FORM 10-Q
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British Columbia, Canada
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98-0455702
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large Accelerated Filer
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◻
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Accelerated Filer
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☒
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Non-Accelerated Filer
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◻ (Do not check if a smaller reporting company)
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Smaller Reporting Company
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◻
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Emerging Growth Company
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◻
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 6.
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June 30, 2018
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December 31, 2017
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||||
Assets
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||||
Current assets:
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||||
Cash and cash equivalents
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$
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39,976
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$
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55,430
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Accounts receivable, net
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18,363
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22,191
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Inventories - current
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13,245
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15,886
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Prepaid expenses and other current assets
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14,757
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11,436
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Total current assets
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86,341
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104,943
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Inventories - non-current
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37,504
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33,940
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Property and equipment, net
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2,375
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2,920
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Intangible assets, net
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212,724
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225,272
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Other non-current assets
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1,384
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2,247
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Total assets
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$
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340,328
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$
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369,322
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Liabilities and shareholders’ (deficit) equity
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Current liabilities:
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Accounts payable
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$
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10,555
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$
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13,800
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Accrued liabilities
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45,618
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41,838
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Provision for legal settlements - current
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8,727
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8,596
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Total current liabilities
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64,900
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64,234
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Long-term debt
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15,787
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—
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Convertible notes, net
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277,143
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258,538
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Provision for legal settlements - non-current
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25,965
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31,016
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Other non-current liabilities
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1,493
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596
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Total liabilities
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385,288
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354,384
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Commitments and contingencies (Note 12)
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Shareholders’ equity:
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Common shares, without par value, 100,000 shares authorized; 18,852 and 18,702 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
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552,506
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551,925
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Additional paid-in-capital
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78,136
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73,185
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Accumulated deficit
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(778,064
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)
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(713,974
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)
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Accumulated other comprehensive income
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102,462
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103,802
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Total shareholders’ (deficit) equity
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(44,960
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)
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14,938
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Total liabilities and shareholders’ (deficit) equity
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$
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340,328
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$
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369,322
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Three Months Ended June 30,
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Six Months Ended June 30,
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2018
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2017
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2018
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2017
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Net revenues
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$
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31,904
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$
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40,877
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$
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59,388
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$
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70,861
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Cost of product sales
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15,703
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14,277
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29,208
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30,722
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Operating expenses:
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Selling, general and administrative
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23,735
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26,514
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47,424
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50,965
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Research and development
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10,360
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10,824
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22,126
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20,124
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Restructuring charges
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—
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1,034
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—
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2,485
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Total operating expenses
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34,095
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38,372
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69,550
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73,574
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Loss from operations
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(17,894
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)
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(11,772
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)
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(39,370
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)
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(33,435
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)
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Interest expense, net
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(11,594
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)
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(9,613
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)
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(22,480
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)
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(18,825
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)
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Other (expense) income, net
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(728
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)
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75
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(1,035
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)
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127
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Loss before provision for income taxes
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(30,216
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)
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(21,310
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)
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(62,885
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)
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(52,133
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)
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Provision for income taxes
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(1,046
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)
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(126
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)
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(1,205
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)
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(265
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)
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Net loss
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$
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(31,262
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)
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$
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(21,436
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)
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$
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(64,090
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)
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$
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(52,398
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)
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Net loss per common share—basic and diluted
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$
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(1.67
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)
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$
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(1.15
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)
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$
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(3.42
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)
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$
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(2.82
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)
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Weighted-average common shares outstanding—basic and diluted
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18,759
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18,609
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18,731
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18,575
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Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||||
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2018
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2017
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2018
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2017
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Net loss
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$
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(31,262
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)
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$
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(21,436
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)
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$
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(64,090
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)
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$
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(52,398
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)
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Other comprehensive (loss) income:
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Foreign currency translation
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(1,995
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)
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576
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(1,340
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)
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1,156
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Other comprehensive (loss) income
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(1,995
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)
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576
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(1,340
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)
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1,156
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Comprehensive loss
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$
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(33,257
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)
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$
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(20,860
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)
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$
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(65,430
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)
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$
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(51,242
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)
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Six Months Ended June 30,
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||||||
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2018
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2017
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Cash used in operating activities
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Net loss
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$
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(64,090
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)
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$
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(52,398
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation
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918
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974
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Amortization of intangible assets
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12,548
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12,504
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Stock-based compensation
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1,842
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2,493
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Non-cash interest expense
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19,146
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15,805
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Provision for inventory excess and obsolescence
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—
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1,536
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Unrealized foreign exchange loss (gain)
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1,170
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(377
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)
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Amortization of debt issuance costs
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127
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—
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Deferred income taxes
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919
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(12
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)
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Other non-cash operating activities
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9
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14
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Changes in assets and liabilities:
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Accounts receivable
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3,790
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(4,107
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)
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Inventories
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(2,772
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)
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4,925
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Prepaid expenses and other assets
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(3,628
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)
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(430
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)
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Accounts payable
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(3,345
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)
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(8,232
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)
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Accrued liabilities and other liabilities
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(831
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)
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|
608
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Net cash used in operating activities
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(34,197
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)
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(26,697
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)
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Cash used in investing activities
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|
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||||
Purchases of property and equipment
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(382
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)
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(560
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)
|
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Net cash used in investing activities
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(382
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)
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(560
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)
|
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Cash provided by financing activities
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|
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|
||||
Net proceeds from term loan, net of debt discount
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19,977
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|
|
—
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Issuance of common shares
|
412
|
|
|
50
|
|
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Payment of term loan issuance costs
|
(698
|
)
|
|
—
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||
Net cash provided by financing activities
|
19,691
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|
|
50
|
|
||
Exchange rate effect on cash
|
(566
|
)
|
|
1,534
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|
||
Net decrease in cash and cash equivalents
|
(15,454
|
)
|
|
(25,673
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)
|
||
Cash and cash equivalents, beginning of period
|
55,430
|
|
|
108,927
|
|
||
Cash and cash equivalents, end of period
|
$
|
39,976
|
|
|
$
|
83,254
|
|
Supplemental disclosures of cash flow information
|
|
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|
||||
Cash paid for interest
|
$
|
3,422
|
|
|
$
|
3,250
|
|
Cash (received) paid for taxes, net
|
$
|
(71
|
)
|
|
$
|
986
|
|
Non-cash investing activities
|
|
|
|
||||
Purchases of property and equipment included in accounts payable
|
$
|
35
|
|
|
$
|
1
|
|
|
Amount
|
||
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(in thousands)
|
||
Balance as of December 31, 2017
|
$
|
13,471
|
|
Provision
|
12,625
|
|
|
Payments
|
(13,184
|
)
|
|
Balance as of June 30, 2018
|
$
|
12,912
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
(in thousands)
|
||||||
Work-in-process
|
$
|
25,565
|
|
|
$
|
22,579
|
|
Finished goods
|
25,184
|
|
|
27,247
|
|
||
Total
|
50,749
|
|
|
49,826
|
|
||
Less: Inventories - current
|
(13,245
|
)
|
|
(15,886
|
)
|
||
Inventories - non-current
|
$
|
37,504
|
|
|
$
|
33,940
|
|
|
|
|
|
|
|
||||||
|
June 30, 2018
|
||||||||||
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Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
|
(in thousands)
|
||||||||||
Developed technology - lomitapide
|
$
|
42,300
|
|
|
$
|
(6,230
|
)
|
|
$
|
36,070
|
|
Developed technology - metreleptin
|
210,158
|
|
|
(33,504
|
)
|
|
176,654
|
|
|||
Total intangible assets
|
$
|
252,458
|
|
|
$
|
(39,734
|
)
|
|
$
|
212,724
|
|
|
|
|
|
|
|
||||||
|
December 31, 2017
|
||||||||||
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Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
|
(in thousands)
|
||||||||||
Developed technology - lomitapide
|
$
|
42,300
|
|
|
$
|
(4,262
|
)
|
|
$
|
38,038
|
|
Developed technology - metreleptin
|
210,158
|
|
|
(22,924
|
)
|
|
187,234
|
|
|||
Total intangible assets
|
$
|
252,458
|
|
|
$
|
(27,186
|
)
|
|
$
|
225,272
|
|
|
|
||
|
Amount
|
||
Years Ending December 31,
|
(in thousands)
|
||
2018 (remaining 6 months)
|
$
|
12,547
|
|
2019
|
25,095
|
|
|
2020
|
25,095
|
|
|
2021
|
25,095
|
|
|
2022
|
25,095
|
|
|
Thereafter
|
99,797
|
|
|
Total intangible assets subject to amortization
|
$
|
212,724
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
|
(in thousands)
|
||||||
Accrued clinical costs
|
$
|
3,565
|
|
|
$
|
2,495
|
|
Accrued employee compensation and related costs
|
5,898
|
|
|
7,755
|
|
||
Accrued professional fees
|
4,735
|
|
|
4,118
|
|
||
Accrued sales allowances
|
12,912
|
|
|
13,471
|
|
||
Accrued royalties
|
4,281
|
|
|
3,588
|
|
||
Other accrued liabilities
|
14,227
|
|
|
10,411
|
|
||
Total
|
$
|
45,618
|
|
|
$
|
41,838
|
|
|
June 30, 2018
|
||
|
(in thousands)
|
||
Note payable under term loan
|
$
|
20,000
|
|
Accrued unpaid interest
|
540
|
|
|
Unamortized debt issuance costs
|
(453
|
)
|
|
Unamortized related debt discount
|
(23
|
)
|
|
Relative fair value attributable to warrants
|
(3,396
|
)
|
|
Fair value attributable to embedded derivative
|
(881
|
)
|
|
Long-term debt
|
$
|
15,787
|
|
|
|
|
|
||||
|
June 30, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Principal
|
$
|
324,998
|
|
|
$
|
324,998
|
|
Less: debt discount
|
(47,855
|
)
|
|
(66,460
|
)
|
||
Net carrying amount
|
$
|
277,143
|
|
|
$
|
258,538
|
|
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Contractual interest expense
|
$
|
1,625
|
|
|
$
|
1,625
|
|
|
$
|
3,250
|
|
|
$
|
3,250
|
|
Amortization of debt discount
|
9,492
|
|
|
8,063
|
|
|
18,605
|
|
|
15,805
|
|
||||
Total
|
$
|
11,117
|
|
|
$
|
9,688
|
|
|
$
|
21,855
|
|
|
$
|
19,055
|
|
|
|
||
Years Ending December 31,
|
Amount
|
||
|
(in thousands)
|
||
2018
|
$
|
3,250
|
|
2019
|
331,498
|
|
|
|
334,748
|
|
|
Less amounts representing interest
|
(9,750
|
)
|
|
Less debt discount, net
|
(47,855
|
)
|
|
Net carrying amount of Convertible Notes as of June 30, 2018
|
$
|
277,143
|
|
|
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, 2018
|
||||||||
|
(in thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
15,050
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15,050
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Embedded derivative liability
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
902
|
|
|
$
|
902
|
|
|
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, 2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
20,046
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20,046
|
|
|
|
|
|
||
|
As of June 30,
|
||||
|
2018
|
|
2017
|
||
|
(in thousands)
|
||||
Stock options
|
2,029
|
|
|
1,922
|
|
Unvested restricted stock units
|
553
|
|
|
759
|
|
Potentially issuable employee stock purchase plan shares
|
61
|
|
|
—
|
|
Warrants
|
1,819
|
|
|
14,515
|
|
Convertible notes
|
1,619
|
|
|
1,619
|
|
Total
|
6,081
|
|
|
18,815
|
|
|
Three Months Ended June 30,
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
|
U.S.
|
|
Brazil
|
|
Other Foreign Countries
|
|
Total
|
|
U.S.
|
|
Brazil
|
|
Other Foreign Countries
|
|
Total
|
||||||||||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||||||||||||||||||
Lomitapide
|
$
|
10,477
|
|
|
$
|
—
|
|
|
$
|
5,795
|
|
|
$
|
16,272
|
|
|
$
|
11,056
|
|
|
$
|
4,299
|
|
|
$
|
5,358
|
|
|
$
|
20,713
|
|
Metreleptin
|
12,481
|
|
|
—
|
|
|
3,151
|
|
|
15,632
|
|
|
14,867
|
|
|
3,759
|
|
|
1,538
|
|
|
20,164
|
|
||||||||
Total
|
$
|
22,958
|
|
|
$
|
—
|
|
|
$
|
8,946
|
|
|
$
|
31,904
|
|
|
$
|
25,923
|
|
|
$
|
8,058
|
|
|
$
|
6,896
|
|
|
$
|
40,877
|
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
|
U.S.
|
|
Brazil
|
|
Other Foreign Countries
|
|
Total
|
|
U.S.
|
|
Brazil
|
|
Other Foreign Countries
|
|
Total
|
||||||||||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||||||||||||||||||
Lomitapide
|
$
|
19,100
|
|
|
$
|
—
|
|
|
$
|
10,537
|
|
|
$
|
29,637
|
|
|
$
|
21,932
|
|
|
$
|
5,939
|
|
|
$
|
8,866
|
|
|
$
|
36,737
|
|
Metreleptin
|
22,248
|
|
|
1,170
|
|
|
6,333
|
|
|
29,751
|
|
|
26,341
|
|
|
4,986
|
|
|
2,797
|
|
|
34,124
|
|
||||||||
Total
|
$
|
41,348
|
|
|
$
|
1,170
|
|
|
$
|
16,870
|
|
|
$
|
59,388
|
|
|
$
|
48,273
|
|
|
$
|
10,925
|
|
|
$
|
11,663
|
|
|
$
|
70,861
|
|
•
|
Lomitapide is marketed in the United States (“U.S.”) under the brand name JUXTAPID (lomitapide) capsules (“JUXTAPID”). JUXTAPID is approved in the U.S. 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”). Lomitapide is approved in the EU, under the brand name LOJUXTA (lomitapide) hard capsules (“LOJUXTA”) for the treatment of adult patients with HoFH, as well as in Japan, Canada, and a limited number of other countries. In December 2016, Aegerion launched JUXTAPID as a treatment for HoFH in Japan. Aegerion receives sales milestones and royalties on net sales of LOJUXTA in the EU and certain other jurisdictions from Amryt Pharma plc (“Amryt”), to whom Aegerion out-licensed the rights to commercialize LOJUXTA in those jurisdictions in December 2016. Lomitapide is also sold, on a named patient sales basis, in Brazil and in a limited number of other countries outside the U.S. where such sales are permitted before regulatory approval in such country as a result of the approval of lomitapide in the U.S. or the EU. We filed for regulatory approval for lomitapide for the treatment of HoFH in Brazil in August 2018.
|
•
|
Metreleptin, a recombinant analog of human leptin, is marketed in the U.S. under the brand name MYALEPT (metreleptin) for injection (“MYALEPT”). MYALEPT is approved 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”). In July 2018, metreleptin, under the brand name MYALEPTA, was approved in the EU as a treatment for complications of leptin deficiency in patients with GL and Partial Lipodystrophy (“PL”). We plan to file for regulatory approvals for metreleptin in GL and PL in other key markets. We offer metreleptin through expanded access programs in countries where permitted by applicable regulatory authorities and under applicable laws, and generate revenues in certain markets where named patient sales are permitted based on the approval of metreleptin in the U.S. or the EU. We plan to initiate, by the end of 2018, a phase 2 trial assessing metreleptin in hypoleptinemic metabolic disorder (“HMD”), a low leptin mediated metabolic disease, subject to approval of our protocol and statistical plan by applicable regulatory authorities. We also plan to continue to explore new opportunities for metreleptin to treat certain other low-leptin mediated metabolic diseases, and are reviewing options for funding such opportunities, along with later-stage studies in HMD, upon which such opportunities are largely dependent.
|
•
|
continuing to sell JUXTAPID as a last-line treatment for adult HoFH patients in the U.S. despite the availability of PCSK9 inhibitor products, which have had a significant adverse impact on sales of JUXTAPID, and gaining market acceptance in the other countries, including Japan, where lomitapide is approved and being commercialized, or may in the future receive approval and be commercialized;
|
•
|
reviewing our holding and capital structure with a view toward optimizing our assets and improving our balance sheet;
|
•
|
managing our costs and expenses to better align with our revenues, while supporting approved products in a compliant manner;
|
•
|
continuing to support patient access to and reimbursement for our products in the U.S. without significant restrictions, particularly given the availability of PCSK9 inhibitor products in the U.S., which has adversely impacted reimbursement of JUXTAPID, and given the potential number of eligible JUXTAPID patients in the U.S. who are on Medicare Part D and the significant percentage of such patients who may not be able to afford their out-of-pocket co-payments for our products because prior sources of financial support through patient assistance programs operated by independent charitable 501(c)(3) organizations may no longer be available to some patients;
|
•
|
continuing to support sales of lomitapide as a treatment for HoFH in Brazil on a named patient sales basis, particularly in light of local economic challenges, the regulatory approval of Amgen’s PCSK9 inhibitor product in April 2016, the potential availability of that and other PCSK9 inhibitor products on a named patient sales or commercial basis in Brazil, ongoing government investigations, an ongoing court proceeding reviewing the regulatory framework for named patient sales in Brazil, and recently implemented regulatory requirements for named patient sales which have added significant hurdles and complexity to the process for named patient sales in Brazil and we believe have led a significant number of patients to discontinue therapy with lomitapide, and continuing to support named patient sales in other key countries where such sales are permitted, despite the availability of PCSK9 inhibitors on a named patient sales basis in such countries;
|
•
|
initiating clinical development of metreleptin in HMD, and exploring potential new opportunities for metreleptin in additional indications, including certain other low-leptin mediated metabolic diseases, assuming we raise capital to fund such opportunities;
|
•
|
building and maintaining market acceptance for MYALEPT in the U.S. for the treatment of complications of leptin deficiency in GL patients and for MYALEPTA for GL and PL patients in the EU, and supporting named patient sales of metreleptin in GL in Brazil, particularly in light of the risks applicable to named patient sales in Brazil, as described above, and supporting such sales in other key countries, including Turkey and France, where such sales are permitted;
|
•
|
gaining regulatory, pricing and reimbursement approvals to market our products in countries in which the products are not currently approved and/or reimbursed or for new indications, including obtaining pricing and reimbursement approvals
|
•
|
preparing for the launch of MYALEPTA in the EU as a treatment for complications of leptin deficiency in patients with GL and PL, including undertaking commercialization and supply chain efforts, such as negotiating and entering into contracts with third parties on a timely basis, and maintaining relationship with third parties we rely on, to supply, among other things, labeled drug product, water for injection and administration kits containing ancillary items to reduce medication errors, such as appropriately sized reconstitution administration syringes, needles, and vials, and detailed instructions for use to pharmacies so that they can be dispensed to patients who are prescribed MYALEPTA;
|
•
|
focusing on and further developing patient support programs and similar initiatives to encourage eligible patients to commence and/or maintain with our products, to the extent permitted in a particular country;
|
•
|
Aegerion’s complying with the various agreements and judgments entered into with the DOJ and SEC described in Note 12, Commitments and Contingencies, in the Notes to Unaudited Condensed Consolidated Financial Statements, including: paying approximately $40.1 million in civil penalties, restitution and settlement amounts (plus interest) over three years; and satisfying various complex and burdensome certification, disclosure, training, monitoring, and other requirements, as described in the “Legal Proceedings” section of our 2017 Form 10-K, filed with the SEC on March 16, 2018;
|
•
|
manufacturing-related activities to support uninterrupted supply of our products, particularly in light of the reduced capacity for, and resulting delay in, the manufacture of metreleptin at the facility of one of our contract manufacturers for metreleptin drug product, due to a warning letter it received from the FDA in 2017 and, more recently, supply interruptions at the facility, which has impacted recent batches of metreleptin drug product and caused uncertainties regarding when metreleptin drug product can once again be manufactured at the facility, which we have plans in place to address, but, which if not addressed, could result in metreleptin drug product shortages starting in the fourth quarter of 2018;
|
•
|
obtaining adequate supplies of diluent for use with metreleptin in light of the global shortage of one of such diluents;
|
•
|
engaging in possible further development efforts related to our existing products, and assessing, and possibly acquiring, potential new product candidates targeted at rare diseases where we believe we can leverage our infrastructure and expertise;
|
•
|
continuing to reinforce a culture of compliance, ethics and integrity throughout Novelion, Aegerion and their subsidiaries; and
|
•
|
defending challenges to the patents or our claims of exclusivity for our products in the U.S., including against potential generic submissions with the FDA with respect to lomitapide, and expanding the intellectual property portfolio for our products.
|
•
|
Net revenues totaled $31.9 million and $59.4 million for the three and six months ended June 30, 2018, primarily generated from sales of lomitapide and metreleptin. Approximately 2% of net revenues were derived from royalties on sales of lomitapide and metreleptin made by our sublicensees in the EU and other territories for the three and six months ended June 30, 2018.
|
•
|
Cost of product sales totaled $15.7 million and $29.2 million for the three and six months ended June 30, 2018, representing costs of selling lomitapide and metreleptin, and the intangible amortization recorded for the periods.
|
•
|
Selling, general and administrative (“SG&A”) expenses decreased from $26.5 million in the three months ended June 30, 2017 to $23.7 million in the three months ended June 30, 2018, and from $51.0 million in the six months ended June 30, 2017 to $47.4 million in the six months ended June 30, 2018. The decreases during the three and six months ended June 30, 2018 are both primarily driven by lower employee-related expenses and outsourced services spending, resulting from our cost saving efforts in the current year, as well as the lower spending in IT infrastructure.
|
•
|
Research and development (“R&D”) expenses decreased modestly from $10.8 million in the three months ended June 30, 2017 to $10.4 million in the three months ended June 30, 2018. R&D expenses increased from $20.1 million in the six months ended June 30, 2017 to $22.1 million in the six months ended June 30, 2018. This increase was primarily driven by our additional spending in clinical activities during the six months ended June 30, 2018.
|
•
|
We used $34.2 million of net cash to fund operating activities for the six months ended June 30, 2018, primarily due to our net loss and to a lesser extent, working capital requirements. Cash and cash equivalents totaled approximately $40.0 million as of June 30, 2018, which included the $20.0 million of gross proceeds received from the Term Loan in March 2018.
|
|
Three Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
$ Increase / (Decrease)
|
|
% Change
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Net revenues
|
$
|
31,904
|
|
|
$
|
40,877
|
|
|
$
|
(8,973
|
)
|
|
(22
|
)%
|
Cost of product sales
|
15,703
|
|
|
14,277
|
|
|
1,426
|
|
|
10
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative
|
23,735
|
|
|
26,514
|
|
|
(2,779
|
)
|
|
(10
|
)%
|
|||
Research and development
|
10,360
|
|
|
10,824
|
|
|
(464
|
)
|
|
(4
|
)%
|
|||
Restructuring charges
|
—
|
|
|
1,034
|
|
|
(1,034
|
)
|
|
(100
|
)%
|
|||
Total operating expenses
|
34,095
|
|
|
38,372
|
|
|
(4,277
|
)
|
|
(11
|
)%
|
|||
Loss from operations
|
(17,894
|
)
|
|
(11,772
|
)
|
|
6,122
|
|
|
52
|
%
|
|||
Interest expense, net
|
(11,594
|
)
|
|
(9,613
|
)
|
|
1,981
|
|
|
21
|
%
|
|||
Other (expense) income, net
|
(728
|
)
|
|
75
|
|
|
(803
|
)
|
|
NM
|
|
|||
Loss before provision for income taxes
|
(30,216
|
)
|
|
(21,310
|
)
|
|
8,906
|
|
|
42
|
%
|
|||
Provision for income taxes
|
(1,046
|
)
|
|
(126
|
)
|
|
920
|
|
|
730
|
%
|
|||
Net loss
|
$
|
(31,262
|
)
|
|
$
|
(21,436
|
)
|
|
$
|
9,826
|
|
|
46
|
%
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Lomitapide
|
$
|
16,272
|
|
|
$
|
20,713
|
|
Metreleptin
|
15,632
|
|
|
20,164
|
|
||
Total net revenues
|
$
|
31,904
|
|
|
$
|
40,877
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
$ Increase / (Decrease)
|
|
% Change
|
|||||||
|
(in thousands)
|
|
|
|||||||||||
Net revenues
|
$
|
59,388
|
|
|
$
|
70,861
|
|
|
$
|
(11,473
|
)
|
|
(16
|
)%
|
Cost of product sales
|
29,208
|
|
|
30,722
|
|
|
(1,514
|
)
|
|
(5
|
)%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Selling, general and administrative
|
47,424
|
|
|
50,965
|
|
|
(3,541
|
)
|
|
(7
|
)%
|
|||
Research and development
|
22,126
|
|
|
20,124
|
|
|
2,002
|
|
|
10
|
%
|
|||
Restructuring charges
|
—
|
|
|
2,485
|
|
|
(2,485
|
)
|
|
(100
|
)%
|
|||
Total operating expenses
|
69,550
|
|
|
73,574
|
|
|
(4,024
|
)
|
|
(5
|
)%
|
|||
Loss from operations
|
(39,370
|
)
|
|
(33,435
|
)
|
|
5,935
|
|
|
18
|
%
|
|||
Interest expense, net
|
(22,480
|
)
|
|
(18,825
|
)
|
|
3,655
|
|
|
19
|
%
|
|||
Other (expense) income, net
|
(1,035
|
)
|
|
127
|
|
|
(1,162
|
)
|
|
(915
|
)%
|
|||
Loss before provision for income taxes
|
(62,885
|
)
|
|
(52,133
|
)
|
|
10,752
|
|
|
21
|
%
|
|||
Provision for income taxes
|
(1,205
|
)
|
|
(265
|
)
|
|
940
|
|
|
355
|
%
|
|||
Net loss
|
$
|
(64,090
|
)
|
|
$
|
(52,398
|
)
|
|
$
|
11,692
|
|
|
22
|
%
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Lomitapide
|
$
|
29,637
|
|
|
$
|
36,737
|
|
Metreleptin
|
29,751
|
|
|
34,124
|
|
||
Total net revenues
|
$
|
59,388
|
|
|
$
|
70,861
|
|
|
Six Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Net cash provided by/(used in):
|
|
|
|
||||
Operating activities
|
$
|
(34,197
|
)
|
|
$
|
(26,697
|
)
|
Investing activities
|
(382
|
)
|
|
(560
|
)
|
||
Financing activities
|
19,691
|
|
|
50
|
|
||
Effect of exchange rates on cash
|
(566
|
)
|
|
1,534
|
|
||
Net decrease in cash and cash equivalents
|
$
|
(15,454
|
)
|
|
$
|
(25,673
|
)
|
•
|
our ability to restructure our existing debt obligations scheduled to mature in mid-2019;
|
•
|
the success of our commercialization efforts and the level of revenues generated from sales of lomitapide and metreleptin in the U.S., and of lomitapide in other key countries where it is approved and being commercialized, including Japan;
|
•
|
the status of ongoing or recently concluded government investigations and lawsuits, such as the Settlement of the JUXTAPID investigations, including relevant obligations, the disclosure of possible or actual outcomes, and the negative publicity surrounding such matters, and the costs associated with the resolution of these investigations and lawsuits, including the civil penalties, restitution and settlement amounts discussed in Note 12, Commitments and Contingencies, in the Notes to Unaudited Condensed Consolidated Financial Statements, the cost of implementing and complying with the CIA, the DPA, and the FDA Consent Decree and criminal probation terms, and the costs and expenses associated with any other investigations or litigation that arise out of these investigations, lawsuits or the Settlement;
|
•
|
the timing and costs of satisfying our debt obligations, including interest payments and any amounts due upon the maturity of such debt, including under Aegerion’s Convertible Notes, the Senior Loan and Aegerion's other indebtedness;
|
•
|
the level of revenues 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. or EU approval of such products, particularly, with respect to Brazil, in light of the additional requirements that have been recently imposed on named patient sales of pharmaceutical products in Brazil, including our products, and potential future additional requirements or limitations, the ongoing court proceedings in Brazil reviewing the regulatory framework for named patient sales and, for lomitapide, regulatory approval of Amgen’s PCSK9 inhibitor product in Brazil in April 2016 and the potential availability of that and other PCSK9 inhibitor products on a named patient sales or commercial basis in Brazil;
|
•
|
the level of physician, patient and payer acceptance of lomitapide and metreleptin, and the extent of the negative impact of and other risks associated with the availability of PCSK9 inhibitor products on sales of JUXTAPID in the U.S.;
|
•
|
our ability to continue to manage our costs and expenses to better align with our revenues and strengthen our capital structure, while supporting approved products in a compliant manner;
|
•
|
our ability to provide security to collateralize any financings, which may be required by lenders as a condition to providing us with any funding, particularly given the fact that substantially all of Aegerion’s assets have been pledged as collateral under the Senior Loan and the Term Loan Agreement, including the intellectual property of metreleptin and lomitapide;
|
•
|
gaining regulatory and pricing and reimbursement approvals to market our products in countries in which the products are not currently approved and/or reimbursed, where it makes business sense to seek such approval, without significant restrictions, discounts, caps or other cost containment measures, including regulatory and pricing and reimbursement approval of metreleptin in the EU for both GL and PL, and the timing and costs of seeking such approvals;
|
•
|
the timing and cost of lifecycle management and clinical development activities, particularly our anticipated trial assessing metreleptin in patients with HMD;
|
•
|
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 our products at the prices at which we offer our products without imposing any additional major hurdles to access or other significant restrictions or limitations, and the ability and willingness of HoFH and GL patients to pay, or to arrange for payment assistance with respect to, any patient cost-sharing amounts for our products applicable under their insurance coverage, particularly in light of recent reductions in contributions to 501(c)(3) patient organizations by pharmaceutical companies;
|
•
|
the cost of maintaining the sales and marketing capabilities necessary for the commercialization of our products for their targeted indications in the market(s) in which each has received regulatory approval and we elect to commercialize such products, to the extent reimbursement and pricing approvals are obtained, and certain other key international markets, if approved;
|
•
|
the timing and costs of future business development opportunities;
|
•
|
the cost of filing, prosecuting and enforcing patent claims, including the cost of defending any challenges to the patents or our claims of exclusivity, and our licensors' ability to be successful in defending such challenges, including, with respect to lomitapide, against potential generic submissions with the FDA and certain assertions raised by Knowledge Ecology International to the National Institutes of Health with respect to the lomitapide method of use patents, the responses to which are being handled by the University of Pennsylvania, the licensor of the lomitapide patents;
|
•
|
the costs of commercializing our products and manufacturing-related activities to commercializing our products, including the costs of securing and providing adequate supplies of drug product to meet commercial demand;
|
•
|
the levels, timing and collection of revenues received from sales of our products in the future;
|
•
|
whether we are successful in our efforts to defend ourselves in, or to settle on acceptable terms, any significant litigation, including litigation that may result, directly or indirectly, from the Settlement; and
|
•
|
the cost of our current and future observational cohort studies and other post-marketing commitments, including to the FDA, the EMA and in any other countries where our products are ultimately approved.
|
|
|
NOVELION THERAPEUTICS INC.
|
||
|
|
|
(Registrant)
|
|
|
|
|
Date: August 7, 2018
|
|
By:
|
/s/ Jeffrey Hackman
|
|
|
|
Jeffrey Hackman
|
|
|
|
Principal Executive Officer
|
|
|
|
|
Date: August 7, 2018
|
|
By:
|
/s/ Michael D. Price
|
|
|
|
Michael D. Price
|
|
|
|
Principal Financial Officer
|
|
|
|
|
|
1.
|
Section 1(f) is hereby deleted in its entirety and replaced with the following:
“Relocation Transition Allowance. From the Commencement Date until April 20, 2018, the Executive will receive a relocation transition allowance to cover the following expenses: (a) temporary housing, not to exceed $4,500 per month; (b) weekly commuting costs to include airfare/train fare not to exceed $1,000 per round trip, and taxi/car services to and from the airport/train station, all of which must comply with the Company’s T&E policy (collectively with (a), the “Relocation Transition Allowance”); and (c) a “gross-up” payment in the amount necessary to offset the tax liability associated with the Relocation Transition Allowance outlined in (a) and (b), and effective April 20, 2018, the Executive will receive, in lieu of the Relocation Transition Allowance and “gross-up” payment, an allowance of up to $20,000 (the “Amended Relocation Transition Allowance”) to cover expenses incurred for relocating to the Cambridge, Massachusetts area; provided, that (x) the Executive must submit expense reports with supporting documentation in such form and containing such information as the Company may request to be reimbursed for all Relocation Transition Allowance and Amended Relocation Transition Allowance expenses, and (y) if, prior to the 12-month anniversary of the Commencement Date, the Executive’s employment terminates other than without Cause or for Good Reason, the Executive will be required to repay the amounts paid to the Executive under the Relocation Transition Allowance and the Amended Relocation Transition Allowance.
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2.
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Other Provisions. The Employment Agreement, as modified by this Amendment, shall remain in full force and effect. This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. The execution of this Amendment may be by actual or facsimile signature.
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NOVELION SERVICES USA, INC.
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EXECUTIVE
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/s/ Linda Buono
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/s/ Murray Stewart
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By: Linda Buono
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By: Dr. Murray Willis Stewart
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Title: SVP, Human Resources
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Title: Executive Vice President, Research & Development
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1.
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I have reviewed this quarterly report on Form 10-Q of Novelion Therapeutics Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Jeffrey Hackman
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Name:
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Jeffrey Hackman
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Title:
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Principal Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Novelion Therapeutics Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Michael D. Price
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Name:
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Michael D. Price
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Title:
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Principal Financial Officer
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Date: August 7, 2018
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/s/ Jeffrey Hackman
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Name:
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Jeffrey Hackman
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Title:
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Principal Executive Officer
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Date: August 7, 2018
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/s/ Michael D. Price
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Name:
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Michael D. Price
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Title:
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Principal Financial Officer
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