lomitapide. We only began generating revenues in January 2013. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a longer operating history and more experience in generating revenue. In addition, as a relatively young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.

Changes in our effective income tax rate could adversely affect our results of operations, particularly once we utilize our remaining federal, state and foreign net operating loss, or NOL, carryforwards.

We are subject to federal and state income taxes in the U.S., as well as in many tax jurisdictions throughout the world. Tax rates in these jurisdictions may be subject to significant change. Our effective income tax rate can vary significantly between periods due to a number of complex factors including, but are not limited to: (i) interpretations of existing tax laws; (ii) the accounting for business combinations, including accounting for contingent consideration; (iii) the tax impact of existing or future healthcare reform legislation; (iv) changes in accounting standards; (v) changes in the mix of earnings in the various tax jurisdictions in which we operate; (vi) the outcome of examinations by the Internal Revenue Service and other jurisdictions; (vii) adjustments to income taxes upon finalization of income tax returns; (viii) the accuracy of our estimates for unrecognized tax benefits; (ix) the repatriation of non-U.S. earnings for which we have not previously provided for income taxes and (x) increases or decreases to valuation allowances recorded against deferred tax assets. If our effective tax rate increases, our operating results and cash flow could be adversely affected.

Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards (NOLs), and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We have triggered an “ownership change” limitation in 2005 and 2012 and may also experience ownership changes in the future as a result of the subsequent shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Any changes to existing accounting pronouncements or taxation rules or practices may cause adverse fluctuations in our reported results of operations or affect how we conduct our business.

A change in accounting pronouncements or taxation rules or practices can have a significant effect on our reported results and may affect our reporting of transactions completed before the change is effective. New accounting pronouncements, taxation rules and varying interpretations of accounting pronouncements or taxation rules have occurred in the past and may occur in the future. The change to existing rules, future changes, if any, or the need for us to modify a current tax or accounting position may adversely affect our reported financial results or the way we conduct our business.

Risks Related to our Common Stock

The market price of our common stock has been, and may continue to be, highly volatile.

Our stock price is volatile, and from October 22, 2010, the first day of trading of our common stock, to June 30, 2015, the trading prices of our stock have ranged from $9.00 to $101.00 per share. Our stock could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including the following:

•

the short-term or long-term success or failure of our commercialization of lomitapide and metreleptin in the U.S.;

•

the level of revenue we receive from named patient sales of our products in Brazil and other key countries where such sales can occur as a result of FDA approval of such products or the marketing authorization granted by the EC for lomitapide;

•

any unexpected hurdles in the commercialization or further development of metreleptin;

•

our ability to obtain timely pricing and reimbursement approval for lomitapide in the key countries of the EU and in the other countries in which lomitapide is, or may be, approved at acceptable price levels and on acceptable terms;

•

the extent of the expected negative impact of the introduction of PCSK9 inhibitor products on sales of lomitapide, beginning in July 2015;

•

the short-term or long-term success or failure of our commercialization of our products in key countries outside the U.S. in which we have or obtain approval, and the level of revenues we generate;

•

our ability to accurately forecast net product sales and operating expenses, and to meet such forecasts;

•

the timing and cost of potential future clinical development of metreleptin in additional indications;

•

any issues that may arise with our supply chain for our products;

•

any adverse regulatory decisions made with respect to our products;

•

any issues that may arise with respect to the safety of our products;

•

our ability to defend ourselves successfully in ongoing government investigations and against claims made in securities class action lawsuits, and, if we are unsuccessful in such defense or decide to settle, the type and amount of any damages, settlement amounts, fines or other payments or adverse consequences that may result;

•

any adverse actions or decisions related to our intellectual property or marketing or data exclusivity, including any third-party action to commence an inter partes proceeding or any action by a third party to gain approval of a generic or biosimilar product;

•

fluctuations in stock market prices and trading volumes of similar companies; and general market conditions and overall fluctuations in U.S. equity markets;

•

low trading volume and short interest positions in our stock;

•

international financial market conditions, including the on-going sovereign debt crisis in the EU;

•

variations in our quarterly operating results;

•

changes in our financial guidance or securities analysts’ estimates of our financial performance;

•

announcements of investigations or litigation, and updates to the status of investigations and litigation, or other notifications from enforcement or regulatory authorities related to our business or business practices;

•

announcements of clinical data, registrational submissions, product launches, new products, services or technologies, commercial relationships, acquisitions or other events by us or our competitors;

•

changes in or materially incorrect application of accounting principles;

•

issuance by us of new securities, or sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

•

the dilutive effect of our Convertible Notes or any other equity or equity-linked financings or alternative strategic arrangements;

•

additions or departures of key personnel;

•

success or failure of products within our therapeutic areas of focus;

•

discussion of us or our stock price by the financial press and in online investor communities;

•

our relationships with and the conduct of third parties on which we depend; and

•

other risks and uncertainties described in these risk factors.

In particular, our revenue guidance relating to our year ending 2015 is predicated on many assumptions, most notably that we have correctly forecast our U.S. revenue growth for both of our products and that ex-U.S. sales of lomitapide, most particularly to the federal Ministry of Health in Brazil, continue as we have forecasted for those patients who have previously received JUXTAPID and to new patients who have obtained federal court orders for JUXTAPID treatment. If any of our assumptions turn out to be incorrect, including our assumptions with regard to the extent of the negative impact of the launch of PCSK9 inhibitor products, beginning in July 2015 in the U.S. and the EU, on our sales of lomitapide in those countries and in other countries where PCSK9 inhibitors are, in the future, approved or available on a named patient basis, our 2015 financial results could be weaker than expected, and the price of our common stock could decline, perhaps precipitously.

In addition, the stock market in general, and the market for small pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Also, broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the past, following periods of volatility in the market in a company’s stock, securities class-action litigation has often been instituted against such a company. We, and certain of our former executive officers, have been named as defendants in a federal securities class action lawsuit filed against us alleging that we and the officers made certain false and misleading statements in violation of federal securities laws. See Part II, Item 1—“Legal Proceedings.” These proceedings and similar litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business and financial condition.

Servicing our debt requires a significant amount of cash. We may not have sufficient cash flow from our business to make payments on our debt, and we may not have the ability to raise the funds necessary to settle conversions of, or to repurchase, the Convertible Notes upon a fundamental change, which could adversely affect our business, financial condition and results of operations.

In August 2014, we incurred indebtedness in the amount of $325.0 million in aggregate principal with additional accrued interest under the 2.00% convertible senior notes due August 15, 2019 (the “Convertible Notes”), for which interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2015. On January 9, 2015, our Loan and Security Agreement with Silicon Valley Bank, originally entered into in March 2012 (as amended, the “Loan and Security Agreement”), was amended to provide for a $25.0 million term loan with per annum interest of 3.0% and a revolving line of credit of up to $15.0 million, subject to a borrowing base equal to 80% of eligible accounts minus certain reserves. Our ability to make scheduled payments of the principal, to pay interest on or to refinance our indebtedness, including the Convertible Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors that may be beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling or licensing assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including the Convertible Notes.

In addition, holders of the Convertible Notes have the right to require us to repurchase their notes for cash upon the occurrence of a fundamental change at a repurchase price equal to 100% of the respective principal amount, plus accrued and unpaid interest, if any. Further, upon conversion of the Convertible Notes following our receipt of the required shareholder approval under NASDAQ Stock Market Rule 5635, unless we elect to deliver solely shares of our common stock to settle such conversion (other than cash in lieu of any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of Convertible Notes surrendered therefor or Convertible Notes being converted. In addition, our ability to pay cash upon repurchase or conversion of the Convertible Notes is restricted by our existing credit facility and may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase Convertible Notes at a time when the repurchase is required by the indenture or to pay any cash payable on future conversions of the Convertible Notes as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our current and future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Convertible Notes or make cash payments upon conversions thereof. In addition, even if holders of the Convertible Notes do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Our indebtedness could adversely affect our financial health and our ability to respond to changes in our business.

Our significant indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences. For example, it could:

•

make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry and competitive conditions and adverse changes in government regulation;

•

limit our flexibility in planning for, or reacting to, changes in our business and our industry;

•

place us at a disadvantage compared to our competitors who have less debt; and

•

limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes, or raise additional capital through equity or other types of financings.

We cannot be sure that our leverage resulting from our level of debt will not materially and adversely affect our ability to finance our operations or capital needs or to engage in other business activities. In addition, we cannot be sure that additional financing will be available when required or, if available, will be on terms satisfactory to us. Further, even if we are able to obtain additional financing, we may be required to use proceeds to repay a portion of our debt. Any of these factors could materially and adversely affect our business, financial condition and results of operations. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

Our business could be negatively affected as a result of the proxy contests and other actions of activist stockholders.

Proxy contests have been waged against many companies in the biopharmaceutical industry over the last few years. If faced with a proxy contest, we may not be able to successfully defend against the contest, which would be disruptive to our business. Even if we are successful, our business could be adversely affected by a proxy contest because:

•

responding to proxy contests and other actions by activist stockholders may be costly and time-consuming and may disrupt our operations and divert the attention of our management and our employees;

•

perceived uncertainties as to our future direction may result in our inability to consummate potential acquisitions, collaborations or in-licensing opportunities and may make it more difficult to attract and retain qualified personnel and business partners; and

•

if individuals are elected to our Board of Directors with a specific agenda different from our strategy for creating long-term stockholder value, it may adversely affect our ability to effectively and timely execute on our strategic plans and create additional value for our stockholders.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and by-laws may delay or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a prohibition on actions by written consent of our stockholders and the ability of our board of directors to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board of directors was considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

We do not intend to pay dividends on our common stock and, consequently, a stockholder’s ability to achieve a return on investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividend on our common stock, and do not currently intend to do so for the foreseeable future.

We currently anticipate that we will retain any future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in the value of such shares. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

Future sales of our common stock may cause our stock price to decline.

Sales of a substantial number of shares of our common stock in the public market or a sale of securities convertible into common stock or the perception that these sales might occur, could significantly reduce the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.

If our existing stockholders sell, or if the market believes our existing stockholders will sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline significantly.

As of June 30, 2015, there were:

•

7,132,275 shares issuable upon the exercise of stock options outstanding under our 2006 Stock Option and Award Plan, the 2010 Stock Option and Incentive Plan (the “2010 Plan”) and the Inducement Stock Option Plan;

•

547,000 shares of restricted stock units subject to vesting;

•

832,429 shares available for future issuance under the 2010 Plan;

•

1,445,754 shares available for issuance under our Inducement Stock Option Plan, a plan that is to be used exclusively for the grant of stock options to individuals who were not previously an employee or a non-employee director (or following a bona fide period of non-employment with us), as an inducement material to the individual’s entry into employment, other than as an executive officer, with us within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules; and

•

$325.0 million of 2.0% convertible senior notes due August 15, 2019 which are convertible into shares of our common stock at an initial conversion rate of 24.2866 shares of common stock per $1,000 principal amount of the Convertible Notes, which corresponds to $41.175 per share of our common stock and in connection with the offering of the Convertible Notes, we entered into warrant transactions convertible into 7,893,145 shares of our common stock.

Under the 2010 Plan, the shares reserved for issuance under the plan are automatically increased on an annual basis in accordance with a pre-determined formula. As a result, on January 1, 2015, January 1, 2014, and January 1, 2013, an additional 1,138,596, 1,175,372, and 1,019,590 shares, respectively, were added to the aggregate number of shares reserved for future issuance under the 2010 Plan under the annual automatic share increase provision of the plan.

If additional shares are sold, or if it is perceived that they will be sold, in the public market, the price of our common stock could decline substantially.

We have registered approximately 10,000,000 shares of the common stock described above that are subject to outstanding stock options and reserved for issuance under our equity plans. These shares can be freely sold in the public market upon issuance, subject to vesting restrictions.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable

Item 3.

Defaults Upon Senior Securities

Not applicable

Item 4.

Mine Safety Disclosure

Not applicable

Item 5.

Other Information

None

Item 6.

Exhibit List


10.1*		Employment Agreement with William T. Andrews, dated March 26, 2012.

10.2*		Employment Agreement with Gregory D. Perry, dated June 26, 2015.

10.3*		Sixth Loan Modification dated August 7, 2015 by and between the Company and Silicon Valley Bank.

31.1*		Certification of Sandford D. Smith, Chief Executive Officer of the Company, filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

31.2*		Certification of Gregory D. Perry, Chief Financial Officer of the Company, filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32.1**		Certification of Sandford D. Smith, Chief Executive Officer of the Company, furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32.2**		Certification of Gregory D. Perry, Chief Financial Officer of the Company, furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.INS*		XBRL Instance Document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

*	Filed herewith

**	Furnished Herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AEGERION PHARMACEUTICALS, INC.

			(Registrant)

Date: August 17, 2015		By:	/s/ Sandford D. Smith
			Sandford D. Smith Chief Executive Officer (principal executive officer) and Director

Date: August 17, 2015		By:	/s/ Gregory D. Perry
			Gregory D. Perry
			Chief Financial Officer (principal financial officer)

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