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

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

Overview

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

We are also pursuing the development of Bylvay in biliary atresia and in
Alagille syndrome, or ALGS, each of which is a rare, life threatening disease
that affects the liver and for which there is no approved pharmacologic
treatment option. We initiated a pivotal clinical trial of Bylvay in biliary
atresia, the BOLD trial, in the first half of 2020. At the end of 2021, we had
enrolled over 50% of the targeted patients in the trial. We expect topline
results from the BOLD trial in 2024. We also initiated a pivotal trial of Bylvay
in ALGS, the ASSERT trial, in the fourth quarter of 2020. In March 2022, we
announced the completion of enrollment in the ASSERT trial and we expect topline
results from the trial by the end of 2022.

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

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

Bylvay – Our main product for PFIC.

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

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

Other Indications under development for Bylvay.

We are also pursuing the development of Bylvay in patients with biliary atresia,
another rare, life-threatening disease that affects the liver and for which
there is no approved pharmacologic treatment option. In December 2018, the
European Commission granted orphan designation to odevixibat for the treatment
of biliary atresia, and in January 2019, the FDA granted orphan drug designation
to odevixibat for the treatment of biliary atresia. We initiated the BOLD
clinical trial, a global pivotal trial and the largest prospective intervention
trial ever conducted in biliary atresia, in the first half of 2020. At the end
of 2021, we had enrolled over 50% of the targeted patients in the trial and
we

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expect topline results in 2024. We believe biliary atresia is one of the most
common rare pediatric liver diseases, and is the leading cause of liver
transplants in children. Our double-blind, placebo controlled pivotal trial in
biliary atresia is designed to enroll approximately 200 patients at 70 sites
globally. Patients will receive either placebo or odevixibat once daily at
120µg/kg. The primary endpoint is survival with native liver after two years of
treatment.

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

In addition, we initiated a pivotal trial of Bylvay in ALGS, the ASSERT trial,
in the fourth quarter of 2020. The trial is fully enrolled with 52 patients aged
0 to 17 years of age with a genetically confirmed diagnosis of ALGS across 35
sites in North America, Europe, Middle East and Asia Pacific. We expect topline
data to be available by the end of 2022. ALGS is a genetic condition associated
with liver, heart, eye, kidney and skeletal abnormalities. In particular, ALGS
patients have fewer than normal bile ducts inside the liver, which leads to
cholestasis and the accumulation of bile and causes scarring in the liver. ALGS
is estimated to affect between one in every 50,000 children born worldwide. We
estimate the prevalence of ALGS to be approximately 12,000 patients across the
U.S. and Europe, and approximately 13,000 combined in other jurisdictions
worldwide, but we are not able to estimate the prevalence of ALGS with
precision. Current treatment for ALGS is generally in line with current
treatments for PFIC as described above. In August 2012, the European Commission
granted orphan designation to odevixibat for the treatment of ALGS. In October
2018, the FDA granted orphan drug designation to odevixibat for the treatment of
ALGS.

We continue to evaluate potential clinical development in other indications,
including primary sclerosing cholangitis, which refers to swelling
(inflammation), scarring, and destruction of bile ducts inside and outside of
the liver. The first symptoms are typically fatigue, itching and jaundice, and
many patients with sclerosing cholangitis also suffer from inflammatory bowel
disease. The estimated incidence of primary sclerosing cholangitis is 9 cases
per 100,000 people. There are currently no drugs approved for the treatment of
sclerosing cholangitis. First-line treatment is typically off-label UDCA,
although UDCA has not been established to be safe and effective in patients with
sclerosing cholangitis in well controlled clinical trials.

Since inception, we have incurred significant operating losses. As of March 31,
2022, we had an accumulated deficit of $343.3 million. We expect to continue to
incur significant expenses and increasing operating losses as we continue our
development of, and seek marketing approvals for, our product candidates,
commercialize Bylvay, prepare for and begin the commercialization of any other
approved products in the future, and add infrastructure and personnel to support
our product development and commercialization efforts and operations as a public
company in the United States.

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

From March 31, 2022we had about $216.7 million in cash and cash equivalents.

Overview of financial operations

The following discussion presents certain components of our Consolidated Statements of Income as well as the factors affecting these elements.

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Revenue
We generate revenue primarily from the receipt of royalty revenue, upfront or
license fees and milestone payments as well as product revenue following our
commercial launch of Bylvay. License agreements with commercial partners
generally include nonrefundable upfront fees and milestone payments. We
recognize revenue on sales of Bylvay when a customer obtains control of the
product, which occurs at a point in time and upon delivery, the receipt of which
is dependent upon the achievement of specified development, regulatory or
commercial milestone events, as well as royalties on product sales of licensed
products, if and when such product sales occur, and payments for pharmaceutical
ingredient or related procurement services. For these agreements, management
applies judgment in the allocation of total agreement consideration to the
performance obligations on a reliable basis that reasonably reflects the selling
prices that might be expected to be achieved in stand-alone transactions. For
additional information about our revenue recognition, refer to Note 1 to our
condensed consolidated financial statements included in this quarterly report.

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

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

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

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

For the three months ended March 31, 2022, we recognized net sales of Bylvay
totaling approximately $4.7 million. No revenue was recognized for the three
months ended March 31, 2021.

Royalty revenue

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

For the three months ended March 31, 2022 and 2021, we recognized revenue of
$2.2 million and $2.0 million, respectively, related to our agreement with EA
Pharma. We expect that any future revenue recognized under our license agreement
with EA Pharma will fluctuate from quarter to quarter and year to year as a
result of royalties for the period from EA Pharma, as well as the uncertain
timing of future milestone payments, if any.

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In October 2021, Albireo entered into an agreement with Jadeite Medicines Inc.
to license, develop and commercialize Bylvay within Japan. For the three months
ended March 31, 2022, no revenue was recognized under the agreement. Currently,
Jadeite is commencing bridging and other clinical studies to pursue New Drug
Application (NDA) filings and obtain approval in Japan for PFIC, ALGS, and
biliary atresia indications. Future royalty revenue recognized under our license
agreement with Jadeite will not commence until after NDA approval in Japan. The
next anticipated milestone payment will be received upon NDA filings in Japan
for Bylvay and the timing of future milestone payments, if any, is uncertain.

Costs and Operating Expenses

Cost of Product Revenue

Cost of product revenue consists of manufacturing and quality headcount costs
for sales of Bylvay. All manufacturing costs, incurred prior to FDA approval
totaled approximately $1.6 million and were not capitalized, and instead were
expensed as research and development expenses from 2020 to July 2021. As a
result, these costs were excluded from cost of product revenue for sales during
the three months ended March 31, 2022.

Research and development costs

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

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

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

Selling, general and administrative expenses

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

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Other Operating Expense, Net

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

Interest expense, net

Interest expense, net consists primarily of non-cash interest expense recorded
in connection with the sale of future royalties, related to sales of elobixibat
in Japan, in addition to both cash and non-cash interest expense associated with
our note payable. In addition, interest expense, net includes interest income
associated with our interest-bearing cash and cash equivalents.

Significant Accounting Policies and Estimates

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

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Results of Operations

Three months completed March 31, 2022 and March 31, 2021

Result of Operations

                                        Three Months Ended March 31,        Change
                                          2022                2021             $

                                                     (in thousands)
Revenue
Product revenue, net                 $         4,656     $             -    $ 4,656
Royalty revenue                                2,176               1,966        210
Total revenue                                  6,832               1,966      4,866
Operating Expenses
Cost of product revenue                          234                   -        234
Research and development                      21,903              19,943      1,960
Selling, general and administrative           16,855              15,273   

1,582

Other operating expense, net                   7,398               6,528   

870

Total cost and operating expenses             46,390              41,744   
  4,646
Operating loss                              (39,558)            (39,778)        220
Other loss
Interest expense, net                        (2,876)             (3,955)      1,079
Net loss                             $      (42,434)     $      (43,733)    $ 1,299


Revenue

                            Three Months Ended March 31,         Change
                             2022                  2021             $

                                         (in thousands)
Product revenue, net    $         4,656       $             -    $ 4,656
Royalty revenue                   2,176                 1,966        210
Total revenue           $         6,832       $         1,966    $ 4,866

Product revenue, net was $4.7 million for the three months ended March 31, 2022
due to Bylvay product sales. Product revenue, net was $2.8 million in the United
States and $1.9 million in international markets. There was no product revenue
for the three months ended March 31, 2021.

Royalty revenue was $2.2 million for the three months ended March 31, 2022
compared with $2.0 million for the three months ended March 31, 2021, an
increase of $0.2 million. The increase relates to estimated royalty revenue to
be received from EA Pharma for elobixibat for the treatment of chronic
constipation.

Cost of product revenue

                              Three Months Ended March 31,         Change
                                 2022                  2021          $

                                           (in thousands)
Cost of product revenue    $            234          $       -    $    234


Cost of product revenue was $0.2 million for the three months ended March 31,
2022. Following Bylvay approval, certain manufacturing and quality headcount
costs are now included in cost of product revenue. There were no material costs,
as materials related to current product sold, was expensed prior to approval.
Bylvay was not approved until July 2021, therefore there was no cost of product
revenue for the three months ended March 31, 2021.

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Research and development costs

                                       Three Months Ended March 31,        Change
                                          2022                2021            $

                                                    (in thousands)

Research and development costs $21,903 $19,943 $1,960


Research and development expenses were $21.9 million for the three months ended
March 31, 2022 compared with $19.9 million for the three months ended March 31,
2021, an increase of $2.0 million. The increase in research and development
expenses for the 2022 period was principally due to clinical and preclinical
program activities, personnel expenses including stock-based compensation and
other costs as we continue to increase our headcount and program activities. The
increase in program activities related to ongoing preclinical trials as well as
the Phase 1 study for A3907, and were partially offset by a decrease in Bylvay
PFIC expenses related to the completion of the PEDFIC 1 study.

The following table summarizes our major product development programs and third-party disbursements for each clinical-stage product candidate and pre-clinical programs for the three months ended March 31, 2022 and 2021.

                                                        Three Months Ended March 31,         Change
                                                           2022                2021             $

                                                                      (in thousands)
Direct third-party project costs:
Bylvay - PFIC                                         $        4,344      $        6,197    $ (1,853)
Bylvay - biliary atresia and ALGS                              5,591       
       5,540           51
A3907                                                          2,002               1,605          397
Preclinical                                                    2,859                 813        2,046
Total                                                 $       14,796      $       14,155    $     641
Other project costs(1):
Personnel costs                                       $        6,434      $        5,660    $     774
Other costs(2)                                                   673                 128          545
Total                                                 $        7,107      $        5,788    $   1,319
Total research and development costs                  $       21,903      $

19,943 $1,960

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

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

support multiple programs.

Selling, general and administrative expenses

                                         Three Months Ended March 31,        Change
                                            2022                2021            $

                                                      (in thousands)

Selling, general and administrative expenses $16,855 $15,273

$1,582


Selling, general and administrative expenses were $16.9 million for the three
months ended March 31, 2022 compared with $15.3 million for the three months
ended March 31, 2021, an increase of $1.6 million. The increase is attributable
to personnel and related expenses as we continue to increase our headcount, and
commercialization activities related to Bylvay including our sales force and
support for global expansion efforts.

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Other operating expense, net

                                    Three Months Ended March 31,          Change
                                     2022                  2021             $

                                                 (in thousands)
Other operating expense, net    $         7,398       $         6,528    $    870


Other operating expense, net totaled $7.4 million for the three months ended
March 31, 2022 compared with $6.5 million for the three months ended March 31,
2021. The difference primarily relates to changes in foreign currency exchange
rates in the two periods.

Interest expense, net

                            Three Months Ended March 31,         Change
                              2022                 2021             $

                                         (in thousands)
Interest expense, net    $       (2,876)      $       (3,955)    $ 1,079

Interest expense, net totaled $2.9 million for the three months ended March 31,
2022 compared with $4.0 million for the three months ended March 31, 2021. The
difference was principally attributable to lower non-cash interest expense
recorded in connection with the sale of future royalties related to sales of
elobixibat in Japan, partially offset by interest income associated with our
interest bearing cash accounts.

Cash and capital resources

Sources of liquidity

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

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

From March 31, 2022our cash and cash equivalents were approximately $216.7 million.

During the first quarter of 2018, following the Japanese MHLW's approval of
elobixibat for the treatment of chronic constipation in January 2018, we
received a $44.5 million payment, net of certain transaction expenses, from HCR
under our royalty interest acquisition agreement (RIAA). Additionally, this
approval triggered a milestone payment to us from EA Pharma of $11.2 million. In
June 2020, we entered into an amendment to the RIAA with HCR pursuant to which
HCR agreed to pay us an additional $14.8 million, net of certain transaction
expenses in exchange for the elimination of the (i) $78.8 million cap amount on
HCR's rights to receive royalties on sales in Japan and sales milestones for
elobixibat in certain other territories that may become payable by EA Pharma and
(ii) $15.0 million payable to us if a specified sales milestone is achieved for
elobixibat in Japan. As of March 31, 2022, we have received approximately $59.3
million in upfront and milestone payments from EA Pharma under a license
agreement for the development and commercialization of elobixibat in specified
countries in Asia. We are eligible to

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receive additional amounts of up to $5.0 million under the amended agreement, if
a specified regulatory event is achieved for elobixibat. To the extent we
receive future Japanese royalties, sales milestones or other specified payments
from EA Pharma, we are obligated to pay those amounts as royalty interest
payments to HCR under the RIAA.

Moreover, in February 2020we completed an underwritten public offering of 2,190,750 common shares pursuant to our Universal Listing Statement for net proceeds of approximately $43.0 million.

On May 7, 2020, we filed a new universal shelf registration statement on Form
S-3, or the 2020 Form S-3, with the SEC, which was declared effective on May 18,
2020, pursuant to which we registered for sale up to $200.0 million of any
combination of our common stock, preferred stock, debt securities, warrants,
rights and/or units from time to time and at prices and on terms that we may
determine. On May 7, 2020, we also entered into a sales agreement with Cowen and
Company, LLC, or Cowen, with respect to an at-the-market offering program
providing for us to offer and sell, from time to time at our sole discretion,
shares of our common stock having an aggregate offering price of up to $50.0
million. This agreement terminated on September 9, 2020.

On September 14, 2020, we completed an underwritten public offering of 4,000,000
shares of our common stock under this registration statement. We received net
proceeds from this offering of approximately $150.4 million, after deducting
underwriting discounts and commissions, but before deducting offering expenses.
As of March 31, 2022, $40.0 million of securities remain available for issuance
under the 2020 Form S-3.

On June 8, 2020, we entered into a Loan and Security Agreement with several
banks and other financial institutions or entities from time to time parties to
the Loan and Security Agreement, as lenders, or collectively referred to as the
Lender, and Hercules Capital, Inc., in its capacity as administrative agent and
collateral agent for itself and Lender (in such capacity, the Agent or
Hercules). The Loan and Security Agreement provides for term loans in an
aggregate principal amount of up to $80.0 million to be delivered in multiple
tranches, (the Term Loans). The tranches consist of (i) a term loan advance to
us in an aggregate principal amount of up to $15.0 million, of which (A) we
agreed to borrow an aggregate principal amount of $10.0 million on the date on
which all conditions to the funding of the Term Loans by the Lender were met
(the Closing Date), but we did not request that the Lender make an additional
term loan advance to us in an aggregate principal amount of $5.0 million prior
to December 15, 2020 as permitted under the agreement, (ii) subject to the
achievement of certain initial performance milestones, or Performance Milestone
I, we had the right to request that the Lender make additional term loan
advances to us in an aggregate principal amount of up to $20.0 million from
January 1, 2021 through December 15, 2021 in minimum increments of $10.0
million, which we did not exercise, and (iii) subject to the Lender's investment
committee's sole discretion, we had the right to request that the Lender make
additional term loan advances to us in an aggregate principal amount of up to
$45.0 million through March 31, 2022 in minimum increments of $5.0 million,
which we did not exercise. As of March 31, 2022, we borrowed an aggregate
principal amount of $10.0 million and there were no term loans available to us
for advance under the Loan and Security Agreement.

Under the Loan and Security Agreement, we also agreed to issue to Hercules
warrants to purchase a number of shares of our common stock equal to 1% of the
aggregate amount of the Term Loans that are funded, as such amounts are funded.
On the Closing Date, we issued a warrant for 5,311 shares of our common stock.
The warrants will be exercisable for a period of seven years from the date of
the issuance of each warrant at a per-share exercise price equal to $18.83,
subject to certain adjustments as specified in the warrants. The shares of
common stock underlying the warrants were subsequently registered on Form S-3
with the SEC, which was declared effective on August 18, 2020.

On February 25, 2021, we filed an automatic shelf registration statement on Form
S-3 with the SEC, which became effective upon filing, pursuant to which we
registered for sale an unlimited amount of any combination of our common stock,
preferred stock, debt securities, warrants, rights and/or units from time to
time and at prices and on terms that we may determine, so long as we continued
to satisfy the requirements of a "well-known seasoned issuer" under SEC rules,
which we refer to as the 2021 Form S-3. Because we are no longer a well-known
seasoned

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issuer, the 2021 Form S-3 is no longer available for us to offer and sell
securities pursuant to the 2021 Form S-3 following the filing of our Annual
Report on Form 10-K on March 1, 2022. On February 25, 2021, we also entered into
a new sales agreement with Cowen, which we refer to as the 2021 Sales Agreement,
with respect to an at-the-market offering program under which we may offer and
sell, from time to time at our sole discretion, shares of our common stock
having an aggregate offering price of up to $100.0 million. Subsequently in July
2021, we sold 7,508 shares of our common stock for net proceeds of approximately
$0.2 million pursuant to the 2021 Sales Agreement. Since the 2021 Form S-3 is no
longer available, unless and until we register the offer and sale of securities
pursuant to the 2021 Sales Agreement in the future, we will not be able to make
any further sales of securities under the 2021 Sales Agreement.

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

Cash flow

Three months completed March 31, 2022 and March 31, 2021

                                                            Three Months Ended March 31,
                                                              2022                2021

                                                                   (in thousands)
Net cash (used in) provided by:
Operating activities                                     $      (35,409)            (34,716)
Investing activities                                               (235)                   -
Financing activities                                               4,380                 404
Total                                                    $      (31,264)     $      (34,312)
Effect of exchange rate changes on cash and cash
equivalents                                                        (188)                 121
Net decrease in cash and cash equivalents                       (31,452)   
        (34,191)


Operating activities
Cash used in operating activities of $35.4 million during the three months ended
March 31, 2022 was primarily a result of our $42.4 million net loss from
operations and a net decrease in assets and liabilities of $6.6 million. The net
decrease in operating assets and liabilities during the three months ended March
31, 2022 was primarily driven by decreases in accrued expenses, inventory and
other current and long-term liabilities, offset by increases in prepaid expenses
and other current assets and accounts receivable, net. This decrease was offset
by non-cash items, including $7.2 million of foreign currency adjustments, $3.5
million of share-based compensation expense and $2.7 million of accretion of
liability related to sale of future royalties. Cash used in operating activities
of $34.7 million during the three months ended March 31, 2021 was primarily a
result of our $43.7 million net loss from operations and a net decrease in
assets and liabilities of $3.8 million. The net decrease in operating assets and
liabilities during the three months ended March 31, 2021 was primarily driven by
decreases in accrued expenses, other current and long-term liabilities, prepaid
expenses and other current assets, offset by increases in accounts payable. This
decrease was offset by non-cash items, including $6.5 million of foreign
currency adjustments, $3.1 million of stock-based compensation expense, and $3.1
million of accretion of liability related to sale of future royalties.

Investing activities

Cash used in investing activities of $0.2 million during the three months ended
March 31, 2022 was primarily related to purchases of property and equipment.
There were no investing activities during the three months ended March 31,
2021.

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Financing activities

Cash provided by financing activities of $4.4 million during the three months
ended March 31, 2022 was primarily related to proceeds from the exercise of
options. Cash provided by financing activities of $0.4 million during the three
months ended March 31, 2021 was primarily related to proceeds from the exercise
of options.

Funding Requirements

Cash used to fund operating expenses is affected by the timing of when we pay
expenses, as reflected in the change in our outstanding accounts payable and
accrued expenses. As a result, cash and cash equivalents are anticipated to be
sufficient to fully fund the launches of Bylvay and the next stages of the early
asset portfolio into 2024 based on current revenue and expense projections.
Bylvay 2022 sales are expected to be a minimum of $30.0 million..

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

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

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

? the Bylvay trial in biliary atresia and the pivotal clinical trial of Bylvay in

ALGS;

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

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

candidates;

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

agreement with EA Pharma or any prospective licensee or collaborator;

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

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

our ability to establish and maintain licenses, collaborations or

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

retain development or marketing responsibilities for any new

license, collaboration or similar agreement;

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

that we invest;

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

real estate portfolio;

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

terms;

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

suitable third-party alternatives for any approved product;

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

to pursue;

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

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

candidates and technologies;


 ? our need and ability to hire additional management and scientific and medical
   personnel;


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operating costs as a public company in United Statesincluding the

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

our company’s internal systems and infrastructure;

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

commercial sale; and

? the effect of competing technological and commercial developments.


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

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

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

We have an effective universal shelf registration statement on Form S-3 with the
SEC, pursuant to which we registered for sale up to $200.0 million of any
combination of our common stock, preferred stock, debt securities, warrants,
rights and/or units from time to time and at prices and on terms that we may
determine. As of March 31, 2022, $40.0 million of securities remain available
for issuance under the shelf registration statement, which we refer to as the
2020 Form S-3. On February 25, 2021, we filed an automatic shelf registration
statement on Form S-3 with the SEC, pursuant to which we registered for sale an
unlimited amount of any combination of our common stock, preferred stock, debt
securities, warrants, rights and/or units from time to time and at prices and on
terms that we may determine, so long as we continued to satisfy the requirements
of a "well-known seasoned issuer" under SEC rules, which we refer to as the 2021
Form S-3, including up to $100.0 million of our common stock pursuant to the
sales agreement with respect to an at-the-market offering program. As of March
31, 2022, there remained $99.7 million of our common stock available for sale
pursuant to the sales agreement. Because we are no longer a well-known seasoned
issuer, the 2021 Form S-3 is no longer be available for us to offer and sell
securities pursuant to the 2021 Form S-3 following the filing of our Annual
Report on Form 10-K on March 1, 2022. Since the 2021 Form S-3 is no longer
available, unless and until we register the offer and sale of securities
pursuant to the 2021 Sales Agreement in the future, we will not be able to make
any further sales of securities under our at-the-market offering program.

The sale of additional equity or convertible debt securities may result in
significant dilution to our stockholders, and the terms may include liquidation
or other preferences that adversely affect the rights of our stockholders. The
incurrence of additional debt financing would result in debt service obligations
and the instruments governing such debt may provide for operating and financing
covenants that would restrict our operations. We may also seek to finance future
cash needs through potential future licensing, collaboration or similar
arrangements. These arrangements may not be available on acceptable terms or at
all, and we may have to relinquish valuable rights to our technologies, future
revenue streams, research programs or product candidates or to grant licenses on
terms that may not be favorable to us. If adequate funds are not available, we
may be required to delay, reduce the scope of or eliminate our development
programs or obtain funds through third-party arrangements that may require us to
relinquish rights to certain product candidates that we might otherwise seek to
develop or commercialize independently.

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