ALBIREO PHARMA, INC. (Form: 10-Q, Received: 11/08/2018 16:19:38)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001‑33451

Albireo Pharma, Inc.

(Exact name of registrant as specified in its charter)

s
Delaware (State or other jurisdiction of incorporation or organization)		90‑0136863 (IRS Employer Identification No.)

10 Post Office Square, Suite 502 South, Boston, MA (Address of principal executive offices)		02109 (Zip code)

Registrant’s telephone number, including area code: (857) 254‑5555

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 1, 2018, the registrant had 11,969,928 shares of common stock, $0.01 par value per share, outstanding.

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Albireo Pharma, Inc.


		Page

PART I — FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements		3
Item 1. Financial Statements		6
Condensed Consolidated Balance Sheets (unaudited) at September 30, 2018 and December 31, 2017		6
Condensed Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2018 and 2017		7
Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the Three and Nine Months Ended September 30, 2018 and 2017		8
Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2018 and 2017		9
Notes to Condensed Consolidated Financial Statements (unaudited)		10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3. Quantitative and Qualitative Disclosures About Market Risk		31

Item 4. Controls and Procedures		31

PART II — OTHER INFORMATION

Item 1A. Risk Factors		33

Item 6. Exhibits		34

Signatures		35

All brand names, trademarks or service marks appearing in this quarterly report are the property of their respective owners. Registrant’s use or display of another party’s trademark, service mark, trade dress or product in this quarterly report is not intended to, and does not, imply a relationship with, or endorsement or sponsorship of, the registrant by such other party.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, that relate to future events or to our future operations or financial performance. Any forward-looking statement involves known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statement. Forward-looking statements include statements, other than statements of historical fact, about, among other things:

the progress, number, scope, cost, duration or results of our development activities, nonclinical studies and clinical trials of A4250, elobixibat, A3384 or any of our other product candidates or programs, such as the target indication(s) for development or approval, the size, design, population, conduct, cost, objective or endpoints of any clinical trial, or the timing for initiation or completion of or availability of results from any clinical trial (including our Phase 3 clinical trial of A4250 in patients with progressive familial intrahepatic cholestasis, or PFIC), for submission or approval of any regulatory filing, or for meeting with regulatory authorities;

the potential benefits that may be derived from any of our product candidates;

the timing of and our ability to obtain and maintain regulatory approval of our existing product candidates, any product candidates that we may develop, and any related restrictions, limitations, or warnings in the label of any approved product candidates;

any payment that HealthCare Royalty Partners III, L.P., or HCR, or EA Pharma Co., Ltd., or EA Pharma, may make to us or any other action or decision that EA Pharma may make concerning elobixibat or our business relationship;

our future operations, financial position, revenues, costs, expenses, uses of cash, capital requirements, our need for additional financing or the period for which our existing cash resources will be sufficient to meet our operating requirements; or

our strategies, prospects, plans, expectations, forecasts or objectives.

Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “forecast,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “targets,” “likely,” “will,” “would,” “could,” “should,” “continue,” “scheduled” and similar expressions or phrases, or the negative of those expressions or phrases, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on our estimates or projections of the future that are subject to known and unknown risks and uncertainties and other important factors that may cause our actual results, level of activity, performance, experience or achievements to differ materially from those expressed or implied by any forward-looking statement. Actual results, level of activity, performance, experience or achievements may differ materially from those expressed or implied by any forward-looking statement as a result of various important factors, including our critical accounting policies and risks and uncertainties relating, among other things, to:

the design, size, duration and endpoints for, and results from, our double blind Phase 3 clinical trial of A4250 in patients with PFIC or related extension study, or any other trials that will be required to obtain marketing approval for A4250 to treat patients with PFIC or any other pediatric cholestatic liver disease, for elobixibat to treat nonalcoholic steatohepatitis, or NASH, or for A3384 to treat bile acid malabsorption, or BAM;

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whether favorable findings from clinical trials of A4250 to date, including findings in indications other than PFIC, will be predictive of results from future clinical trials, including the trials comprising our Phase 3 PFIC program for A4250;

whether either or both of the U.S. Food and Drug Administration, or FDA, and European Medicines Agency, or EMA, will determine that the primary endpoint and treatment duration of the Phase 3 trial in patients with PFIC are sufficient, even if such primary endpoint is met with statistical significance, to support approval of A4250 in the United States or the European Union, to treat PFIC, a symptom of PFIC, a specific PFIC subtype(s) or otherwise;

the outcome and interpretation by regulatory authorities of an ongoing third-party study pooling and analyzing long-term PFIC patient data;

the timing for completion of, or for availability of data from, the trials comprising the Phase 3 PFIC program for A4250, and the outcomes of such trials;

delays or other challenges in the recruitment of patients for the Phase 3 trial of A4250;

whether we will receive a rare pediatric disease priority review voucher for A4250 from the FDA when applicable, whether a rare pediatric disease priority review voucher that we may receive in the future for A4250, if any, will be valuable to us, and, if necessary, whether the rare pediatric disease priority review voucher program will be renewed beyond 2020;

the competitive environment and commercial opportunity for a potential treatment for PFIC and other orphan pediatric cholestatic liver diseases;

the conduct and results of clinical trials and nonclinical studies and assessments of A4250, elobixibat, A3384 or any of our other product candidates and programs, including the performance of third parties engaged to execute them and difficulties or delays in patient enrollment and data analysis;

the medical benefit that may be derived from A4250, elobixibat, A3384 or any of our other product candidates;

the extent to which our agreements with HCR and EA Pharma for elobixibat generate nondilutive income for us;

the timing and success of submission, acceptance and approval of regulatory filings and any related restrictions, limitations or warnings in the label of any approved product candidates;

the significant control or influence that EA Pharma has over the commercialization of elobixibat in Japan and the development and commercialization of elobixibat in EA Pharma’s other licensed territories;

whether we elect to seek and, if so, our ability to establish a license or other partnering transaction with a third party for elobixibat in the United States or Europe;

whether findings from nonclinical studies and clinical trials of IBAT inhibitors will be predictive of future clinical success for a product candidate of ours in the treatment of NASH;

the accuracy of our estimates regarding expenses, costs, future revenues, uses of cash and capital requirements;

our ability to obtain additional financing on reasonable terms, or at all;

our ability to establish additional licensing, collaboration or similar arrangements on favorable terms and our ability to attract collaborators with development, regulatory and commercialization expertise;

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the success of competing third-party products or product candidates;

our ability to successfully commercialize any approved product candidates, including their rate and degree of market acceptance;

our ability to obtain coverage, pricing or reimbursement for approved products in the United States or European Union;

our ability to expand and protect our intellectual property estate;

regulatory developments in the United States and other countries;

our ability to fully remediate our identified internal control material weaknesses by our planned timeframe;

the performance of our third-party suppliers, manufacturers and contract research organizations and our ability to obtain alternative sources of raw materials;

our ability to attract and retain key personnel; and

our ability to comply with regulatory requirements relating to our business, and the costs of compliance with those requirements, including those on data privacy and security.

These and other risks and uncertainties are described in greater detail under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10‑K for the fiscal year ended December 31, 2017, in item 1A of Part II of this quarterly report, and in other filings that we make with the Securities and Exchange Commission, or SEC. As a result of the risks and uncertainties, the results or events indicated by the forward-looking statements may not occur. We caution you not to place undue reliance on any forward-looking statement.

In addition, any forward-looking statement in this quarterly report represents our views only as of the filing date of this quarterly report and should not be relied upon as representing our views as of any subsequent date. We anticipate that subsequent events and developments may cause our views to change. Although we may elect to update these forward-looking statements publicly at some point in the future, we specifically disclaim any obligation to do so, except as required by applicable law. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Albireo Pharma, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	September 30,		December 31,
	2018		2017
ASSETS
Current assets:
Cash and cash equivalents	$	173,602	$	53,231
Prepaid expenses and other assets		490		1,054
Other receivables		2,304		726
Total current assets		176,396		55,011
Property and equipment, net		199		178
Goodwill		17,260		17,260
Other noncurrent assets		396		775
Total assets	$	194,251	$	73,224
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	3,481	$	1,350
Accrued expenses		5,278		6,105
Other liabilities		327		474
Total current liabilities		9,086		7,929
Liability related to sale of future royalties		48,461		—
Long-term liabilities		37		42
Total liabilities		57,584		7,971
Stockholders’ Equity:
Common stock, $0.01 par value per share — 30,000,000 authorized at September 30, 2018 and December 31, 2017; 11,969,928 and 8,902,784 issued and outstanding at September 30, 2018 and December 31, 2017, respectively		120		89
Additional paid in capital		213,005		114,522
Accumulated other comprehensive income		4,150		1,001
Accumulated deficit		(80,608)		(50,359)
Total stockholders’ equity		136,667		65,253
Total liabilities and stockholders’ equity	$	194,251	$	73,224

See accompanying notes to Condensed Consolidated Financial Statements.

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Albireo Pharma, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Revenue	$	237	$	—	$	12,169	$	2
Operating expenses:
Research and development		9,666		3,226		22,228		9,000
General and administrative		3,850		3,709		12,216		10,634
Other operating (income) expense, net		(614)		(401)		1,377		(392)
Total operating expenses		12,902		6,534		35,821		19,242
Operating loss		(12,665)		(6,534)		(23,652)		(19,240)
Interest income (expense), net		(1,367)		23		(4,049)		(378)
Other income (expense), net		7		—		(2,546)		260
Net loss before income taxes		(14,025)		(6,511)		(30,247)		(19,358)
Income tax				—				—
Net loss	$	(14,025)	$	(6,511)	$	(30,247)	$	(19,358)
Net loss per share attributable to holders of common stock:
Net loss per share - basic and diluted	$	(1.17)	$	(0.73)	$	(2.60)	$	(2.60)
Weighted average shares outstanding - basic and diluted		11,969,791		8,878,430		11,612,760		7,452,709

See accompanying notes to Condensed Consolidated Financial Statements.

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Albireo Pharma, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Net loss	$	(14,025)	$	(6,511)	$	(30,247)	$	(19,358)
Other comprehensive loss:
Foreign currency translation adjustment		(618)		(589)		3,149		(679)
Total other comprehensive income (loss)		(618)		(589)		3,149		(679)
Total comprehensive loss	$	(14,643)	$	(7,100)	$	(27,098)	$	(20,037)

See accompanying notes to Condensed Consolidated Financial Statements.

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Albireo Pharma, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2018		2017
Cash flows from operating activities:
Net loss	$	(30,247)	$	(19,358)
Adjustments to reconcile net loss to net cash used in operating activities:
Non cash interest expense on liability related to royalty monetization		4,880		—
Accretion of debt discount and amortization of issuance costs		—		387
Depreciation and amortization		33		23
Change in fair value of financial instruments		(1)		(251)
Gain on sale of property, plant and equipment		(14)		—
Stock-based compensation expense		3,868		2,861
Unrealized foreign exchange (gain) loss		4,802		(593)
Changes in operating assets and liabilities:
Trade receivables		(243)		17
Prepaid expenses and other current assets		555		242
Other receivables		(1,434)		(338)
Other non-current assets		379		15
Trade payables		2,292		465
Accrued expenses		(1,516)		(3,244)
Other liabilities and long-term liabilities		(160)		110
Other non-current liabilities				43
Net cash used in operating activities		(16,806)		(19,621)
Cash flows from investing activities:
Purchase of property, plant and equipment		(61)		(187)
Proceeds from sale of property, plant and equipment		14		—
Net cash used in investing activities		(47)		(187)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs		94,139		48,500
Proceeds from royalty agreement		44,525		—
Exercise of options		507		226
Payments of principal on borrowings		—		(2,159)
Net cash provided by financing activities		139,171		46,567
Effect of exchange rate changes on cash and cash equivalents		(1,947)		383
Net increase in cash and cash equivalents		120,371		27,142
Cash and cash equivalents—beginning of period		53,231		29,931
Cash and cash equivalents—end of period	$	173,602	$	57,073
Supplemental disclosures of cash flow information:
Cash paid for interest	$	—	$	160
Shares issued upon cashless exercise of Kreos warrants		—		617

See accompanying notes to Condensed Consolidated Financial Statements.

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Albireo Pharma, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Summary of significant accounting policies and basis of presentation

Organization

Albireo Pharma, Inc. (Parent), together with its direct and indirect subsidiaries (the Company), is a clinical-stage biopharmaceutical company focused on the development and commercialization of novel bile acid modulators to treat orphan pediatric liver diseases and other liver and gastrointestinal diseases and disorders. The Company’s clinical pipeline includes a Phase 3 product candidate, a Phase 2 product candidate, and elobixibat, which is approved in Japan for the treatment of chronic constipation. We also anticipate commencing a development program with elobixibat in nonalcoholic steatohepatitis or NASH. A4250, the Company’s Phase 3 lead product candidate, is in development initially for the treatment of patients with progressive familial intrahepatic cholestasis (PFIC), a rare, life-threatening genetic disorder affecting young children.

Basis of presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information, and the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2017. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for fair presentation have been included in the Condensed Consolidated Financial Statements. The results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the full fiscal year, any other interim period or any future fiscal year. The condensed consolidated financial statements are prepared on a basis consistent with prior periods except for the adoption of the new revenue recognition standard discussed below.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).

Principles of consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of Parent and its direct or indirect wholly owned subsidiaries, Albireo Limited, Albireo AB, Elobix AB, Albireo, Inc., Albireo Security Corp. and Biodel UK Limited. All intercompany balances and transactions have been eliminated in consolidation.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each entity comprising the Company are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The functional currency for Parent, Albireo, Inc. and Albireo Security Corp. is the U.S. Dollar (USD), the functional currency for Albireo Limited, Elobix AB and Biodel UK Limited is the Euro, and the functional currency for Albireo AB is the Swedish Krona (SEK). The Company consolidates its financial statements in USD.

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Transactions and balances

Foreign currency transactions in each entity comprising the Company are remeasured into the functional currency of the entity using the exchange rates prevailing at the respective transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized within Other (income) expense, net in the Condensed Consolidated Statements of Operations as part of operating expenses.

The results and financial position of the Company that have a functional currency different from the USD are translated into the presentation currency as follows:

assets and liabilities presented are translated at the closing exchange rate as of September 30, 2018 and December 31, 2017;

income and expenses for each statement of comprehensive income (loss) are translated at the average exchange rate for the applicable period;

significant transactions use the closing exchange rate on the date of the transaction; and

all resulting exchange differences arising from such translations are recognized directly in other comprehensive income (loss) and presented as a separate component of equity.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes. Management must apply significant judgment in this process. On an ongoing basis, the Company evaluates its estimates and assumptions, including but not limited to accruals, deferred tax assets and royalty monetization liability estimated at fair value. Actual results could materially differ from these estimates.

Fair value of financial instruments

When measuring the fair value of financial instruments, the Company evaluates valuation techniques such as the market approach, the income approach and the cost approach. A three-level valuation hierarchy, which prioritizes the inputs to valuation techniques that are used to measure fair value, is based upon whether such inputs are observable or unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;

Level 2—Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable for substantially the full term of the assets or liabilities; and

Level 3—Unobservable inputs that reflect the reporting entity’s estimate of assumptions that market participants would use in pricing the asset or liability.

Research and development expenses

Research and development costs are expensed as incurred and include primarily salaries, benefits and other staff-related costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs.

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The Company’s nonclinical studies and clinical trials are performed by third-party contract research organizations (CROs). Some of these expenses are billed monthly for services performed, while others are billed based upon milestones achieved. For nonclinical studies, the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled and percentage of work completed to date or contract milestones achieved. The Company’s estimates are highly dependent upon the timeliness and accuracy of the data provided by the respective CROs regarding the status of the contracted activity, with adjustments made when deemed necessary.

Revenue recognition

In 2012, the Company entered into a license agreement (the Agreement) with EA Pharma Co., Ltd. (EA Pharma, formerly Ajinomoto Pharmaceuticals Co., Ltd.) to develop a select product candidate (elobixibat) for registration and subsequent commercialization in select markets. In conjunction with the Agreement, the Company granted EA Pharma an exclusive license to its intellectual property for development and commercialization activities in the designated field and territories. The Company is entitled to payments resulting from pharmaceutical ingredient or related procurement services if provided as part of a development plan. Revenue related to these payments is recorded on a net basis; in this instance, the Company acts as an agent, as it does not have discretion to change suppliers and does not perform any part of the services or manufacture of the subject pharmaceutical ingredients. The costs associated with these activities are netted against the related revenue in the condensed consolidated statements of operations.

In 2012, EA Pharma made an upfront cash payment to the Company of €10.0 million under the Agreement. The parties amended the agreement in April 2016, pursuant to which EA Pharma made an additional cash payment to the Company of $8.0 million. As of September 30, 2018, the Company is eligible to receive an additional regulatory-based milestone payment under the Agreement of €4.3 million ($5.0 million based on the Euro to USD exchange rate as of September 30, 2018) if a specified regulatory event is achieved for elobixibat. In December 2017, the Company executed a royalty interest acquisition agreement (RIAA) with HealthCare Royalty Partners III, L.P. (HCR) relating to certain royalties and sales milestone payments due under the Agreement and which is detailed below. The cash payments and any other payments for milestones and royalties from EA Pharma are non-refundable, non-creditable and not subject to set-off.

The Agreement will continue until the last royalty period for any product in the territory, which is defined as the period when there are no remaining patent rights or regulatory exclusivity in place for any products subject to royalties. EA Pharma may terminate the Agreement at will upon 180 days’ prior written notice to the Company. Either party may terminate the Agreement for the other party’s uncured material breach or insolvency and in certain other circumstances agreed to by the parties.

The Company assessed this arrangement in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606), and concluded that the contract counterparty, EA Pharma, is a customer. The Company identified the following material promises under the arrangement: (1) a sub-licensable and exclusive license to use the Company’s intellectual property and collaboration compounds to conduct development and commercialization activities in the designated fields and territories and (2) the technology transfer of the Albireo intellectual property and compound. Participation on the joint development committee (“JDC”) and joint commercialization committee (“JCC”) was determined to be quantitatively and qualitatively immaterial and therefore is excluded from performance obligations. The license was determined to not be distinct from the technology transfer; as such, the Company determined that these promises should be combined into a single performance obligation.

Under the Agreement, in order to evaluate the appropriate transaction price, the Company determined that the upfront amount constituted the entirety of the consideration to be included in the transaction price as of the outset of the arrangement, which was allocated to the single performance obligation. At the outset of the arrangement, the transaction price included only the €10.0 million upfront consideration received, and was increased to include the $8.0 million received in conjunction with the 2016 amendment. The potential milestone payments were excluded from the transaction price, as all milestone amounts were fully constrained. In April 2013, December 2015, and October 2016, various development milestone events were achieved, and the Company recognized revenue related to these events; because the

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Company previously satisfied its performance obligation to deliver the license, the Company recorded these milestone payments as received. The Company will reevaluate the transaction price at the end of each reporting period and as other uncertain events are resolved or other changes in circumstances occur, and, if necessary, adjust its estimate of the transaction price.

In January 2018, the Japanese Ministry of Health Labour and Welfare (MHLW) approved a new drug application filed by EA Pharma for elobixibat for the treatment of chronic constipation, for which the Company received a milestone payment of $11.2 million. Based on the regulatory approval, the Company determined that the milestone was no longer at risk of significant reversal. As such, because the single performance obligation had previously been satisfied, the Company recognized this amount in full in the first quarter of 2018 and there was no deferred revenue or contract asset as of September 30, 2018.

Monetization of Future Royalties

In December 2017, the Company executed the RIAA with HCR pursuant to which it sold to HCR the right to receive all royalties from sales in Japan and sales milestones achieved from any covered territory potentially payable to the Company under the Agreement, up to a specified maximum “cap” amount of $78.8 million, based on the funds the Company received from HCR to date. The Company received $44.5 million from HCR, net of certain transaction expenses, under the RIAA and the Company is eligible to receive an additional $15.0 million under the RIAA if a specified sales milestone is achieved for elobixibat in Japan. If the cap amount is reached, the Company will again become eligible to receive royalties from Japanese sales and sales milestones from covered territories for elobixibat from EA Pharma under the Agreement. The Company is obligated to make royalty interest payments to HCR under the RIAA only to the extent it receives future Japanese royalties, sales milestones or other specified payments from EA Pharma. Although the Company sold its rights to receive royalties from the sales of elobixibat in Japan, as a result of its ongoing involvement in the cash flows related to these royalties, the Company will continue to account for these royalties as revenue. The Company recorded the $44.5 million as a liability related to sale of future royalties (royalty obligation). The royalty obligation will be amortized using the effective interest rate method, based on the Company’s best estimate of the time it will take to reach the capped amount. The following table shows the activity within the liability account during the period from the inception of the royalty transaction in December 2017 to September 30, 2018:


	September 30, 2018
	(in thousands)
Liability related to sale of future royalties—beginning balance	$	—
Proceeds from sale of future royalties, net		44,525
Unrealized foreign currency (gain)/loss on remeasurement of the liability		2,535
Foreign currency translation (gain)/loss		(2,545)
Accretion of interest expense on liability related to royalty monetization		4,880
Repayment of the liability		(697)
Liability related to sale of future royalties—ending balance	$	48,698
Less current portion classified within other current liabilities		(237)
Net ending liability related to sale of future royalties	$	48,461

The Company records estimated royalties to accrued other until the payment is received from EA Pharma at which time the Company then remits payment to HCR. As royalties are remitted to HCR, the balance of the royalty obligation will be effectively repaid over the life of the RIAA. In order to determine the amortization of the royalty obligation, the Company is required to estimate the total amount of future royalty payments to be received and submitted to HCR, as noted above, based on the Company’s best estimate of the time it will take to reach the cap amount. The sum of these amounts less the $44.5 million proceeds the Company received will be recorded as interest expense over the life of the royalty obligation. Since inception, the Company’s estimate of its total interest expense resulted in a quarterly effective interest rate of approximately 4.20%. The Company periodically assesses the estimated royalty payments to HCR and to the extent such payments are greater or less than its initial estimates or the timing of such payments is materially different than its original estimates, the Company will prospectively adjust the accretion of interest on the royalty obligation. There are a number of factors that could materially affect the amount and the timing of royalty payments, most of which are not within the Company’s control. Such factors include, but are not limited to, the rate of elobixibat

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prescriptions, the number of doses administered, the introduction of competing products, manufacturing or other delays, patent protection, adverse events that result in governmental health authority imposed restrictions on the use of the drug products, significant changes in foreign exchange rates as the royalties remitted to HCR are in U.S. dollars while sales of elobixibat are in Japanese yen, and sales never achieving forecasted numbers, which would result in reduced royalty payments, reduced non-cash royalty revenues and reduced non-cash interest expense over the life of the royalty obligation.

Loss contingencies

Loss contingencies are recorded as liabilities when it is probable that a liability has occurred and the amount of loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that an ultimate loss will be material. Contingent liabilities are often resolved over long periods of time. Estimating probable losses requires analysis that often depends on judgments about potential actions by third parties, such as regulators.

Recently adopted accounting pronouncements

In June 2018, the FASB issued, ASC 2018-07 “ Improvement to Nonemployee Share-based Payment Accounting”. Under the new standard, companies are no longer be required to value non-employee awards differently from employee awards. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company has early adopted this standard as of July 1, 2018 and determined there was no impact on the date of adoption to the Company’s condensed consolidated financial statements.

Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers , using the modified retrospective transition method. Under this method, results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five step analysis: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step analysis to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company enters into licensing agreements which are within the scope of ASC 606, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties. The terms of these arrangements may include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products.

In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must use significant judgment to determine: (a) the number of performance obligations based on the determination under step (ii) above and (b) the transaction price under step (iii) above. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be

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included in the transaction price as described further below. The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied.

Amounts received prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.

Exclusive Licenses

If the license to the Company’s intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. In assessing whether a promise or performance obligation is distinct from the other promises, the Company considers factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the collaboration partner can benefit from a promise for its intended purpose without the receipt of the remaining promise, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The measure of progress, and thereby periods over which revenue should be recognized, are subject to estimates by management and may change over the course of the research and development and licensing agreement. Such a change could have a material impact on the amount of revenue the Company records in future periods.

Milestone Payments

At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Royalties

For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Impact of Adoption

The most significant change relates to the Company’s accounting for contingent milestone payments. Under ASC 605, the Company recognized revenue related to contingent milestone payments as the milestone was achieved, using the milestone method. Under ASC 606, the Company performs an assessment of the probability of milestone

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achievement at each reporting date, and determines whether the cumulative revenue related to the milestone is at risk of significant reversal.

As a result of adopting ASC 606 on January 1, 2018, the Company did not record any cumulative changes in the current period, as the performance obligation related to the Agreement with EA Pharma was fully satisfied in 2012. Additionally, there was no difference in the revenue recognized or costs recorded in the nine months ended September 30, 2018 as what would have been recognized or recorded under ASC 605.

In September 2016, the FASB issued ASU 2016‑15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) ,” which changes how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017 and for interim periods therein. The Company has adopted this standard as of January 1, 2018 and determined there is no impact of this standard on the Company’s condensed consolidated financial statements as of the date of the adoption.

In May 2017, the FASB issued ASU 2017‑09, “ Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting,” (ASC 718), which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The new standard is effective for fiscal years beginning after December 15, 2017 and for interim periods therein. The Company has adopted this standard as of January 1, 2018 and determined there is minimal impact on the Company’s condensed consolidated financial statements.

Accounting pronouncements issued but not yet adopted

In February 2016, the FASB issued ASU 2016‑02, “ Leases (Topic 842) .” The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In August, another method of adoption was issued which provides an alternative to the modified retrospective transition method and allows companies to forgo the retrospective reporting requirements by recognizing a cumulative effect adjustment to the opening balance of retained earnings upon adoption in 2019.

The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and expects to use the optional transition method .

2. Commitments and contingencies

Operating lease commitments

As of September 30, 2018, future minimum commitments under facility operating leases were $1,025,000.

Rent expense recognized under the Company’s operating leases was $304,000 and $283,000 for the nine months ended September 30, 2018 and 2017, respectively.

Agreements with CROs

As of September 30, 2018, the Company had various agreements with CROs for the conduct of specified research and development activities. Based on the terms of the respective agreements, the Company may be required to make future payments of up to $25.0 million to CROs upon the completion of contracted work.

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Other Commitments

In connection with the spin-off of Albireo Limited from AstraZeneca in 2008 and associated transfer agreements, the Company became party to an assignment agreement between AstraZeneca and a named inventor on a patent related to elobixibat. In connection with this agreement, in April 2018, the Company was required to pay a one-time “launch fee” of $457,000.

3. Net loss per share

Basic net loss per share, or Basic EPS, is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding. Diluted net loss per share, or Diluted EPS, is calculated by dividing the net loss by the weighted-average number of shares of common stock plus dilutive common stock equivalents outstanding.

The following table sets forth the computation of Basic EPS and Diluted EPS (in thousands, except for share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Basic and Diluted EPS:
Numerator
Net loss	$	(14,025)	$	(6,511)	$	(30,247)	$	(19,358)
Denominator
Weighted average number of shares		11,969,791		8,878,430		11,612,760		7,452,709
Basic and Diluted EPS	$	(1.17)	$	(0.73)	$	(2.60)	$	(2.60)

The following outstanding common stock equivalents were excluded from the computation of Diluted EPS for the three and nine months ended September 30, 2018 and 2017 because including them would have been anti-dilutive:


	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2018	2017	2018	2017
Options to purchase common stock	1,442,361	748,390	1,442,361	748,390

4. Income taxes

The Company did not record a tax provision or benefit for the three months or nine months ended September 30, 2018 or 2017. The Company has continued to maintain a full valuation allowance against its net deferred tax assets. The Company has had an overall net operating loss position since its inception.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (TCJA). SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC Topic 740, Income Taxes . Although no changes were made to provisional amounts during the three or nine months ended September 30, 2018, the Company will continue to refine its estimates related to the new legislation as clarifying guidance and interpretations are issued.

5. Stock-based Compensation

The Company recognized stock-based compensation expense for employees of $1.6 million and $0.8 million for the three months ended September 30, 2018 and 2017, respectively, and $3.9 million and $2.9 million for the nine months ended September 30, 2018 and 2017, respectively.

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A summary of the outstanding stock options as of September 30, 2018 is as follows:


	Stock Options Outstanding
				Weighted-
		Weighted-		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
	Number of	Price Per		Term	Value (in
	Shares	Share		(Years)	thousands)
Outstanding—December 31, 2017	1,035,361	$	17.78	8.71	$	11,896
Granted	551,250	$	31.18
Expirations/forfeitures	(45,032)	$	41.95
Exercises	(72,782)	$	6.97
Outstanding—September 30, 2018	1,468,797	$	22.35	8.29	$	16,954
Exercisable—September 30, 2018	485,290	$	15.47	6.84	$	9,855
Vested or expected to vest at—September 30, 2018	1,449,375	$	22.64	8.30	$	16,333

Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options.

Options to purchase 19,422 shares of common stock are performance based and vest upon the date the Company files a drug approval application for its product candidate A4250 for any orphan indication, if such filing occurs prior to a specified date. This unvested performance-based option is excluded from the vested or expected to vest balance as of September 30, 2018.

As of September 30, 2018, the total unrecognized compensation expense related to unvested options was $16.9 million, which the Company expects to recognize over a weighted average vesting period of 2.6 years.

In determining the estimated fair value of the stock-based awards, the Company uses the Black-Scholes option pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

The fair value of stock option awards granted during the nine months ended September 30, 2018 was estimated with the following assumptions:


	Nine Months Ended
	September 30, 2018
Price per share of common stock	$	30.37	-	33.61
Expected term (in years)		5.5	-	6.0
Risk-free interest rate		2.6	-	2.9	%
Expected volatility		84.4	-	86.9	%
Dividend rate				0	%

6. Financings

At-the-Market Sales

In October 2017, the Company entered into an at-the-market offering program Sales Agreement with Cowen and Company, LLC (Cowen) relating to the sale of shares of the Company’s common stock having an aggregate offering price of up to $50.0 million from time to time through Cowen, acting as its agent. In February 2018, the Company sold an aggregate of 728,862 shares of common stock pursuant to the Sales Agreement and received proceeds, net of offering expenses, of approximately $24.2 million.

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January 2018 Underwritten Public Offering

On January 29, 2018, the Company completed an underwritten public offering of 2,265,500 shares of its common stock, at a price to public of $33.00 per share. The Company received net proceeds from this offering of $70.0 million, after deducting underwriting discounts, commission and offering expenses.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our 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, 2017, 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, 2017 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 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. The initial target indication for our lead product candidate, A4250, is progressive familial intrahepatic cholestasis, or PFIC, a rare, life-threatening genetic disorder affecting young children for which there is currently no approved drug treatment. We completed a Phase 2 clinical trial of A4250 in children with chronic cholestasis and pruritus and enrolled the first patient in our Phase 3 clinical trial of A4250 in patients with PFIC in May of 2018. In June of 2018, the FDA granted a rare pediatric disease designation to A4250, which affirms our eligibility to apply for a rare pediatric disease priority review voucher upon submission of a new drug application for A4250. In October of 2018, the FDA granted fast track designation to A4250 for the treatment of pruritus associated with PFIC. In addition to PFIC, we are considering conducting clinical development of A4250 as a treatment for one or more other pediatric cholestatic liver diseases and disorders. In October of 2018, the FDA granted orphan drug designation to A4250 for the treatment of Alagille syndrome, or ALGS, a rare, life-threatening disease that affects the liver and for which there is no approved pharmacologic treatment option . Our most advanced product candidates in addition to A4250 include elobixibat, which is approved in Japan for the treatment of chronic constipation and for which we anticipate conducting a Phase 2 clinical trial as a treatment for nonalcoholic steatohepatitis, or NASH, and A3384, which is a product candidate to treat bile acid malabsorption. In June 2018, the Company was granted a patent for a method of using elobixibat to treat NASH in both the U.S. and Europe. We also have a preclinical program in NASH.

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 50,000 to 100,000 children born worldwide. Benign recurrent familial intrahepatic cholestasis, or BRIC, is a disease that is caused by the same genetic defect as PFIC, and patients who manifest the same symptoms as PFIC but their symptomatology tends to be episodic in nature. BRIC has also been estimated to affect between one in every 50,000 to 100,000 children born worldwide. Based on the published incidence, published regional populations, and estimated median life expectancies, we estimate the prevalence of PFIC together with BRIC to be approximately 8,000 to 10,000 patients in the U.S. and E.U. but we are not able to estimate the prevalence of PFIC or BRIC with precision. We estimate that there are approximately 3,000 to 4,000 PFIC patients in the U.S. and E.U. We also estimate that there are approximately 5,000 to 6,000 BRIC patients in the U.S. and E.U. We currently have not modeled other regional opportunities in Asia, the Middle East and Latin America. We are aware there may be higher prevalence of disease in countries such as Saudi Arabia and Turkey. There are currently no drugs approved for the treatment of PFIC. First-line treatment for PFIC is typically off-label ursodeoxycholic acid, or UDCA, which is approved in the U.S. and elsewhere for the treatment of primary biliary cholangitis. 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.

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We are considering conducting future clinical development of A4250 as a treatment for other pediatric cholestatic liver diseases and disorders in addition to PFIC. These indications may include any or all of ALGS,biliary atresia and primary sclerosing cholangitis.

ALGS is a genetic condition associated with liver, heart, eye 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. We estimate the incidence of ALGS to be one in 55,000 newborns and the prevalence to be approximately 2,100 patients in the U.S. and 1,600 patients in the E.U. There are currently no drugs approved for the treatment of ALGS. Current treatment for ALGS is generally in line with current treatments for PFIC as described above. In October 2018, the FDA granted orphan drug designation to A4250 for the treatment of ALGS.

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 7.3 in every 100,000 births in the U.S. and one in every 18,000 births in the E.U and the prevalence is estimated to be approximately 9,600 patients in the U.S. and 6,600 patients in the E.U. 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.

Primary sclerosing cholangitis 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 sclerosing cholangitis is 6.3 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.

In October of 2018, we appointed Simon N.R. Harford as Chief Financial Officer and Treasurer.

Since inception, we have incurred significant operating losses. As of September 30, 2018, we had an accumulated deficit of $80.6 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, prepare for and begin the commercialization of any approved products, and add infrastructure and personnel to support our product development efforts and operations as a public company in the United States.

As a clinical-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.

As of September 30, 2018, we had approximately $173.6 million in cash and cash equivalents.

Financial Operations Overview

The following discussion sets forth certain components of our consolidated statements of operations as well as factors that impact those items.

Revenue

We generate revenue primarily from the receipt of royalty revenue, upfront or license fees, milestone payments and payment for pharmaceutical ingredient or related procurement services that are made pursuant to license agreements or related supply agreements. License agreements with commercial partners generally include nonrefundable upfront fees and milestone payments, 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

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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.

Operating Expenses

Research and Development Expenses

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.

General and Administrative Expenses

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, general and administrative expenses include fees for third-party professional services, including consulting, information technology, legal and accounting services and other corporate expenses and allocated overhead.

Critical 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 significant accounting policies are described in Note 1 to our audited consolidated financial statements included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2017 and to the extent policies have changed

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in Note 1 to our condensed consolidated financial statements included in this quarterly report. We believe that our accounting policies relating to revenue recognition and the adoption of ASC 606 (see Note 1 to our condensed consolidated financial statements included in this quarterly report), royalty monetization and related estimates (see Note 1 to our condensed consolidated financial statements included in this quarterly report), research and development expenses and stock-based compensation are the most critical to understanding and evaluating our reported financial results. We have identified these policies as critical because they are both important to the presentation of our financial condition and results of operations and require us to make judgments and estimates on matters that are inherently uncertain and may change in future periods. These policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in our Annual Report on Form 10‑K for the year ended December 31, 2017, except as it relates to the adoption of new standards in the current year.

Results of Operations

Three Months Ended September 30, 2018 and September 30, 2017

Revenue


	Three Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Revenue	$	237	$	—	$	237

There was $237,000 in revenue for the three months ended September 30, 2018 compared with $0 for the three months ended September 30, 2017, an increase of $237,000. The higher revenue is due to the estimated royalty revenue from EA Pharma for elobixibat for the 2018 period.

Research and development expenses


	Three Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Research and development expenses	$	9,666	$	3,226	$	6,440

Research and development expenses were $9.7 million for the three months ended September 30, 2018 compared with $3.2 million for the three months ended September 30, 2017, an increase of $6.4 million. The higher research and development expenses for the 2018 period were principally due to an increase of $3.4 million in costs associated with development of A4250, including costs incurred for manufacturing and clinical development activities for our Phase 3 clinical trial in patients with PFIC, an increase of $1.7 million in personnel and related expenses as we continue to increase our headcount and an increase of $699,000 in preclinical work primarily related to NASH.

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The following table summarizes our principal product development programs and the out-of-pocket third-party expenses incurred with respect to each clinical-stage product candidate and our preclinical programs for the three months ended September 30, 2018 and 2017.


	Three Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Direct third-party project costs:
A4250	$	5,351	$	1,988	$	3,363
Elobixibat		284		23		261
A3384		162		93		69
Preclinical		794		95		699
Total	$	6,591	$	2,199	$	4,392
Other project costs (1) :
Personnel costs	$	2,048	$	387	$	1,661
Other costs (2)		1,027		640		387
Total	$	3,075	$	1,027	$	2,048
Total research and development costs	$	9,666	$	3,226	$	6,440

(1)

Other project costs are leveraged across multiple programs.

(2)

Other costs include facility, supply, consultant and overhead costs that support multiple programs.

General and administrative expenses


	Three Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
General and administrative expenses	$	3,850	$	3,709	$	141

General and administrative expenses were $3.9 million for the three months ended September 30, 2018 compared with $3.7 million for the three months ended September 30, 2017, an increase of $141,000.

Other operating (income) expense, net


	Three Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Other operating (income) expense, net	$	(614)	$	(401)	$	(213)

Other operating (income) expense, net totaled $614,000 of other operating income for the three months ended September 30, 2018 compared with $401,000 of other operating income for the three months ended September 30, 2017, a difference of $213,000. The difference resulted from differences in currency exchange rates in the two periods.

Interest income (expense), net


	Three Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Interest income (expense), net	$	(1,367)	$	23	$	(1,390)

Interest income (expense), net totaled $1.4 million of expense for the three months ended September 30, 2018 compared with $23,000 of income for the three months ended September 30, 2017, a difference of $1.4 million. The difference was principally attributable to $2.0 million in non-cash interest expense recorded in connection with the sale

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of future royalties, partially offset by interest income for the 2018 period. There was no such non-cash interest expense in the prior year.

Other income (expense), net



	Three Months Ended September 30,				Change
	2018		2017		$
		(in thousands)
Other income (expense), net	$	7	$	—	$	7

Net other expense was $7,000 for the three months ended September 30, 2018 compared with net other income of $0 for the three months ended September 30, 2017, a difference of $7,000.

Nine Months Ended September 30, 2018 and September 30, 2017

Revenue


	Nine Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Revenue	$	12,169	$	2	$	12,167

Revenue was $12.2 million for the nine months ended September 30, 2018 compared with $2,000 for the nine months ended September 30, 2017, an increase of $12.2 million. The higher revenue is due to a milestone payment received from EA Pharma due to the approval by the Japanese MHLW of the new drug application for elobixibat for the treatment of chronic constipation and the estimated royalty revenue from EA Pharma for elobixibat for the period.

Research and development expenses


	Nine Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Research and development expenses	$	22,228	$	9,000	$	13,228

Research and development expenses were $22.2 million for the nine months ended September 30, 2018 compared with $9.0 million for the nine months ended September 30, 2017, an increase of $13.2 million. The higher research and development expenses for the 2018 period were principally due to an increase of $6.7 million in costs associated with development of A4250, including costs incurred for manufacturing and clinical development activities for our Phase 3 clinical trial in patients with PFIC, an increase of $3.5 million in personnel and related expenses as we continue to increase our headcount, an increase of $1.4 million in preclinical work primarily associated with NASH, and $1.0 million in other non-program specific R&D costs.

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	Nine Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Direct third-party project costs:
A4250	$	12,202	$	5,473	$	6,729
Elobixibat		379		19		360
A3384		495		201		294
Preclinical		1,594		179		1,415
Total	$	14,670	$	5,872	$	8,798
Other project costs (1) :
Personnel costs	$	4,805	$	1,331	$	3,474
Other costs (2)		2,752		1,797		955
Total	$	7,557	$	3,128	$	4,429
Total research and development costs	$	22,227	$	9,000	$	13,227

(1)

Other project costs are leveraged across multiple programs.

(2)

Other costs include facility, supply, consultant and overhead costs that support multiple programs.

General and administrative expenses



	Nine Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
General and administrative expenses	$	12,216	$	10,634	$	1,582

General and administrative expenses were $12.2 million for the nine months ended September 30, 2018 compared with $10.6 million for the nine months ended September 30, 2017, an increase of $1.6 million. The higher general and administrative expenses for the 2018 period were principally attributable to increases in professional fees and recruitment costs.

Other operating (income) expense, net


	Nine Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Other operating (income) expense, net	$	1,377	$	(392)	$	1,769

Other operating (income) expense, net totaled $1.4 million of expense for the nine months ended September 30, 2018 compared with $392,000 of expense for the nine months ended September 30, 2017, a difference of $1.8 million. The difference resulted from changes in currency exchange rates between the two periods.

Interest expense, net


	Nine Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Interest expense, net	$	(4,049)	$	(378)	$	(3,671)

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Interest expense, net totaled $4.0 million for the nine months ended September 30, 2018 compared with $378,000 for the nine months ended September 30, 2017, an increase of $3.7 million. The difference was principally attributable to $4.9 million in non-cash interest expense recorded in connection with the sale of future royalties relating to sales of elobixibat in Japan, partially offset by interest income for the 2018 period, compared to interest expense related to our prior loan facility for the 2017 period.

Other income (expense), net


	Nine Months Ended September 30,				Change
	2018		2017		$
	(in thousands)
Other income (expense), net	$	(2,546)	$	260	$	(2,806)

Other income (expense), net was $2.6 million of expense for the nine months ended September 30, 2018 compared with $260,000 of income for the nine months ended September 30, 2017, a change of $2.8 million. The difference is primarily related to the foreign currency expense associated with our royalty monetization offset by the exercise of warrants by our lender in May 2017.

Liquidity and Capital Resources

Sources of Liquidity

We do not expect to generate significant revenue from product sales unless and until we or a potential future licensee or collaborator obtains marketing approval for, and commercializes, one or more of our current or potential future product candidates (other than elobixibat as a treatment for chronic constipation in Japan), which we do not expect to occur until at least 2021, if at all. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of and seek regulatory approvals for our product candidates. We are subject to all of the risks applicable to the development 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 continue to incur additional costs associated with operating as a public company and anticipate that we will need substantial additional funding to complete development of and potentially commercialize our product candidates.

Our operations have historically been financed primarily through issuances of shares of common stock, preference shares 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. 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 product candidates.

As of September 30, 2018, our cash and cash equivalents were approximately $173.6 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 RIAA. Under the terms of the RIAA, we are eligible to receive an additional $15 million if a specified sales milestone is achieved for elobixibat in Japan. Additionally, the MHLW approval triggered a milestone payment to us from EA Pharma of €9.0 million ($11.2 million based on the Euro to U.S. Dollar, or USD, exchange rate at January 31, 2018).

In January 2018, we completed an underwritten public offering of 2,265,500 shares of our common stock for net proceeds of approximately $70.0 million under a universal shelf registration statement on Form S‑3 with the SEC, which was declared effective on December 5, 2017 and pursuant to which we registered for sale up to $125 million of any combination of our common stock, preferred stock, debt securities, warrants, rights, purchase contracts and/or units from time to time and at prices and on terms that we may determine. Subsequently, in February 2018, we sold 728,862 shares

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of our common stock for net proceeds of approximately $24.2 million pursuant to an at-the-market offering program Sales Agreement that we entered into with Cowen in October 2017. Under the Sales Agreement, we may offer and sell, from time to time at our discretion, shares of our common stock through Cowen as our sales agent. Under the sales agreement, Cowen may sell the shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended. We are not obligated to make any sales of common stock under the sales agreement. As of September 30, 2018, approximately $25.2 million of securities remain available for issuance under the shelf registration statement, including up to $25.0 million of our common stock available for issuance under the at-the-market offering program sales agreement.

In October 2017, we entered into an asset purchase agreement pursuant to which we sold legacy intellectual property of our predecessor, Biodel, for $4.5 million.

In May 2017, we completed an underwritten public offering of 2,530,000 shares of our common stock at a price to the public of $20.50 per share. Our net proceeds from the offering, after underwriting discounts, commissions and offering expenses, were $48.5 million.

In April 2012, Albireo AB entered into a license agreement with EA Pharma for the development and commercialization of elobixibat in specified countries in Asia. Albireo AB subsequently transferred the agreement to its wholly owned subsidiary, Elobix AB, and the agreement was amended in January 2015, April 2016 and December 2017. We have received approximately $45.4 million in upfront and milestone payments from EA Pharma under this agreement. We are eligible to receive an additional payment of €4.3 million under the agreement ($5.0 million based on the Euro to USD exchange rate as of September 30, 2018) if a specified regulatory event is achieved for elobixibat. In addition, subject to the terms of the RIAA with HCR, we may in the future also become eligible under the license agreement to receive up to ¥3.5 billion if specified sales milestones are achieved for elobixibat.

Cash Flows

Nine Months Ended September 30, 2018 and September 30, 2017


	Nine Months Ended September 30,
	2018		2017
	(in thousands)
Net cash provided by (used in):
Operating activities	$	(16,806)		(19,621)
Investing activities		(47)		(187)
Financing activities		139,171		46,567
Total	$	122,318	$	26,759
Effect of exchange rate changes on cash and cash equivalents		(1,947)		383
Net increase in cash and cash equivalents		120,371		27,142

Operating activities

Net cash used in operating activities for the nine months ended September 30, 2018 was $16.8 million compared to net cash used in operating activities of $19.6 million for the corresponding 2017 period, a change of $2.8 million. The change is primarily due to the milestone payment from EA Pharma of $11.2 million during the 2018 period offset by increased R&D expenses.

Investing activities

Net cash used in investing activities was $47,000 for the nine months ended September 30, 2018 compared to $187,000 for the corresponding 2017 period, a decrease of $140,000. The decrease was due to greater property and equipment purchases in 2017 in connection with our move to our current offices in Boston.

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Financing activities

Net cash provided by financing activities for the nine months ended September 30, 2018 was $139.2 million compared to net cash provided in financing activities of $46.6 million for the corresponding 2017 period, a difference of $92.6 million. The difference was principally due to our receipt of (i) $94.2 million in aggregate net proceeds from our public offering in January 2018 and our sales through our at-the-market offering program sales agreement in February 2018, and (ii) $44.5 million in net proceeds from HCR under our RIAA in February 2018.

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. We believe that our existing cash and cash equivalents will be sufficient to meet our projected operating requirements at least into 2021. However, our operating plans may change as a result of many factors, including those described below, and we may need additional funds sooner than planned to meet operational needs and capital requirements. In addition, if the conditions for raising capital are favorable we may seek to raise additional funds at any time.

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

the costs, design, duration and any potential delays of, and the results of, our Phase 3 clinical trial of A4250;

the scope, number, progress, timing of initiation duration, cost, results and timing of clinical trials and nonclinical studies of our current or potential future product candidates;

whether and to what extent milestone events are achieved under our license agreement with EA Pharma, our RIAA with HCR or any potential future licensee or collaborator;

the outcomes 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 additional licensing, collaboration or similar arrangements on favorable terms and whether and to what extent we retain development or commercialization responsibilities under any new licensing, collaboration or similar arrangement;

the success of any other business, product or technology that we acquire or in which we invest;

our ability to maintain, expand and defend the scope of our intellectual property portfolio;

our ability to manufacture any approved products on commercially reasonable terms;

our ability to establish 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 pursue;

the costs of acquiring, licensing or investing in businesses, product candidates and technologies;

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

the costs to operate as a public company in the United States, including the need to implement additional financial and reporting systems and other internal systems and infrastructure for our business;

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market acceptance of our product candidates, to the extent any are approved for commercial sale;

our ability to obtain coverage, pricing or reimbursement for approved products in the United States or European Union;

the effect of competing technological and market developments; and

our ability to comply with regulatory requirements relating to our business, and the costs of compliance with those requirements, including those on data privacy and security.

We cannot determine precisely the completion dates and related costs of our development programs due to inherent uncertainties in outcomes of clinical trials and the regulatory approval process. We cannot be certain that we will be able to successfully complete our 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 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 filed a universal shelf registration statement on Form S‑3 with the SEC, which was declared effective on December 5, 2017 and pursuant to which we registered for sale up to $125 million of any combination of our common stock, preferred stock, debt securities, warrants, rights, purchase contracts and/or units from time to time and at prices and on terms that we may determine. As of September 30, 2018 , approximately $25.2 million of securities remain available for issuance under this shelf registration statement, including up to $25.0 million of our common stock available for issuance pursuant to the at-the-market offering program sales agreement that we entered into with Cowen in October 2017, as described above.

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.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. We do not hold or issue financial instruments for trading purposes.

Foreign Currency Exchange Risk

The functional currency for Albireo Pharma, Inc., Albireo, Inc. and Albireo Security Corp. is the USD, the functional currency for Albireo Limited, Elobix AB and Biodel UK Limited is the Euro, and the functional currency for Albireo AB is the Swedish Krona, or SEK. The Company consolidates its financial statements in USD. Our transactions are denominated in USD, the Euro and SEK, and are exposed to the effects of these exchange rates. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. Fluctuations in currency exchange rates could harm our business in the future. The effect of a 10% adverse change in exchange rates on foreign denominated cash, receivables and payables as of September 30, 2018 would have been material.

To date, we have not entered into any material foreign currency hedging contracts although we may do so in the future.

Interest Rate Sensitivity

As of September 30, 2018, we had approximately $173.6 million in cash and cash equivalents. Our surplus cash and cash equivalents are invested in interest-bearing accounts from time to time which earn interest based on the terms agreed for each account. We have not entered into investments for trading or speculative purposes. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, will reduce future investment income. If overall interest rates had decreased by 10% during the periods presented, our interest income would not have been materially affected.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) as of the end of the period covered by this Form 10‑Q, have concluded that, based on such evaluation and as a result of the material weaknesses discussed in our “Management’s Report on Internal Control over Financial Reporting” in our Form 10‑K for the year ended December 31, 2017 and below, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Material Weaknesses and Remediation of Material Weaknesses

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2018. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework).

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Based on our assessment, our management concluded that the material weaknesses reported in our Annual Report on Form 10-K for the year ended December 31, 2017 remain un-remediated as of September 30, 2018. The material weaknesses will not be considered remediated until the enhanced controls operate for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As previously disclosed, the identified material weaknesses are pervasive in our internal control processes and involve the control environment, risk assessment, control activity and monitoring activities. Specifically, the material weaknesses relate to an insufficiently staffed finance organization with the requisite knowledge of U.S. GAAP and SEC reporting or skills in and ability to focus on internal control over financial reporting matters; not fully designing, implementing and monitoring policies or financial reporting controls that identify and sufficiently mitigate risks of material misstatement to the financial statements; and insufficient design, implementation and monitoring of general information technology controls to support the effective operation of financial controls.

Our management remains committed to the implementation of remediation efforts to address the material weaknesses and even though progress has been made to strengthen our controls, further remediation is needed. Management is in the process of executing a remediation plan with a new chief financial officer hired in October 2018 and a senior director of finance hired in September 2018 to provide enhanced oversight and governance of all financial reporting activities. A new financial reporting system was implemented in the second quarter of 2018 and we are continuing to strengthen our control processes and procedures with enhanced control documentation and additional management reviews to address these weaknesses and to ensure that we become compliant with the requirements of Section 404 of the Sarbanes-Oxley Act 2002. As we continue to evaluate and work to improve our internal control over financial reporting, our management may take additional measures.

Changes in Internal Control over Financial Reporting

Other than as described above, there were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the nine months ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on March 27, 2018 except that the following risk factor has been modified.

We are subject to anti-corruption laws, as well as export control laws, data protection laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of operations and financial condition.

Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, or the FCPA, and other anti-corruption laws that apply in countries where we do business and may do business in the future. The FCPA and these other laws generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We may in the future operate in jurisdictions that pose a high risk of potential FCPA violations and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the FCPA or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

We are also subject to other laws and regulations governing our international operations, including regulations administered by the government of the United States and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws. In addition, various statutes and rules in Europe and elsewhere around the world regulate privacy and data protection, which affect our collection, use, storage, and transfer of information both abroad and in the United States. New laws and regulations are periodically being enacted in this area, which remains in a state of flux. Monitoring and complying with these laws requires substantial financial resources.

In particular, the European Union’s General Data Protection Regulation, or GDPR, took effect in May 2018, and will require us to meet new and more stringent requirements regarding the handling of personal data about European Union residents. The GDPR is a complex law and the regulatory guidance is still evolving. Furthermore, many of the countries within the European Union are still in the process of drafting supplementary data protection legislation in key fields where the GDPR allows for national variation, including the fields of clinical study and other health-related information. Failure to meet GDPR requirements could result in penalties of up to 4% of our worldwide revenue. While we have taken steps to comply with the GDPR, including reviewing our security procedures, updating our website, revising our clinical study informed consent forms, and entering into data processing agreements with relevant contractors, we cannot assure you that our efforts to remain in compliance will be fully successful.

There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA or other legal requirements, including Trade Control and data protection laws. If we are not in compliance with these laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, civil lawsuits and damages, orders to stop transferring or using personal data, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity. Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws, Trade Control laws or data protection laws by U.S. or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.

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Item 6. Exhibits


Exhibit No.	Description	Filed Herewith	Incorporated by Reference Herein from Form or Schedule	Filing Date	SEC File/ Req. Number

10.1*	Employment Agreement dated as of July 23, 2018 by and between the Registrant and Patrick T. Horn, M.D., Ph.D.	X

10.2*	Separation Agreement effective as of July 31, 2018 by and between the Registrant and Paresh N. Soni, M.D., Ph.D.	X

10.3*	Employment Agreement dated as of October 4, 2018 by and between the Registrant and Simon N.R. Harford.	X

10.4*	Separation Agreement dated as of October 4, 2018 by and between the Registrant and Thomas A. Shea.	X

10.5*	Inducement Stock Option Agreement dated as of October 10, 2018 by and between the Registrant and Simon N.R. Harford.	X

10.6*	Inducement Restricted Stock Unit Agreement dated as of October 10, 2018 by and between the Registrant and Simon N.R. Harford.	X

31.1	Certification of the Registrant’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X

31.2	Certification of the Registrant’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X

32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X

101	The following materials from the Registrant’s Quarterly Report on Form 10‑Q for the quarter ended September 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (unaudited) at September 30, 2018 and December 31, 2017, (ii) Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2018 and 2017, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2018 and 2017, (iv) Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2018 and 2017, and (v) Notes to Condensed Consolidated Financial Statements (unaudited).	X

*Management contract or compensatory plan or arrangement

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SIGNATURES

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


	ALBIREO PHARMA, INC.

Dated: November 8, 2018	By:	/s/ Ronald H.W. Cooper
		Ronald H.W. Cooper
		President and Chief Executive Officer

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into effective as of July 23, 2018 (the “Effective Date”) by and between Albireo Pharma, Inc., a Delaware corporation (the “Company”}, and Patrick Horn (the “Executive”).

RECITALS

The Company desires to employ the Executive and the Executive desires to be employed on the terms and conditions set forth in this Agreement. In consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree:

1. Employment. Subject to the terms and conditions set forth in this Agreement, the Company hereby offers, and the Executive hereby accepts employment. Executive’s employment shall begin on a mutually agreed upon date (the “Start Date”).

2. Term . This Agreement will continue in effect until terminated in accordance with Section 5. The term of this Agreement is hereafter referred to as the “Term.” The effective date of Executive’s termination of employment with the Company is hereafter referred to as the “Termination Date.”

3. Duties and Performance.

(a) During the Term, the Executive shall serve the Company as its Chief Medical Officer. In addition, and without further compensation, the Executive shall serve as a director and/or officer of the Company and/or one or more of the Company’s Affiliates to the extent so elected or appointed from time to time.

(b) During the Term, the Executive shall be employed by the Company on a full-time basis and shall perform the duties and responsibilities of his position and such other duties and responsibilities on behalf of the Company and its Affiliates as reasonably may be designated from time to time by the Company’s Chief Executive Officer (the “CEO”) or the Company’s Board of Directors (the “Board”) . The Executive’s principal work location shall be in Boston, Massachusetts, subject to such business travel as is customary for Executive’s position and, in particular, regular travel to the offices of the Company’s Affiliate in Sweden.

(c) During the Term, the Executive shall devote his full business time and his best efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates and to the discharge of his duties and responsibilities hereunder. The Executive shall not engage in any other business activity or serve in any industry, trade, professional, governmental or academic position during the term of this Agreement, except as may be expressly approved in advance by the CEO in writing; provided, however, that the Executive may without advance consent participate in charitable activities and passive personal investment activities, provided that such activities do not, individually or in the aggregate: (i) interfere with the performance of the Executive’s duties under this Agreement; (ii) conflict with the business interests of the Company or any of its Affiliates; and (iii) violate Sections 7, 8 and 9 of this Agreement.

(d) During the Term, the Executive shall comply with all Company policies, practices, and procedures and all codes of ethics or business conduct applicable to the Executive’s position, as in effect from time to time.

4. Compensation and Benefits. As compensation for all services performed by the Executive hereunder during the Term, and subject to performance of the Executive’s duties and responsibilities to the Company and its Affiliates, pursuant to this Agreement or otherwise:

(a) Base Salary . During the Term, the Company shall pay the Executive a base salary at a rate of $420,000 per year (the “Base Salary”) , payable in accordance with the normal payroll practices of the Company as in effect from time to time.

(b) Annual Bonus Compensation. For each full fiscal year completed during the Term, the Executive shall be eligible to participate in an annual bonus plan provided by the Company. The Executive’s annual target bonus opportunity shall be thirty-five percent (35%) of the Base Salary (the “Target Bonus”), with the actual amount of the bonus, if any, to be determined by the Board or the Compensation Committee of the Board, in accordance with applicable performance criteria reasonably established by the Board or the Compensation Committee of the Board. In order to earn an annual bonus under this Section 4(b) for any fiscal year, the Executive must be employed by the Company on the last date of the applicable fiscal year. Any annual bonus payable hereunder will be paid at the same time as such bonuses are paid to similarly situated Company executives, but in no event later than two and one-half months following the end of the fiscal year for which the bonus is earned. The Executive’s Target Bonus for the fiscal year in which the Start Date occurs will be pro-rated based on the number of days Executive was employed in such fiscal year.

(c) Employee Benefit Plans . During the Term, the Executive shall be eligible to participate in such employee benefit plans from time to time in effect for similarly-situated employees of the Company, which may include short-term disability, long term disability, and 40l(k) retirement savings plans, except to the extent any employee benefit plan provides for benefits otherwise provided to the Executive hereunder (e.g., a severance pay plan) . Such participation shall be subject to (i) the terms of the applicable plan documents and (ii) generally applicable Company policies. The Executive shall have no recourse against the Company in the event that the Company should alter, modify, add to or eliminate any or all of its employee benefit plans.

(d) Business Expenses. The Company shall pay or reimburse the Executive for reasonable, customary, and necessary business expenses incurred or paid by the Executive in the performance of his duties and responsibilities hereunder, subject to such reasonable substantiation and documentation and to travel and other policies as may be required by the Company from time to time.

(e) Stock Options . The Company shall grant to the Executive a stock option exercisable for 37,500 shares of the Company’s common stock, par value $0.01, at an exercise price equal to the fair market value per share on the date of grant (as determined pursuant to the Plan), such stock option to (i) be subject to the terms of the Company’s 2018 Equity Incentive Plan, as may be amended from time to time (the “Plan”) , and (ii) vest as to 25% of the underlying shares on the first anniversary of the Start Date and thereafter the remaining 75% of the underlying shares shall vest in equal quarterly installments through the fourth anniversary of the Start Date, conditioned upon Executive’s continuing employment, and subject to other terms and conditions set forth in an award agreement to be provided by the Company . Nothing herein requires the Board to make additional grants of options or other awards in any year.

(f) Signing Bonus . The Executive shall be eligible to receive a signing bonus of $65,000 (the “Signing Bonus”), which will be paid in a single lump-sum no later than the first payroll date following the Start Date. Executive shall repay the Signing Bonus to the Company, within thirty (30) days of the Termination Date, if within twelve (12) months of the Start Date: (i) the Executive terminates his employment with the Company; or (ii) the Company terminates his employment for Cause (as defined herein).

5. Termination of Employment: Severance Benefits. The Executive’s employment shall terminate under the following circumstances:

(a) Death. In the event of the Executive’s death during the Term, the date of death shall be the Termination Date and the Company shall pay or provide to the Executive’s designated beneficiary or, if no beneficiary has been designated by the Executive in a notice received by the Company, to his estate: (i) any Base Salary earned but not paid through the Termination Date; (ii) any business expenses incurred by the Executive but unreimbursed on the Termination Date, provided that such expenses and required substantiation and documentation are submitted within sixty (60) days following the Termination Date, that such expenses are reimbursable under Company policy, and that any such expenses subject to Section 5(f’)(iv) shall be paid not later than the deadline specified therein; and (iii) any annual bonus earned but not paid for the fiscal year preceding the fiscal year in which the Termination Date occurs (all of the foregoing, payable subject to the timing limitations described herein, the “Final Compensation”) . Other than the Final Compensation, the Company shall have no further obligation or liability to the Executive. Other than business expenses described in Section 5(a)(ii), the Final Compensation shall be paid to the Executive’s designated beneficiary or estate at the time prescribed by applicable law and in all events within thirty (30) days following the Termination Date .

(b) Disability .

(i) The Company may terminate the Executive’s employment, upon notice to the Executive, in the event that the Executive becomes disabled during his employment hereunder through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform substantially all of his duties and responsibilities hereunder (notwithstanding the provision of any reasonable accommodation) for one hundred and eighty (180) days during any period of three hundred and sixty-five (365) consecutive calendar days, whether or not consecutive. In the event of such termination, the Company shall have no further obligation or liability to the Executive, other than for payment of the Final Compensation due the Executive. Other than business expenses described in Section 5(a)(ii), the Final Compensation shall be paid to the Executive at the time prescribed by applicable law and in all events within thirty (30) days following the Termination Date.

(ii) If any question shall arise as to whether the Executive is disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantially all of his duties and responsibilities hereunder, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to whom the Executive or his duly appointed guardian, if any, has no reasonable objection, to determine whether the Executive is disabled, and such determination shall for the purposes of this Agreement be conclusive. If such question shall arise and the Executive shall fail to submit to such medical examination, the Company’s determination of the issue shall be binding on the Executive.

(c) By the Company for Cause . The Company may terminate the Executive’s employment for Cause at any time upon notice to the Executive setting forth in reasonable detail the nature of such Cause. The following, as determined by the Board in its reasonable judgment, shall constitute Cause for termination:

(i) The Executive’s willful failure to perform, or gross negligence in the performance of, the Executive’s material duties and responsibilities to the Company or any of its Affiliates that, if capable of cure, is not cured within thirty (30) days of written notice of such failure or negligence by the Company to the Executive; provided, that the Company will not have to provide more than one notice and opportunity to cure with respect to any multiple, repeated, related or substantially similar events or circumstances;

(ii) Conduct by the Executive that constitutes fraud, embezzlement or other material dishonesty with respect to the Company or any of its Affiliates;

(iii) The Executive’s commission of, or plea of nolo contendere to, (A) a felony or (B) other crime involving moral turpitude; or

(iv) The Executive’s material breach of this Agreement, any shareholder or option agreement between the Executive and the Company or any of its Affiliates or of any fiduciary duty that the Executive has to the Company or any of its Affiliates that, if capable of cure, is not cured within thirty (30) days of written notice of such breach by the Company to the Executive; provided, that the Company will not have to provide more than one notice and opportunity to cure with respect to any multiple, repeated, related or substantially similar events or circumstances.

Upon the giving of notice of termination of the Executive’s employment hereunder for Cause, the Company shall have no further obligation or liability to the Executive, other than for the Final Compensation due to the Executive. Other than business expenses described in Section S(a)(ii), the Final Compensation shall be paid to the Executive at the time prescribed by applicable law and in all events within thirty (30) days following the Termination Date.

(d) By the Company without Cause . The Company may terminate the Executive’s employment hereunder without Cause at any time upon notice to the Executive. In the event of such termination, in addition to the Final Compensation due to the Executive, the Company will pay the Executive severance pay, at the same monthly rate as the Base Salary, for twelve (12) months following the Termination Date (the “Severance Benefits”). Other than business expenses described in Section S(a)(ii), the Final Compensation shall be paid to the Executive at the time prescribed by applicable law and in all events within thirty (30) days following the Termination Date. Any obligation of the Company to provide the Severance Benefits is conditioned, however, on the Executive signing and returning to the Company (without revoking) a timely and effective general release of claims in the form provided by the Company by the deadline specified therein, all of which (including the lapse of the period for revoking the release of claims as specified in the release of claims) shall have occurred no later than the sixtieth (60th) calendar day following the date of termination (any such separation agreement submitted by such deadline, the “Release of Claims”) and on the Executive’s continued compliance in material respects with the obligations of the Executive to the Company and its Affiliates that survive termination of his employment, including without limitation under Sections 7, 8 and 9 of this Agreement. Subject to Section S(f) below, all Severance Benefits to which the Executive is entitled hereunder shall be payable in accordance with the normal payrol1 practices of the Company, with the first payment, which shall be retroactive to the day immediately following the Termination Date, being due and payable on the Company’s next regular payday for executives that follows the effective date of the Release of Claims. Notwithstanding the foregoing, if the time period to consider, return and revoke the Release of Claims covers two of the Executive’s taxable years, any portion of the Severance Benefits that constitutes deferred compensation subject to Section 409A (as defined below) shall in all events be paid in the later taxable year. The Release of Claims required for Severance Benefits in accordance with this Section S(d) creates legally binding obligations on the part of the Executive and the Company therefore advises the Executive to seek the advice of an attorney before signing the Release of Claims.

(e) By the Executive. The Executive may terminate his employment hereunder at any time upon thirty (30) days’ prior written notice to the Company. In the event of termination of the Executive’s employment in accordance with this Section S(e), the Board may elect to waive the period of notice, or any portion thereof, and, if the Board so elects, the Company will pay the Executive the Base Salary for the period so waived. The Company shall also pay the Executive the Final Compensation due

to him (other than business expenses described in Section S(a)(ii)) at the time prescribed by applicable law and in all events within thirty (30) days following the Termination Date.

(f) Timing of Payments and Section 409A.

(i) This Agreement and any payments or benefits provided hereunder shall be interpreted, operated and administered in a manner intended to avoid the imposition of additional taxes under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) . Further, the Company and Executive hereto acknowledge and agree that the form and timing of the payments and benefits to be provided pursuant to this Agreement are intended to be exempt from, or to comply with, one or more exceptions to the requirements of Section 409A of the Code (“Section 409A”). Notwithstanding anything to the contrary in this Agreement, if at the time of the Executive’s termination of employment, the Executive is a “specified employee,” as defined below, any and all amounts payable under this Section 5 on account of such separation from service that constitute deferred compensation and would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon the Executive’s death; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-l(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (B) benefits that qualify as excepted welfare benefits pursuant to Treasury regulation Section l.409A-l(a)(5); or (C) other amounts or benefits that are not subject to the requirements of Section 409A .

(ii) For purposes of this Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (as defined in Section l. 409A - l (h) of the Treasury regulations after giving effect to the presumptions contained therein), and the term “specified employee” means an individual determined by the Company to be a specified employee under Treasury regulation Section 1.409A - l (i).

(iii) Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments.

(iv) Any payment of or reimbursement for expenses that would constitute nonqualified deferred compensation subject to Section 409A shall be subject to the following additional rules: (i) no reimbursement or payment of any such expense shall affect the Executive’s right to reimbursement or payment of any such expense in any other calendar year; (ii) reimbursement or payment of the expense shall be made, if at all, promptly, but not later than the end of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement or payment shall not be subject to liquidation or exchange for any other benefit.

(v) In no event shall the Company have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A.

(g) Exclusive Right to Severance . The Executive agrees that the Severance Benefits to be provided to him in accordance with the terms and conditions set forth in this Agreement are intended to be exclusive with respect to severance or termination pay and post-employment employee benefits. The Executive hereby knowingly and voluntarily waives any right he might otherwise have to participate in or receive benefits under any other plan, program or policy of the Company providing for severance or termination pay or benefits.

6. Effect of Termination. The provisions of this Section 6 shall apply to any termination of the Executive’s employment under this Agreement, whether pursuant to Section 5 or otherwise.

(a) Provision by the Company of Final Compensation and Severance Benefits, if any, that are due the Executive in each case under the applicable termination provision of Section 5 shall constitute the entire obligation of the Company to the Executive with respect to severance or termination pay and post-employment employee benefits.

(b) Except for any right of the Executive to continue group health plan participation in accordance with applicable law, the Executive’s participation in all employee benefit plans shall terminate pursuant to the terms of the applicable plan documents based on the date of termination of the Executive’s employment without regard to any Base Salary for notice waived pursuant to Section S(e) hereof or to any Severance Benefits or other payment made to or on behalf of the Executive following such date of termination.

(c) Provisions of this Agreement shall survive any termination of the Executive’s employment if so provided herein or if necessary or desirable fully to accomplish the purposes of other surviving provisions, including without limitation the obligations of the Executive under Sections 7, 8 and 9. The obligation of the Company to provide Severance Benefits hereunder, and Executive’s right to retain such payments, is expressly conditioned on the Executive’s continued compliance in all material respects with Sections 7, 8 and 9. The Executive recognizes that, except as expressly provided in Section S(d) or with respect to Base Salary paid for notice waived pursuant to Section 5(e), no cash compensation or benefits will be earned after termination of employment.

7. Confidential Information.

(a) The Executive acknowledges that the Company and its Affiliates continually develop Confidential Information, that the Executive will develop Confidential Information for the Company or its Affiliates and that the Executive will learn of Confidential Information during the course of employment. All Confidential Information which the Executive creates or to which he has access as a result of his employment or other associations with the Company or any of its Affiliates is and shall remain the sole and exclusive property of the Company or its Affiliate, as applicable. The Executive shall comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall never disclose to any Person (except as required by applicable law or for the proper performance of his duties and responsibilities to the Company and its Affiliates), or use for his own benefit or gain or the benefit or gain of any other Person, any Confidential Information obtained by the Executive incident to his employment or any other association with the Company or any of its Affiliates. The Executive understands that this restriction shall continue to apply after his employment terminates, regardless of the reason for such termination. Further, the Executive shall furnish prompt notice to the Company of any required disclosure of Confidential Information sought pursuant to subpoena, court order or any other legal process or requirement, and provide the Company a reasonable opportunity to seek protection of the Confidential Information prior to any such disclosure. The confidentiality obligation under this Section 7 shall not apply to information that has become generally known through no wrongful act on the part of the Executive or any other Person having an obligation of confidentiality to the Company or any of its Affiliates. Nothing in this Agreement limits, restricts or in any other way affects the Executive from communicating with any governmental agency or entity, or communicating with any official or staff person of a governmental agency or entity, concerning matters relevant to the governmental agency or entity.

whether or not prepared by the Executive, shall be the sole and exclusive property of the Company and its Affiliates. Except in the proper performance of the Executive’s regular duties for the Company or as expressly authorized in writing in advance by the Board or its expressly authorized designee, the Executive will not copy any Documents or remove any Documents or copies or derivatives thereof from the premises of the Company. The Executive shall safeguard all Documents and shall surrender to the Company at the time his employment terminates, and at such earlier time or times as the Board or its designee may specify, all Documents and other property of the Company or any of its Affiliates and all documents, records and files of the customers and other Persons with whom the Company or any of its Affiliates does business (“Third Party Documents”) and each individually a “Third Party Document”) then in the Executive’s possession or control; provided, however, that if a Document or Third-Party Document is on electronic media, the Executive may, in lieu of surrendering the Document or Third-Party Document, provide a copy to the Company on electronic media and delete and overwrite all other electronic media copies thereof. Upon request of any duly authorized officer of the Company, the Executive shall disclose all passwords and passcodes necessary or desirable to enable the Company or any of its Affiliates or the Persons with whom the Company or any of its Affiliates do business to obtain access to the Documents and Third-Party Documents.

(c) Under the Defend Trade Secrets Act of 2016, the Company hereby provides notice and Executive hereby acknowledges that Executive may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (B) is solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

8. Assignment of Rights to Inte11ectual Property. The Executive sha11 promptly and fully disclose all Intellectual Property to the Company. The Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) the Executive’s full right, title and interest in and to all Intellectual Property. The Executive shall execute any and all applications for domestic and foreign patents, copyrights or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Intellectual Property to the Company (or as otherwise directed by the Company) and to permit the Company to enforce any patents, copyrights or other proprietary rights to the Intellectual Property. The Executive will not charge the Company for time spent in complying with these obligations. All copyrightable works that the Executive creates shall be considered “work made for hire” and shall, upon creation, be owned exclusively by the Company.

9. Restricted Activities. The Executive agrees that the following restrictions on his activities during and after his employment are necessary to protect the goodwill, Confidential Information and other legitimate interests of the Company and its Affiliates:

(a) While the Executive is employed by the Company and during the twelve (12) month period following the Termination Date (the “Restricted Period”), regardless of the reason therefore, the Executive shall not, directly or indirectly, whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise: (x) control or own any interest in a Person that engages in the Competitive Business in the Restricted Area; or (y) render any services to, or engage in any activities for, any Person that engages in the Competitive Business in the Restricted Area. Nothing in this Section 9(a), however, shall prevent the Executive’s passive ownership of two (2) percent or less of the equity securities of any publicly traded company.

(i) For purposes of this Agreement, the “Competitive Business” means the business of developing, marketing or selling (i) therapeutic drugs to treat liver disease or constipation or

(ii) any other drug that has a therapeutic purpose that is the same or substantially similar to the therapeutic purpose of any drug that the Company or any of its Affiliates is developing, marketing or selling during the Executive’s employment with the Company or, with respect to the portion of the Restricted Period that follows termination of the Executive’s employment, at the time of such termination.

(ii) For purposes of this Agreement, the “Restricted Area” means any geographic area in which the Company or any of its Affiliates engages in any business activity or is actively planning to engage in any business activity at any time during the Executive’s employment with the Company or, with respect to the portion of the Restricted Period that follows termination of the Executive’s employment, at the time of such termination.

(b) During the Term, the Executive shall not, directly or indirectly, undertake any outside activity, whether or not competitive with the business of the Company or its Affiliates that could reasonably give rise to a conflict of interest or otherwise interfere with any of his duties for, or obligations to, the Company or any of its Affiliates.

(c) During the Restricted Period, the Executive shall not, directly or indirectly: (i) solicit or encourage any customer, client, business partner, or other business relation of the Company or any of its Affiliates (each, a “Business Relationship”) to terminate or diminish its relationship with them; or (ii) seek to persuade any Business Relationship or any prospective Business Relationship to conduct with anyone other than the Company or any of its Affiliates any business or activity which such Business Relationship conducts, or such prospective Business Relationship could conduct, with the Company or any of its Affiliates; provided, however, that these restrictions shall apply (A) only with respect to those Persons who are or have been a Business Relationship at any time within the immediately preceding two (2)-year period or whose business has been solicited on behalf of the Company or any of the Affiliates by any of their officers, employees or agents within such two (2)-year period, other than by form letter, blanket mailing or published advertisement, and (B) only if the Executive has performed work for such Person during his employment with the Company or one of its Affiliates or been introduced to, or otherwise had contact with, such Person as a result of his employment or other associations with the Company or one of its Affiliates or has had access to Confidential Information which would assist in the Executive’s solicitation of such Person.

(d) During the Restricted Period (excluding any activities undertaken on behalf of the Company or any of its Affiliates in the course of his duties hereunder), the Executive shall not, directly or indirectly, and will not assist any other Person to: (i) hire, engage or solicit for hiring or engagement any employee of the Company or any of its Affiliates or seek to persuade any employee of the Company or any of its Affiliates to discontinue employment; or (ii) solicit or encourage any independent contractor providing services to the Company or any of its Affiliates to terminate or diminish its relationship with them; provided, however, that these restrictions shall apply only to employees and independent contractors who have provided services to the Company or any of its Affiliates at any time within the immediately preceding two-(2) year period.

10. Enforcement of Covenants. The Executive acknowledges that he has carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed upon his pursuant to Sections 7, 8 and 9. The Executive agrees without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the goodwill, Confidential Information and other legitimate interests of the Company and its Affiliates; that each and every one of these restraints is reasonable in respect to subject matter, length of time and geographic area; and that these restraints, individually or in the aggregate, will not prevent him from obtaining other suitable employment during the period in which the Executive is bound by them. The Executive further agrees that he will never assert, or permit to be asserted on his behalf, in any forum, any position contrary to the foregoing. The

Executive further acknowledges that, were he to breach any of the covenants contained in Sections 7, 8 or 9, the damage to the Company and its Affiliates would be irreparable. The Executive therefore agrees that the Company, in addition to any other remedies available to it, shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by the Executive of any of said covenants, without having to post bond, and will additionally be entitled to an award of attorney’s fees incurred in connection with securing any relief hereunder. The parties further agree that, in the event that any provision of Section 7, 8 or 9 sha1l be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. The Executive agrees that the Restricted Period shall be tolled, and shall not run, during any period of time in which he is in violation of the terms thereof, in order that the Company and its Affiliates shall have all of the agreed-upon temporal protection recited herein. No breach of any provision of this Agreement by the Company, or any other claimed breach of contract or violation of law, or change in the nature or scope of the Executive’s employment relationship with the Company, shall operate to extinguish the Executive’s obligation to comply with Sections 7, 8 and 9. Each of the Company’s Affiliates shall have the right to enforce all of the Executive’s obligations to that Affiliate under this Agreement, including without limitation pursuant to Section 7, 8 or 9.

11. No Conflicting Agreements. The Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which the Executive is a party or is bound and that the Executive is not now subject to any covenants against competition or similar covenants or any other obligations to any Person or to any court order, judgment or decree that would affect the performance of his obligations hereunder. The Executive will not disclose to or use on behalf of the Company any proprietary information of a third party without such party’s consent.

12. Definitions. Capitalized words or phrases shall have the meanings provided in this Section 12 and as provided elsewhere herein:

(a) “Affiliate” means any person or entity directly or indirectly controlling, controlled by or under common control with the Company, where control may be by either management authority or equity interest.

(b) “Code” means the Internal Revenue Code of 1986, as amended.

(c) “Confidential Information” means any and all information of the Company and its Affiliates that is not generally available to the public, and any and all information, publicly known in whole or in part or not, which, if disclosed by the Company or any of its Affiliates, would assist in competition against any of them. Confidential Information includes without limitation such information relating to (i) the development, research, testing, manufacturing, marketing and financial activities of the Company and its Affiliates, (ii) the Products, (iii) the costs, sources of supply, financial performance and strategic plans of the Company and its Affiliates, (iv) the identity and special needs of the patients of the Company and its Affiliates and (v) the people and organizations with whom the Company and its Affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes information that the Company or any of its Affiliates has received, or may receive hereafter, belonging to others or that was received by the Company or any of its Affiliates with any understanding, express or implied, that it would not be disclosed.

(whether alone or with others, whether or not during normal business hours or on or off Company premises) during the Executive’s employment and during the period of six (6) months immediately following termination of his employment that relate either to the Services or to any prospective activity of the Company or any of its Affiliates or that result from any work performed by the Executive for the Company or any of its Affiliates or that make use of Confidential Information or any of the equipment or facilities of the Company or any of its Affiliates.

(e) “Person” means a natural person, a corporation, a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company or any of its Affiliates.

(t) “Products” means all products planned, researched, developed, tested, sold, licensed, leased, or otherwise distributed or put into use by the Company or any of its Affiliates, together with all services provided or otherwise planned by the Company or any of its Affiliates, during the Executive’s employment.

13. Withholding. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.

14. Section 280G .

(a) In the event that the Company undergoes a “change in ownership or control” (within the meaning of Section 280G of the Code and the regulations and guidance promulgated thereunder (“Section 280G”)) and all, or any portion, of the payments provided under this Agreement, either alone or together with other payments or benefits which the Executive receives or is entitled to receive from the Company (collectively, the “Total Payments”), could constitute an “excess parachute payment” within the meaning of Section 280G, then the Executive shall be entitled to receive (i) an amount limited (to the minimum extent necessary) so that no portion of the Total Payments shall be non-deductible for US federal income truces by reason of Section 280G (the “Limited Amount”), or (ii) if the amount of the Total Payments (without regard to clause (i)) reduced by the excise tax imposed by Section 4999 of the Code (the “Excise Tax”) and the amount of all other applicable federal, state and local taxes (with income taxes all computed at the highest applicable marginal rate) is greater than the Limited Amount reduced by the amount of all taxes applicable thereto (with income truces all computed at the highest marginal rate), the amount of the Total Payments otherwise payable without regard to clause (i). If it is determined that the Limited Amount will maximize the Employee’s after-tax proceeds, the Total Payments shall be reduced to equal the Limited Amount in the following order: (i) first, by reducing cash severance payments that are exempt from Section 409A, (ii) second, by reducing other payments and benefits that are exempt from Section 409A and to which Q&A 24(c) of Section 1.280G- l of the Treasury Regulations does not apply, (iii) third, by reducing all remaining payments and benefits that are exempt from Section 409A and (iv) finally, by reducing payments and benefits that are subject to Section 409A, in each case, with all such reductions done on a pro rata basis.

(b) All determinations made pursuant this Section 14 will be made at the Company’s or its Affiliates’ expense by an accounting firm or consulting group with experience in performing calculations regarding the applicability of Section 280G and Section 4999 of the Code selected by the Company for such purpose (the “Independent Advisors”). For purposes of such determinations, no portion of the Total Payments shall be taken into account which, in the opinion of the Company and its legal advisors, (y) does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) or (z) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation. In the event it is later determined that (A) a greater reduction in the Total Payments should

have been made to implement the objective and intent of this Section 14, the excess amount shall be returned immediately by the Executive to the Company or (B) a lesser reduction in the Total Payments should have been made to implement the objective and intent of this Section 14, the additional amount shall be paid immediately by the Company, or any Affiliate of the Company, as applicable, to the Executive.

15. Assignment. Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other; provided, however, that (a) the Company may assign its rights and obligations under this Agreement without the consent of the Executive to one of its Affiliates, or in the event that the Company shall hereafter effect a reorganization with, consolidate with, or merge into, an Affiliate or any Person or transfer or have transferred all or substantially all of its properties, outstanding stock, or assets to an Affiliate or any Person and (b) in the event that all of the Company’s rights and obligations under this Agreement are assigned pursuant to this Section 15, each reference to Company herein shall be deemed from and after such assignment instead to be a reference to the assignee. This Agreement shall inure to the benefit of and be binding upon the Company and the Executive, and their respective successors, executors, administrators, heirs and permitted assigns.

16. Severability . If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

17. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

18. Notices. Any and all notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person, consigned to a reputable national courier service or deposited in the United States mail, postage prepaid, registered or certified, and addressed to the Executive at his last known address on the books of the Company or, in the case of the Company, at its principal place of business, attention of the CEO, or to such other address as either party may specify by notice to the other actually received.

19. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes and terminates all prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Executive’s employment relationship with the Company (including, without limitation, the offer letter dated July 17, 2018).

20. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by an expressly authorized representative of the Company.

21. Headings. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

22. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

23. Governing Law . This is a Massachusetts contract and shall be construed and enforced under and be governed in all respects by the laws of Massachusetts, without regard to any conflict of laws principles that would result in the application of the laws of any other jurisdiction.

[The remainder of this page has been left blank intentionally.]

IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by its duly authorized representative, and by the Executive, as of the date first above written.

	ALBIREO PHARMA, INC.


	By:
	Name:
	Title: President & Chief Executive Officer


	EXECUTIVE


	Patrick Horn, MD, PhD

Exhibit 10.2

SEPARATION AGREEMENT

This Separation Agreement (this “Agreement ” ) is made and entered into by and between Albireo Pharma, Inc. (“Company”) and Paresh N. Soni ( “ Executive ” ).

WHEREAS, Executive’s employment with Company shall end on August 3 , 2018 (the “Separation Date”);

WHEREAS, the Executive and Company desire to enter into a formal Agreement to memorialize the terms and conditions of Executive’s separation from Company;

WHEREAS, this Agreement shall become effective on the eighth (8 th ₎ day after the day on which Executive signs below (such 8 th day referred to herein as the “Effective Date”).

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereby agree as follows:

1. Separation of Employment.

(a) Executive’s employment with Company shall end on the Separation Date as defined above. Executive represents and warrants that he shall promptly transition his dutie s and responsibilities as a Company officer pursuant to Company’s request and direction. Following the Separation Date, Executive shall not be and shall not represent himself as an employee or agent of Company.

(b) To the extent not theretofore paid or provided, Company shall pay or provide to Executive the following (together the “ Final Compensation ” ): (i) Executive’s Base Salary through the Separation Date ; (ii) any accrued but unused vacation pay; and (iii) any other amounts or benefits required to be paid or provided or which Executive is entitled to receive under any plan, program , policy or practice or contract or agreement of Company and its affiliated companies.

2. Severance Bonus. In exchange for the mutual promi s e s set forth in this Agreement , Company agrees to provide Executive with a severance bonus in an amount equal to the Target Bonus as defined in Executive’s employment agreement with Company dated September 6, 2016 (the “Employment Agreement”) for the current fiscal year. The foregoing severance bonus shall be paid in one lump sum payment, within sixty (60) days following the Effective Date (the “Severance Bonus”).

Executive acknowledges and agrees that the Severance Bonus is not intended to and does not constitute a severance plan or confer a benefit on anyone other than the parties. Executive further acknowledges that except for the Severance Bonus and the Final Compensation, Executive is not now and shall not in the future be entitled to any other compensation from Company including , without limitation on , other wages, commissions , bonuses, vacation pay, holiday pay, paid time off , stock, stock options, equity , or any other form of compensation or benefit.

3. Release of Claims.

(a) Release. The parties hereby agree and acknowledge that by signing this Agreement and in consideration of the Severance Bonus, and for other good and valuable consideration provided for in this Agreement, each party is waiving and releasing such party ’ s right to assert any form of legal claim against

Executive, on the one hand, or Company 11 _, on the other hand, whatsoever for any alleged action, inaction or circumstance existing or arising from the beginning of time through the Separation Date. The waiver and release herein is intended to bar any form of legal claim, charge, complaint or any other form of action jointly referred to as “Claims”) seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), t e recovery of any damages or any other form of monetary recovery whatsoever (including, without limitation, back pay, front pay, compensatory damages, emotional distress damages, punitive damages, attorneys’ fees and any other costs) against Company, for any alleged action, inaction or circumstance existing or arising through the Separation Date. Without limiting the generality of the foregoing, Executive specifically waives and releases Company from any waivable claim arising from or related to Executive’s employment relationship with Company through the Separation Date including, without limitation: (i) Claims under any Massachusetts or other state or federal statute, regulation or executive order (as amended) relating to employment, discrimination, fair employment practices, wages, hours or other terms and conditions of employment, including but not limited to the Age Discrimination in Employment Act and Older Workers Benefit Protection Act, the Civil Rights Acts of 1866 and 1871 and Title VII of the Civil Rights Act of 1964 and the Civil Rights Act of 1991, the Equal Pay Act, the Americans With Disabilities Act, the Genetic Information Non-Discrimination Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Lilly Ledbetter Fair Pay Act, the National Labor Relations Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act of 1974, COBRA, the Worker Adjustment and Retraining Notification Act, the Massachusetts Fair Employment Practices Statute, the Massachusetts Equal Rights Act, the Massachusetts Civil Rights Act, the Massachusetts Privacy Statute, the Massachusetts Sexual Harassment Statute, the Massachusetts Wage Act, the Massachusetts Minimum Fair Wages Act, the Massachusetts Equal Pay Act, and any similar Massachusetts or other state or federal statute, regulation or executive order (as amended) relating to or other terms and conditions of employment. Please note that this section specifically includes a waiver and release of Claims regarding payments or amounts covered by the Massachusetts Wage Act or the Massachusetts Minimum Fair Wages Act, including hourly wages, salary, overtime, minimum wages, commissions, vacation pay, holiday pay, sick leave pay, dismissal pay, bonus pay or severance pay; (ii) Claims under any Massachusetts or other state or federal common law theory including, without limitation, wrongful discharge, breach of express or implied contract, promissory estoppel, unjust enrichment, breach of a covenant of good faith and fair dealing, violation of public policy, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, misrepresentation, deceit, fraud or negligence or any claim to attorneys’ fees under any applicable statute or common law theory of recovery; and (iii) any other Claim arising under other state or federal law.

(b) Release Limitations; Participation in Agency Proceedings. Notwithstanding the foregoing, this section does not: (i) release Company from any obligation expressly set forth in this Agreement; (ii) waive or release any legal claims which Executive may not waive or release by law, including obligations under workers’ compensation laws; (iii) prohibit Executive from challenging the validity of this release under federal law; (iv) prohibit Executive from filing a charge or complaint of employment-related discrimination with the Equal Employment Opportunity Commission (“EEOC”) or similar state agency, or from participating in any investigation or proceeding conducted by the EEOC or similar state agency, or from responding to a request for information or documents (or providing information or documents) to the EEOC or similar state agency; or (v) limit Executive’s ability to communicate with any government agencies or otherwise participate in any investigation or proceeding that may be conducted by any government agency, including providing documents or other information, without notice to Company, or

¹¹

For purposes of this section, “Company” means Albireo Pharma, Inc. and its divisions, affiliates, parents, subsidiaries and related entities, and its and their owners, shareholders, partners, directors, officers, employees, trustees, agents, successors and assigns.

limit Executive’s right to receive an award for information provided to any government agencies. Executive’s waiver and release, however , are intended to be a complete bar to any recovery or personal benefit by or to Executive with respect to any claim (exc e pt those which cannot be released under la w) , including those raised through a charge with the EEOC. Accordingly , nothing in this section shall be deemed to limit Company’s right to seek immediate dismissal of such charge or complaint on the basis that Executive’s signing of this Agreement constitutes a full release of any individual rights under the federal discrimination laws, or to seek restitution to the extent permitted by law of the economic benefits provided to Executive under this Agreement in the event Executive’s successfully challenge the validity of thi s release and prevail in any claim under the federal discrimination laws .

(c) Acknowledgement. Executive acknowledges and agrees that, but for providing this waiver and release, Executive would not be receiving the Severance Bonus provided to Executive under the terms of this Agreement.

4. ADEA/OWBPA Review and Revocation P e riod. Executive and Company acknowledge that Executive has specific rights under the Age Discrimination in Employment Act (“ADEA’’) and the Older Workers Benefit Protection Act (the “ OWBPA”) , which prohibit discrimination on the basis of age. It is Company’s desire and intent to make certain that Executive fully understands the provisions and effects of this Agreement , which includes a release of claims under the ADEA and OWBPA. To that end, Executive has been encouraged and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Agreement. Consistent with the provisions of the ADEA and OWBPA , Company also is providing Executive with twenty one (21) days from the Separation Date in which to consider and accept the terms of this Agreement by signing below and returning it to Jason Duncan , General Counsel , Albireo Pharma, Inc. , 10 Post Office Square , Suite 502 South, Boston, MA 02109 . Executive may rescind Executive’s assent to this Agreement if, within seven (7) days after Executive signs this Agreement, Executive delivers by hand or send by mail (certified, return receipt and postmarked within such seven-day period) a notice of rescission to Jason Dun can , General Counsel, at the above-referenced address.

5. Material Breach. A breach of any of Sections 4, 5, 6, 7 or 8 of this Agreement shall constitute a material breach of this Agreement and , in addition to any other legal or equitable remedy available to Company , shall entitle Company to recover the Severance Bonus paid to Executive hereunder.

6. Successors and Assigns. This Agreement is personal to Executive and shall not be assignable by Executive. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives. Company may assign this Agreement without the consent of Executive. This Agreement shall inure to the benefit of and be binding upon Company and its successors and assigns.

7. Code Section 409A. Both Executive and Company intend this Agreement to be in compliance with Section 409A of the Internal Revenue Code of 1986 (as amended). Executive acknowledges and agrees , however, that Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement , including, without limitation , to consequences related to Code Section 409A. In the event any payments or benefits are deemed by the IRS to be non-compliant, this Agreement, at Executive’s option, shall be modified to the extent practicable, so as to make it compliant by altering the payments or benefits, or the timing of their receipt, provided that no such modification shall increase Company’s obligations hereunder.

12. Miscellaneous .

(a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws.

(b) Captions. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

(c) Amendments. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(d) Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Executive:	Paresh N. Soni, M.D., Ph.D
	148 Long Wharf Drive
	Mystic, CT 06355

If to	Albireo Pharma, Inc.
Company:	10 Post Office Square
	Suite 502 South
	Boston, MA 02109
	Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(f) Withholding. Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(g) Waivers. Executive’s or Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(h) Entire Agreement. This Agreement and the agreements and/or the agreement sections explicitly referenced as surviving herein (including Sections 7, 8 and 9 of the Employment Agreement), contain the entire agreement between Company and Executive with respect to the subject matter hereof and, from and after the Effective Date, shall supersede any other agreement between the parties with respect to the subject matter hereof.

(j) Counterparts; Scanned Signatures. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by each party and delivered to the other party.

A counterpart executed and delivered by PDF or facsimile shall be sufficient for the Agreement to become effective.

IN WITNESS WHEREOF, Executive has hereunto set Executive ’ s hand and, pursuant to the authorization from the Board , Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

PARESH N. SONI, M.D.		ALBIREO PHARMA , INC.

		By:

Signed Name:		Name:


Printed Name:		Title:

Exhibit 10.3

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “ Agreement ” ) is made and entered into effective as of October 4, 2018 (the “ Effective Date ” ) by and between Albireo Pharma , Inc. , a Delaware corporation (the “ Company ” ) , and Simon N.R. Harford (the “ Executive ” ) .

RECITALS

The Company desires to employ the Executive and the Executive desires to be employed on the terms and conditions set forth in this Agreement. In consideration of the foregoing premises and the mutual promises , terms , provisions and conditions set forth in this Agreement , the parties hereby agree:

1. Employment. Subject to the terms and conditions set forth in this Agreement, the Company hereby offers, and the Executive hereby accepts employment. Executive ' s employment shall begin on October 10, 2018 or such other date as mutually agreed upon by the parties (the “ Start Date ” ) .

2. Term . This Agreement will continue in effect until terminated in accordance with Section

5. The term of this Agreement is hereafter referred to as the “ Term. ” The effective date of Executive ' s termination of employment with the Company is hereafter referred to as the “ Termination Date. ”

3. Duties and Performance.

(a) During the Term, the Executive shall serve the Company as its Chief Financial Officer. In addition , and without further compensation , the Executive shall serve as a director and/or officer of the Company and/or one or more of the Company ' s Affiliates to the extent so elected or appointed from time to time.

(b) During the Term , the Executive shall be employed by the Company on a full-time basis and shall perform the duties and responsibilities of his position and such other duties and responsibilities on behalf of the Company and its Affiliates as reasonably may be designated from time to time b y the Company 's Chief Executive Officer (the “ CEO”) or the Company's Board of Directors (the “ Board ” ) . The Executive ' s principal work location shall be in Boston , Massachusetts , subject to such business travel as is customary for Executive ' s position and, in particular , regular travel to the offices of the Company ' s Affiliate in Sweden .

(c) During the Term, the Executive shall devote his full business time and his best efforts , business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates and to the discharge of his duties and responsibilities hereunder. The Executive shall not engage in any other business activity or serve in any industry , trade, professional , governmental or academic position during the term of this Agreement, except as may be expressly approved in advance by the CEO in writing ; provided , however , that the Executive may without advance consent participate in charitable activities and passive personal investment activities, provided that such activities do not , individually or in the aggregate : (i) interfere with the performance of the Executive ' s duties under this Agreement ; (ii) conflict with the business int e rests of the Company or any of its Affiliates ; and (iii) violate Sections 7 , 8 and 9 of this Agreement. Notwithstanding the foregoing , the parties hereto acknowledge that Executive is party to a Consulting Agreement with PAREXEL International Corporation commencing on October 2 , 2018 and terminating December 31 , 2018. Company expressly assents to Executive rendering the services contemplated by the Consulting Agreement.

(d) During the Term , the Executive shall comply with all Company policies, practices , and procedures and all codes of ethics or business conduct applicable to the Executive ' s position , as in effect from time to time.

4. Compensation and Benefits . As compensation for all services performed by the Executive hereunder during the Term, and subject to performance of the Executive ' s duties and responsibilities to the Company and its Affiliates, pursuant to this Agreement or otherwise:

(a) Base Salary . During the Term , the Company shall pay the Executive a base salary at a rate of $400 , 000 per year (the “ Base Salary ” ) , payable in accordance with the normal payroll practices of the Company as in effect from time to time.

(b) Annual Bonus Compensation. For each full fiscal year completed during the Term, the Executive shall be eligible to participate in an annual bonus plan provided by the Company . The Executive ' s annual target bonus opportunity shall be thirty-five percent (35%) of the Base Salary (the “ Target Bonus ” ) , with the actual an1ount of the bonus , if any , to be determined b y the Board or the Compensation Committee of the Board , in accordance with applicable performance criteria reasonably established by the Board or the Compensation Committee of the Board. In order to earn an annual bonus under this Section 4(b) for any fiscal year , the Executive must be employed by the Company on the last date of the applicable fiscal y ear. Any annual bonus payable hereunder will be paid at the same time as such bonuses are paid to similarly situated Company executives, but in no event later than two and one-half months following the end of the fiscal year for which the bonus is earned. The Executive ' s Target Bonus for the fiscal year in which the Start Date occurs will be pro-rated based on the number of days Executive was employed in such fiscal year .

(c) Employee Benefit Plans . During the Tem1 , the Executive shall be eligible to participate in such emp lo yee benefit plans from time to time in effect for similarly-situated employees of the Company , which may include short-term disability , long term disability , and 40l(k) retirement savings plans , except to the extent any employee benefit plan provides for benefits otherwise provided to the Executive hereunder (e.g. , a severance pa y plan). Such participation shall be subject to (i) the terms of the applicable plan documents and (ii) generally applicable Company policies . The Executive shall have no recourse against the Company in the event that the Company should alter , modify, add to or eliminate any or all of its employee benefit plans.

(d) Business E x penses . Th e Compan y shall pa y or reimburse the Executi v e for reasonable , customary , and necessary business expenses incurred or paid b y the Executive in the performance of his duties and responsibilities hereunder, subject to such reasonable substantiation and documentation and to travel and other policies as may be required by the Company from time to time.

(e) Inducement Grants; Participation in Equity Plans .

(i) As an inducement material to the Executive entering into employment with the Company , the Company shall grant to the Executive a stock option (the “ Inducement Option ” ) exercisable for 37 , 500 shares of the Company ' s common stock , par value $0 . 01 , at an exercise price equal to the fair market value per share on the date of grant, such stock option to vest as to 25% of the underlying shares on the first anniversary of the Start Date and thereafter the remaining 75% of the underlying shares shall vest in equal quarterly installments through the fourth anniversary of the Start Date , conditioned upon Executive ' s continuing employment , and subject to other terms and conditions set forth in an award agreement to be provided by the Company.

(ii) As an inducement material to the Executive entering into employment with the Company , the Company shall grant to the Executive 5 , 000 restricted stock units (“Inducement RSUs”), such RSUs to vest as to 25% of the award on the first anniversary of the Start Date and thereafter the remaining 75% of the award shall vest in equal quarterly installments through the fourth anniversary of

the Start Date , conditioned upon Executive ' s continuing employment , and subject to other terms and conditions set forth in an award agreement to be provided by the Company.

(iii) The Inducement Option and Inducement RSUs are each intended to be granted as an “ inducement” award under Nasdaq Listing Rule 5635(c)(4) and , accordingly , such awards will be granted outside of the Company ' s existing equity compensation plans. Nothing in this Section 4(e) requires the Board to make additional grants of options , restricted stock units, or other awards in any year .

(iv) Executive shall be eligible to receive grants m1der the Company ' s 2018 Equity Incentive Plan (the “ Equity Plan”), and any subsequent equity plan , with the amount of future grants , if any, to be determined by the Board or the Compensation Committee of the Board , and subject to the terms of the Equity Plan or any subsequent equity plan .

5. Termination of Employment; Severance Benefits. The Executive ' s employment shall terminate under the following circumstances:

(a) Death . In the event of the Executive ' s death during the Term , the date of death shall be the Termination Date and the Company shall pay or provide to the Executive ' s designated beneficiary or , if no beneficiary has been designated by the Executive in a notice received by the Company , to his estate : (i) an y Base Salary earned but not paid through the Termination Date ; (ii) any business expenses incurred by the Executive but unreimbursed on the Termination Date , provided that such expenses and required substantiation and documentation are submitted within sixty (60) days following the Termination Date , that such expenses are reimbursable under Company policy , and that any such expenses subject to Section 5(h)(iv) shall be paid not later than the deadline specified therein ; and (iii) any annual bonus earned but not paid for the fiscal year preceding the fiscal year in which the Termination Date occurs and (iv) a pro-rated annual bonus for the fiscal year in which the termination occurs based upon the number of days worked in the year (all of the foregoing , payable subject to the timing limitations described herein , the “ Final Compensation ” ) . Other than the Final Compensation, the Company shall have no further obligation or liability to the Executive. Other than business expenses described in Section 5(a)(ii) , the Final Compensation shall be paid to the Executive ' s designated beneficiary or estate at the time prescribed by applicable law and in all e v ents within thirty (30) da y s following the Termination Date .

(b) Disability.

(i) The Company may terminate the Executive's employment , upon notice to the Executive , in the event that the Executive becomes disabled during his employment hereunderthrough any illness , injury , accident or condition of either a physical or psychological nature and, as a result , is unable to perform substantially all of his duties and responsibilities herem1der (notwithstanding the provision of any reasonable accommodation) for one hundred and eighty (180) days during any period of three hundred and sixty-five (365) consecutive calendar days , whether or not consecutive. In the event of such termination, the Company shall have no further obligation or liability to the Executive, other than for payment of the Final Compensation due the Executive . Other than business expenses described in Section 5(a)(ii), the Final Compensation shall be paid to the Executive at the time prescribed by applicable law and in all events within thirty (30) days following the Termination Date.

(ii) If any question shall arise as to whether the Executive is disabled through any illness, injury , accident or condition of either a physical or psychological nature so as to be unable to perforn1 substantially all of his duties and responsibilities hereunder , the Executive may , and at the request of the Company shall , submit to a medical examination by a physician selected by the Company to whom the Executive or his duly appointed guardian , if any , has no reasonable objection , to determine whether the Executive is disabled , and such detern1ination shall for the purposes of this Agreement be conclusive. If such question shall arise and the Executive shall fail to submit to such medical examination, the Company ' s determination of the issue shall be binding on the Executive.

(c) By the Company for Cause . The Company may tem1inate the Executive ' s employment for Cause at any time upon notice to the Executive setting forth in reasonable detail the nature of such Cause. The following , as determined by the Board in its reasonable judgment, shall constitute Cause for termination:

(i) The Executive ' s willful failure to perform, or gross negligence in the performance of , the Executive ' s material duties and responsibilities to the Company or any of its Affiliates that, if capable of cure, is not cured within thirty (30) days of written notice of such failure or negligence by the Company to the Executive; provided , that the Company will not have to provide more than one notice and opportunity to cure with respect to m1y multiple , repeated, related or substantially similar events or circumstances ;

(ii) Conduct by the Executive that constitutes fraud , embezzlement or other material dishonesty with respect to the Company or any of its Affiliates ;

(iii) The Executive ' s commission of , or plea of nolo contendere to, (A) a felony or (B) other crime involving moral turpitude ; or

(iv) The Executive ' s material breach of this Agreement , m1y material written policies of the Company, or any other agreement between the Executive mid the Compm1y or any of its Affiliates or of any fiduciary duty that the Executive has to the Company or any of its Affiliates that , if capable of cure, is not cured within thirty (30) da y s of written notice of such breach by the Company to the Executive; provided , that the Compm1y will not have to provide more thm1 one notice and opportunity to cure with respect to any multiple , repeated, related or substantially similar events or circumstances.

Upon the giving of notice of termination of the Executive ' s employment hereunder for Cause, the Company shall have no further obligation or liability to the Executive, other than for the Final Compensation due to the Executive . Other than business expenses described in Section 5(a)(ii), the Final Compensation shall be paid to th e E x ecutive at the time pr e scribed by applicable law and in all e vents within thirty (30) days following the Termination Dat e. In the event of a termination for Cause , the Final Compensation will not include the pro-rated annual bonus.

(d) By the Company without Cause . The Company may tem1inate the Executive ' s employment hereunder without Cause at m1y time upon notice to the Executive . In the event of such termination at a time other than during the twelve (12) month period following a Change of Control (as defined in the Equity Plan, in addition to the Final Compensation due to the Executive , the Company will pay or provide the Executive the following (the “ Severance Benefits ” ) :

(i) the Company will continue to pay the Executive severance pay, at the same monthly rate as the Base Salary , for the twelve (12) month period following the Termination Date (the “ Severance Period ” ) ; and

(ii) the Company will pay the Executive an amount equal to his then current Target Bonus , payable in substantially equal monthly installments during the Severance Period.

Other than business expenses described in Section 5(a)(ii) , the Final Compensation shall be paid to the Executive at the time prescribed by applicable law and in all events within thirty (30) days following the Tem1ination Date. Any obligation of the Company to provide the Severance Benefits is conditioned, however , on the Executive signing and returning to the Company (without revoking) a timely and effective general release of claims in the form provided by the Company by the deadline specified therein, all of which (including the lapse of the period for revoking the release of claims as specified in the release of

claims) shall have occurred no later than the sixtieth (60th) calendar day following the date of termination (any such separation agreement submitted by such deadline , the “ Release of Claims”) and on the Executive's continued compliance in material respects with the obligations of the Executive to the Company and its Affiliates that survive termination of his employment, including without limitation under Sections 7, 8 and 9 of this Agreement. Subject to Section 5(h) below , all Severance Benefits to which the Executive is entitled hereunder shall be payable in accordance with the normal payroll practices of the Company, with the first payment , which shall be retroactive to the day immediately following the Termination Date , being due and payable on the Company's next regular payday for executives that follows the effective date of the Release of Claims. Notwithstanding the foregoing, if the time period to consider, return and revoke the Release of Claims covers two of the Executive's taxable years, any portion of the Severance Benefits that constitutes deferred compensation subject to Section 409A (as defined below) shall in all events be paid in the later taxable year. The Release of Claims required for Severance Benefits in accordance with this Section 5(d) creates legally binding obligations on the part of the Executive and the Company therefore advises the Executive to seek the advice of an attorney before signing the Release of Claims.

(e) By the Executive for Good Reason. The Executive may terminate his employment for Good Reason by (A) providing notice to the Company specifying in reasonable detail the condition giving rise to the Good Reason no later than the thirtieth (30th) day following the occurrence of that condition; (B) providing the Company a period of thirty (30) days to remedy the condition and so specifying in the notice ; and (C) terminating his employment for Good Reason within thirty (30) days following the expiration of the period to remedy if the Company fails to remedy the condition. The following , if occurring without the Executive's consent, shall constitute “G ood Reason” for termination by the Executive:

(i) a material diminution in the nature or scope of the Executive 's title, duties, authority or responsibilities;

(ii) a requirement that the Executive report to any person other than the CEO

or the Board;

(iii) a requirement that the Executive relocate his principal work location to a lo cation more than thirty (30) miles outside of Boston, Massachusetts; or

(iv) a material reduction in Base Salary, which for purposes of this Agreement shall mean a reduction of more than fifteen percent (15%) in the aggregate.

In the event of a termination of employment in accordance with this Section 5 ( e) at a time other than during the twelve (12) month period following a Change of Control, the Executive will be entitled to receive the Severance Benefits he would have been entitled to receive had he been terminated by the Company other than for Cause pursuant to Section 5(d) above , provided that the Executive signs and returns (without revoking) a timely and effective Release of Claims as set forth in Section 5(d).

(f) By the Executive without Good Reason. The Executive may terminate his employment hereunder at any time upon thirty (30) days ' prior written notice to the Company. In the event of termination of the Executive's employment in accordance with this Section 5(£), the Board may elect to waive the period of notice, or any portion thereof, and, if the Board so elects, the Company will pay the Executive the Base Salary for the period so waived. The Company shall also pay the Executive the Final Compensation due to him (other than business expenses described in Section 5(a)(ii)) at the time prescribed by applicable law and in all events within thirty (30) days following the Termination Date. In the event of termination by the Executive without Good Reason , the Final Compensation will not include the pro-rated annual bonus .

(g) Termination Following a Change of Control . In the event of a termination of the Executive's employment within twelve (12) months following a Change of Control either by the Company

without Cause (in accordance with Section 5(d)) or by the Executive for Good Reason (in accordance with section 5(e)) and provided that the Executive signs and returns (without revoking) a timely m1d effective Release of Claims as set forth in Section 5(d):

(i) The Executive will be entitled to receive the Severance Benefits he would have been entitled to receive had he been terminated b y the Company other thm1 for Cause pursuant to Section 5(d) above , except that the Severance Period shall equal the fifteen (15) month period following the Termination Date ; mid

(ii) Notwithstanding anything to the contrary , including , without limitation , the Equity Plan or any subsequent equity plan, all equity awards held by the Executive that are outstanding prior to the Change of Control (including, without limitation , the Inducement Option m1d the Inducement RSUs) shall, to the extent unvested or subject to vesting-like restrictions, be fully vested and exercisable (m1d any vesting-like restrictions shall lapse in full) immediately prior to the Change of Control. The foregoing sentence shall be (A) deemed incorporated into each option agreement or similar agreement evidencing awards made to the Executive after the Start Date mid (B) without prejudice to the Executive ' s right to any earlier acceleration of vesting , continued period of vesting or post-termination rights for the Executive provided for in the applicable plan or program under which such equity award was granted or under applicable law .

The Compm1y shall also pay the Executive the Final Compensation due to him (other thm1 business expenses described in Section 5(a)(ii)) at the time prescribed by applicable law and in all events within thirty (30) days following the Termination Date.

(h) Timing of Payments and Section 409A .

(i) This Agreement and all payments or benefits provided hereunder shall be interpreted, operated mid administered in a manner intended to avoid the imposition of additional taxes under Section 409A of the Internal Revenue Code of 1986 , as amended (the “ Code ” ) . Further, the Company and Executive hereto acknowledge and agree that the form and timing of the payments and benefits to be provided pursuant to this Agreement are intended to be e x empt from , or to comply with , one or more exceptions to the requirements of Section 409A of the Code (“Section 409A ” ) . Notwithstanding m1ything to the contrary in this Agreement, if at the time of the Executive ' s termination of employment, the Executive is a “ specified employee ,” as defined below , any and all amounts payable under this Section 5 or 9(a) on account of such separation from service that constitute deferred compensation and would (but for this provision) be payable within six (6) months following the date of termination , shall instead be paid on the next business day following the expiration of such six (6) month period or , if earlier, upon the Executive ' s death ; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulation Section l.409A-l(b) (including without limitation by reason of the safe harbor set forth in Section l.409A-l(b)(9)(iii), as determined by the Company in its reasonable good faith discretion) ; (B) benefits that qualify as excepted welfare benefits pursuant to Treasury regulation Section l.409A-l(a)(5); or (C) other amounts, or benefits that are not subject to the requirements of Section 409A.

(ii) For purposes of this Agreement , all references to “termination of employment ” and correlative phrases shall be construed to require a “separation from service” (as defined in Section l.409A-l(h) of the Treasury regulations after giving effect to the presumptions contained therein), and the term “ specified employee ” means an individual determined by the Company to be a specified employee under Treasury regulation Section l.409A-l(i).

(iii) Each payment made under this Agreement shall be treated as a separate payment mid the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments.

Any payment of or reimbursement for expenses that would constitute nonqualified deferred compensation subject to Section 409A shall be subject to the following additional rules: (i) no reimbursement or payment of any such expense shall affect the Executive's right to reimbursement or payment of any such expense in any other calendar year; (ii) reimbursement or payment of the expense shall be made, if at all , promptly , but not later than the end of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement or payment shall not be subject to liquidation or exchange for any other benefit.

(iv) In no event shall the Company have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with , or be exempt from , the requirements of Section 409A.

(i) Exclusive Right to Severance . The Executive agrees that the Severance Benefits to be provided to him in accordance with the term and conditions set forth in this Agreement are intended to be exclusive with respect to severance or termination pay and post-employment employee benefits. The Executive hereby knowingly and voluntarily waives any right he might otherwise have to participate in or receive benefits under any other plan, program or policy of the Company providing for severance or termination pay or benefits.

6. Effect of Termination. The provisions of this Section 6 shall apply to any tem1ination of the Executive ' s employment under this Agreement , whether pursuant to Section 5 or otherwise.

(a) Provision by the Company of Final Compensation and Severance Benefits, if any , that are due the Executive in each case under the applicable tem1ination provision of Section 5 shall constitute the entire obligation of the Company to the Executive with respect to severance or termination pay and post-employment employee benefits.

(b) Except for any right of the Executive to continue group health plan participation in accordance with applicable law, the Executive's participation in all employee benefit plans shall terminate pursuant to the terms of the applicable plan documents based on the date of termination of the Executive's employment without regard to any Base Salary for notice waived pursuant to Section 5(t) hereof or to any Severance Benefits or other payment made to or on behalf of the Executive following such date of termination .

(c) Provisions of this Agreement shall survive any termination of the Executive's employment if so provided herein or if necessary or desirable fully to accomplish the purposes of other surviving provisions, including without limitation the obligations of the Executive under Sections 7, 8 and 9. The obligation of the Company to provide Severance Benefits hereunder , and Executive's right to retain such payments, is expressly conditioned on the Executive's continued compliance in all material respects with Sections 7 , 8 and 9. The Executive recognizes that , except as expressly provided in Section 5(d) or with respect to Base Salary paid for notice waived pursuant to Section 5(t), no cash compensation or benefits will be earned after termination of employment.

7. Confidential Information .

with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall never disclose to any Person (except as required by applicable law or for the proper performance of his duties and responsibilities to the Company and its Affiliates), or use for his own benefit or gain or the benefit or gain of any other Person , any Confidential Information obtained by the Executive incident to his employment or any other association with the Company or any of its Affiliates. The Executive understands that this restriction shall continue to apply after his employment terminates, regardless of the reason for such termination. Further , the Executive shall furnish prompt notice to the Company of any required disclosure of Confidential Information sought pursuant to subpoena , court order or any other legal process or requirement , and provide the Company a reasonable opportunity to seek protection of the Confidential Information prior to any such disclosure . The confidentiality obligation under this Section 7 shall not apply to information that has become generally known through no wrongful act on the part of the Executive or any other Person having an obligation of confidentiality to the Company or any of its Affiliates. Nothing in this Agreement limits , restricts or in any other way affects the Executive from communicating with any governmental agency or entity, or communicating with any official or staff person of a governmental agency or entity , concerning matters relevant to the governmental agency or entity.

(b) All documents , records , tapes and other media of every kind and description relating to the business , present or otherwise , of the Company or any of its Affiliates and any copies or derivatives (including without limitation electronic) , in whole or in part , thereof (the “ Documents ” ) , whether or not prepared by the Executive, shall be the sole and exclusive property of the Company and its Affiliates . Except in the proper performance of the Executive ' s regular duties for the Company or as expressly authorized in writing in advance by the Board or its expressly authorized designee, the Executive will not copy any Documents or remove any Documents or copies or derivatives thereof from the premises of the Company. The Executive shall safeguard all Documents and shall surrender to the Company at the time his employment terminates , and at such earlier time or times as the Board or its designee may specify , all Documents and other property of the Company or any of its Affiliates and all documents , records and files of the customers and other Persons with whom the Company or any of its Affiliates does business ( “ Third Party Documents ” ) and each individually a “ Third Party Document ” ) then in the Executive ' s possession or control ; provided , however , that if a Document or Third-Party Document is on electronic media , the Executive may , in lieu of surrendering the Document or Third-Party Document , provide a copy to the Compan y on electronic media and delete and overwrite all other electronic media copies thereof. Upon request of any duly authorized officer of the Company , the Executive shall disclose all passwords and passcodes necessary or desirable to enable the Company or any of its Affiliates or the Persons with whom the Company or any of its Affiliates do business to obtain access to the Documents and Third-Party Documents.

(c) Under the Defend Trade Secrets Act of 2016 , the Company hereby provides notice and Executive hereby acknowledges that Executive may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state, or local government official , either directly or indirectly , or to an attorney and (B) is solely for the purpose of reporting or investigating a suspected violation of law ; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding , if such filing is made under seal.

8. Assignment of Rights to Intellectual Property. The Executive shall promptly and fully disclose all Intellectual Property to the Company. The Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) the Executive ' s full right , title and interest in and to all Intellectual Property. The Executive shall execute any and all applications for domestic and foreign patents , copyrights or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Intellectual Property to the Company (or as otherwise directed by the Company) and to permit the Company to enforce any patents , copyrights or other proprietary rights to the Intellectual Property. The

Executive will not charge the Company for time spent in complying with these obligations. All copyrightable works that the Executive creates shall be considered “w ork made for hire ” and shall, upon creation, be owned exclusively by the Compan y.

9. Restricted Activities. The Executive agrees that the following restrictions on his activities during and after his employment are necessary to protect the goodwill , Confidential Information and other legitimate interests of the Company and its Affiliates:

(a) During the Tem1 and during the twelve (12) month period following the date of the Executive ' termination of employment either b y the Company for Restricted Cause (as defined below) or by the Executive for any reason (such period , the “ Non-Compete Period ” ) , the Executive shall not , directly or indirectly , whether as owner , partner , investor , consultant, agent , employee, co-venturer or otherwise: (x) control or own any interest in a Person that engages in the Competitive Business in the Restricted Area; or (y) render any services to , or engage in any activities for, any Person that engages in the Competitive Business in the Restricted Area . Nothing in this Section 9(a) , however , shall prevent the Executive ' s passive ownership of two (2) percent or less of the equity securities of any publicl y traded company.

(i) In consideration of the Executive ' s agreement not to compete under this Section 9(a), the Company shall pay the Executive , on a pro-rata basis , an amount equal to fifty (50%) of the Executive ' s then-current Base Salary , reduced by any Severance Benefits the Executive is eligible to receive from the Company , if any (such payments , the “N on-Compete Payments ”) . The Company, in its sole discretion, may elect at any time prior to the Termination Date to waive the restrictions set forth in Section 9(a) , which such waiver shall automatically terminate the Company’ s obligations to compensate the Executive under this Section 9(a)(i). The Executive agrees that nothing in this Section 9(a)(i) gives the Executive an election as to his compliance with Section 9(a). Any obligation of the Company to provide the Non-Compete Payments is conditioned on the Executive signing and returning to the Company (without revoking) a timely and effective Release of Claims as set forth in Section 5(d).

(ii) If the Executive breaches any obligations under Section 9(a) at any time during the Non-Compete Period , then , in addition to any other remedies that the Company may have against the Executive, the Executive shall no longer be entitled to the Non-Compete Payments and shall be obligated to immediately return any and all payments made to the Executive pursuant to Section 9(a)(i) .

(iii) For purposes of this Agreement, the “ Competitive Business” means the business of developing , marketing or selling (i) therapeutic drugs to treat liver disease or constipation or (ii) any other drug that has a therapeutic purpose that is the same or substantially similar to the therapeutic purpose of any drug that the Company or any of its Affiliates is developing , marketing or selling during the Executive ' s employment with the Company or , with respect to the portion of the Non-Compete Period that follows termination of the E xec utive ' s employment , at the time of such termination . Notwithstanding the foregoing, nothing herein shall restrict Executive's activities with respect to any Person so long as those activities are not in the areas defined as Competitive Business herein.

(iv) For purposes of this Agreement, “ Restricted Cause ” means the Board ' s determination, in its reasonable judgement, that: (A) the Executive failed to materially perform his duties ; (B) the Executive acted or failed to act in any way that materially injures the Company ; or (C) there exists any reason constituting Cause.

(v) For purposes of this Agreement, the “ Restricted Area” means any geographic area in which the Company or any of its Affiliates engages in any business activity or is actively planning to engage in any business activity at any time during the Executive ' s employment with the Company or , with respect to the portion of the Non-Compete Period that follows termination of the Executive ' s employment , at the time of such termination.

(b) During the Term , the Executive shall not , directl y or indirectly , undertak e an y outside activity , whether or not competitive with the business of the Company or its Affiliates that could reasonabl y give rise to a conflict of interest or otherwise interfere with any of his duties for , or obligations to , the Company or any of its Affiliates .

(c) During the Term and during the twelve (12) month period following the Termination Date (the “ Nonsolicitation Period ” ) , regardless of the reason for such termination , the Ex e cutive shall not , dir e ctl y or indirectly: (i) solicit or encourage any customer , client , business partner , or other business relation of the Company or any of its Affiliates (each , a “ Business Relationship ” ) to terminate or diminish its relationship with them ; or (ii) seek to persuade an y Business Relationship or any prospective Business Relationship to conduct with anyone other than the Company or any of its Affiliates any business or activity which such Business Relationship conducts , or such prospective Business Relationship could conduct , with the Company or any of its Affiliates ; provided , however , that these restrictions shall apply (A) only with respect to those Persons who are or have been a Business Relationship at any time within the immediately preceding two (2)-year period or whose business has been solicited on behalf of the Company or an y of the Affiliates by any of their officers, emplo y ees or agents within such two (2) -y ear period , other than by form letter , blanket mailing or published advertisement , and (B) onl y if the Executive has performed work for such Person during his emplo y ment with the Compan y or one of its Affiliates or been introduced to , or otherwise had contact with, such Person as a result of his employment or other associations with the Company or one of its Affiliates or has had access to Confidential Information which would assist in the Executive ' s solicitation of such Person.

(d) During the Nonsolicitation Period (excluding any activities undertaken on behalf of the Company or any of its Affiliates in the course of his duties hereunder) , the Executive shall not , directly or indirectly , and will not assist any other Person to: (i) hire , engage or solicit for hiring or engagement any employee of the Company or any of its Affiliates or seek to persuade any employee of the Company or any of its Affiliates to discontinue employment; or (ii) solicit or encourage any independent contractor providing services to the Company or any of its Affiliates to terminate or diminish its relationship with them ; provided , however , that these restrictions shall apply only to employees and independent contractors who have provided services to the Company or any of its Affiliates at any time within the immediatel y pr e ceding two - (2) y ear p er iod.

l0. Enforcement of Covenants . The Executive acknowledges that he was provided with at least ten (10) days to carefully read and consider all the terms and conditions of this Agreement, including the restraints imposed upon him pursuant to Sections 7 , 8 and 9 , and has had the opportunity to consult with legal counsel of Executive ' s choosing regarding such terms mid conditions. The Executive agrees without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the goodwill, Confidential Information and other legitimate interests of the Company and its Affiliates ; that each and every one of these restraints is reasonable in respect to subject matter, length of time and geographic area ; and that these restraints, individually or in the aggregate , will not prevent him from obtaining other suitable employment during the period in which the Executive is bound by them. The Executive further agrees that he will never assert , or permit to be asserted on his behalf, in any forum , any position contrary to the foregoing. The Executive further acknowledges that , were he to breach any of the covenants contained in Sections 7 , 8 or 9, the damage to the Company and its Affiliates would be irreparable. The Executive therefore agrees that the Company, in addition to any other remedies available to it , shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by the Executive of any of said covenants , without having to post bond , mid will additionally be entitled to an award of attorney ' s fees incurred in connection with securing any relief hereunder. The parties further agree that , in the event that any provision of Section 7 , 8 or 9 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time , too large a geographic area or too great a range of activities , such provision shall be deemed to be modified to permit its

enforcement to the maximum extent permitted by law . The Executive agrees that the Nonsolicitation Period shall be tolled, and shall not run , during any period of time in which he is in violation of the terms thereof, in order that the Company and its Affiliates shall have all of the agreed-upon temporal protection recited herein. No breach of any provision of this Agreement by the Company, or any other claimed breach of contract or violation of law, or change in the nature or scope of the Executive's employment relationship with the Company , shall operate to extinguish the Executive's obligation to comply with Sections 7, 8 and 9. Each of the Company ' s Affiliates shall have the right to enforce all of the Executive ' s obligations to that Affiliate under this Agreement, including without limitation pursuant to Section 7 , 8 or 9.

11. No Conflicting Agreements. The Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which the Executive is a party or is bound and that the Executive is not now subject to any covenants against competition or similar covenants or any other obligations to any Person or to any court order , judgment or decree that would affect the performance of his obligations herem1der. The Executive will not disclose to or use on behalf of the Company any proprietary information of a third party without such party 's consent.

12. Definitions. Capitalized words or phrases shall have the meanings provided in this Section 12 and as provided elsewhere herein:

(a) “ Affiliate” means any person or entity directly or indirectly controlling, controlled by or under common control with the Company , where control may be by either management authority or equity interest.

(b) “ Code” means the Internal Revenue Code of 1986 , as amended.

(c) “Confidential Information” means any and all information of the Company and its Affiliates that is not generally available to the public , and any and all information, publicly known in whole or in part or not, which , if disclosed by the Company or any of its Affiliates, would assist in competition against any of them . Confidential Information includes without limitation such information relating to (i) the development, research, testing, manufach1ring, marketing and financial activities of the Company and its Affiliates , (ii) the Products , (iii) the costs, sources of supply, financial performance and strategic plans of the Company and its Affiliates , (iv) the identity and special needs of the patients of the Company and its Affiliates and (v) the people and organizations with whom the Company and its Affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes information that the Company or any of its Affiliates has received, or may receive hereafter, belonging to others or that was received by the Company or any of its Affiliates with any understanding, express or implied, that it would not be disclosed.

(d) “ Intellectual Property” means inventions , discoveries , developments, methods , processes , compositions, works, concepts and ideas (whether or not patentable or copyrightable or constituting trade secrets) conceived, made , created, developed or reduced to practice by the Executive (whether alone or with others , whether or not during normal business hours or on or off Company premises) during the Executive's employment and during the period of six (6) months immediately following termination of his employment that relate either to the Products or to any prospective activity of the Company or any of its Affiliates or that result from any work performed by the Executive for the Company or any of its Affiliates or that make use of Confidential Information or any of the equipment or facilities of the Company or any of its Affiliates.

(e) “ Person” means a natural person, a corporation , a limited liability company, an association, a partnership, an estate, a trust and any other entity or organization , other than the Company or any of its Affiliates.

(f) “ Products” means all products planned, researched, developed, tested, sold, licensed , leased, or otherwise distributed or put into use by the Company or any of its Affiliates , together with all services provided or otherwise planned by the Company or any of its Affiliates , during the Executive's employment.

13. Withholding. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.

14. Section 280G .

(a) In the event that the Company undergoes a “ change in ownership or control” (within the meaning of Section 280G of the Code and the regulations and guidance promulgated thereunder ( “ Section 280G ” )) and all , or any portion , of the payments provided under this Agreement , either alone or together with other payments or benefits which the Executive receives or is entitled to receive from the Company (collectively , the “ Total Payments ” ), could constitute an “ excess parachute payment” within the meaning of Section 280G, then the Executive shall be entitled to receive (i) an amount limited (to the minimum extent necessary) so that no portion of the Total Payments shall be non-deductible for US federal income taxes by reason of Section 280G (the “ Limited Amount”) , or (ii) if the amount of the Total Payments (without regard to clause (i)) reduced by the excise tax imposed by Section 4999 of the Code (the “ Excise Tax”) and the amount of all other applicable federal , state and local taxes (with income taxes all computed at the highest applicable marginal rate) is greater than the Limited Amount reduced by the amount of all taxes applicable thereto (with income taxes all computed at the highest marginal rate) , the amount of the Total Payments otherwise payable without regard to clause (i). If it is determined that the Limited Amount will maximize the Employee's after-tax proceeds , the Total Payments shall be reduced to equal the Limited Amount in the following order : (i) first , by reducing cash severance payments that are exempt from Section 409A, (ii) second , by reducing other payments and benefits that are exempt from Section 409A and to which Q&A 24(c) of Section l. 280G - l of the Treasury Regulations does not appl y, (iii) third , by reducing all remaining payments and benefits that are exempt from Section 409A and (iv) finally , by reducing payments and benefits that are subject to Section 409A , in each case , with all such reductions done on a pro rata basis.

(b) All determinations made pursuant this Section 14 will be made at the Company's or its Affiliates ' expense by an accounting firm or consulting group with experience in performing calculations regarding the applicability of Section 280G and Section 4999 of the Code selected by the Company for such purpose (the “ Independent Advisors ” ) . For purposes of such determinations , no portion of the Total Payments shall be taken into account which , in the opinion of the Company and its legal advisors , (y) does not constitute a “ parachute payment ” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) or (z) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4 )(B) of the Code, in excess of the “ base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation . In the event it is later determined that (A) a greater reduction in the Total Payments should have been made to implement the objective and intent of this Section 14, the excess amount shall be returned immediately by the Executive to the Company or (B) a lesser reduction in the Total Payments should have been made to implement the objective and intent of this Section 14 , the additional amount shall be paid immediately by the Company , or any Affiliate of the Company , as applicable , to the Executive.

15. Assignment. Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein , by operation of law or otherwise , without the prior written consent of the

other ; provided , however , that (a) the Company may assign its rights and obligations under this Agreement without the consent of the Executive to one of its Affiliates , or in the event that the Company shall hereafter effect a reorganization with, consolidate with , or merge into , an Affiliate or any Person or transfer or have transferred all or substantially all of its properties, outstanding stock, or assets to an Affiliate or any Person and (b) in the event that all of the Company ' s rights and obligations under this Agreement are assigned pursuant to this Section 15, each reference to Company herein shall be deemed from and after such assignment instead to be a reference to the assignee. This Agreement shall inure to the benefit of and be binding upon the Company and the Executive, and their respective successors , executors , administrators , heirs and permitted assigns.

16. Severability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement , or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or W1enforceable , shall not be affected thereby , and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law .

17. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party . The failure of either party to require the performance of any term or obligation of this Agreement , or the waiver by either party of any breach of this Agreement , shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

18. Notices. Any and all notices , requests , demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person, consigned to a reputable national courier service or deposited in the United States mail, postage prepaid , registered or certified, and addressed to the Executive at his last known address on the books of the Company or, in the case of the Company , at its principal place of business , attention of the CEO , or to such other address as either party may specify by notice to the other actually received.

19. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes and terminates all prior communications, agreements and understandings, written or oral , with respect to th e t e rms and conditions of the Executive ' s employm e nt r e lationship with th e Compan y (including , without limitation , the offer letter dated September 17 , 2018) .

20. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by an expressly authorized representative of the Company.

21. Headings. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

22. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

[The remainder of this page has been left blank intentionally.]

IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by its duly authorized representative, and by the Executive, as of the date first above written.

	ALBIREO PHARMA, INC.


	By:
	Name:
	Title:


	EXECUTIVE

Exhibit 10.4

SEPARATION AGREEMENT

This Separation Agreement (this “ Agreement ” ) is made and entered into as of October 4, 2018 (the “ Execution Date”) by and between Albireo Pharma , Inc. ( “ Company”) and Thomas A Shea ( “ Executive ” ) .

WHEREAS, Executive ' s employment with Company shall end on December 31 , 2018 (the “ Separation Date”) ;

WHEREAS , Executive and Company desire to enter into a formal Agreement to memorialize the terms and conditions of Executive ' s separation from Company ;

WHEREAS , this Agreement shall become effective on the eighth (8th) day after the day on which Executive signs below (such 8th day referred to herein as the “ Effective Date”) .

NOW , THEREFORE , in consideration of the mutual covenants and agreements contained herein, the parties hereby agree as follows :

1. Separation of Employment.

(a) Executive ' s employment with Company shall end on the Separation Date as defined above . Executive represents and warrants that he shall promptly transition his duties and responsibilities as a Company officer pursuant to Company ' s request and direction . Following the Separation Date , Executive shall not be and shall not represent himself as an employee or agent of Company .

(b) To the extent not theretofore paid or provided , Company shall pay or provide to Executive the following (together the “ Final Compensation ” ) : (i) Executive ' s Base Salary through the Separation Date ; (ii) any accrued but unused vacation pay ; and (iii) any other amounts or benefits required to be paid or provided or which Executive is entitled to receive under any plan , program , policy or practice or contract or agreement of Company and its affiliated companies.

2. Separation Benefit. Provided that Executive (A) remains employed in good standing through the Separation Date , (B) executes and does not revoke this Agreement , and (C) executes and does not revoke the Supplem e ntal Release attached as Exhibit A (the “ Supplemental Release ” ) , Company agrees to provide Executive with the following payments and benefits (together, the “Separation Benefit”):

(a) Company shall pay to Executive twelve (12) months of severance pay based on Executive ' s Base Salary as of the Separation Date. In accordance with Section 5(d)(iii) of Executive ' s employment agreement with Company dated August 4, 2016 (the “ Employment Agreement ” ) , the foregoing severance pay shall be paid in equal installments over the 12 - month severance period in accordance with Company ' s normal payroll practices and commencing on the first regular payday for executives following the Supplemental Effective Date (as defined in the Supplemental Release).

(b) Provided that Executive properly and timely elects to continue Executive's health and dental insurance coverage to the extent allowed under COBRA (or mini-COB RA) , Company will contribute towards the cost of such COBRA (or mini-COBRA) coverage in the same amount as if Executive were actively employed, plus any COBRA (or mini-COBRA) administration fees, until the earlier of: (i) December 31, 2019; or (ii) the date Executive becomes eligible for coverage under the group health plan of another employer (the “COBRA Contribution Period”). During this COBRA Contribution Period, Executive will be required to contribute towards the cost of the COBRA (or mini-COBRA) premium in the same amount as if Executive was actively employed, which Executive agrees to timely

pay. After the COBRA Contribution Period, Executive will be responsible for the full cost of any such COBRA (or mini-COBRA) premiums. Executive agrees to promptly notify Company if Executive becomes eligible under the group health plan of another employer prior to December 31, 2019. Following the expiration or termination of the COBRA Contribution Period, Executive may at Executive's sole cost and expense continue COBRA coverage for Executive and Executive 's spouse and eligible dependents, for the duration permitted by and subject to all the requirements of COBRA.

(c) Notwithstanding anything in the Option Agreements or Incentive Plans to the contrary, the options that are vested and exercisable as of the Separation Date (as summarized in Section 3(a)), to the extent not previously exercised, shall remain exercisable until the one (1) year anniversary of the Separation Date.

Executive acknowledges and agrees that the Separation Benefit is not intended to and does not constitute a severance plan or confer a benefit on anyone other than the parties. Executive further acknowledges that except for the Separation Benefit and the Final Compensation, Executive is not now and shall not in the future be entitled to any other compensation from Company including, without limitation, other wages, commissions, bonuses, vacation pay, holiday pay, paid time off, stock, stock options, equity, or any other form of compensation or benefit.

3. Equity.

(a) Executive was granted options to purchase 125,947 shares of Company's common stock pursuant to the terms of the Stock Option Agreements dated November 3, 2016, January 20, 2017, August 21, 2017 and June 8, 2018 (collectively, the “Option Agreements”) and the terms of Company ' s 2016 Equity Incentive Plan, 2017 Equity Incentive Plan and 2018 Equity Incentive Plan, respectively (collectively, the “Incentive Plans “). Assuming Executive remains employed in good standing through the Separation Date, as of the Separation Date, 54,217 shares shall be vested (the “Vested Shares”) and the remaining 71,730 shares shall be unvested (the “Unvested Shares”) pursuant to the Option Agreements. Executive acknowledges and agrees that, upon the Separation Date, the options with respect to the Unvested Shares shall be terminated and he shall have no right(s) to exercise the options with respect to any portion of such Unvested Shares.

(b)

(c) Except for Executive's ability to exercise the Vested Shares in accordance with the Incentive Plans and the Option Agreements , Executive represents and agrees that (i) he does not own any common stock, stock options, or other equity interest in Company, (ii) he has no right to acquire any further stock options, common stock, equity or other interest in Company under the Option Agreements and/or the Incentive Plans and he shall not in the future have any right to acquire any equity or other interest in Company under the Incentive Plans or the Option Agreements , and (iii) he shall not have any right to vest in any stock or stock options under any Company equity, stock and/or stock option plan or program (of whatever name or kind) that he may have participated in or were eligible to participate in during his employment with Company.

4. Ongoing Covenants; Return of Property. Executive expressly acknowledges and agrees that Executive shall adhere to the provisions of Section 7 (“Confidential Information”), Section 8 (“Assignment of Rights to Intellectual Property”) and Section 9 (“Restricted Activities”) of the Employment Agreement, which are expressly incorporated by reference herein and shall survive the signing of this Agreement. Executive further acknowledges and agrees that Executive shall abide by any and all Company policies and applicable common law and statutory obligations relating to the protection of Company' s trade secrets and confidential and proprietary information.

5. Confidentiality . Information relating to the negotiation of this Agreement and the terms of this Agreement, shall be held confidential by Executive and shall not be publicized or disclosed to:

(a) any person, other than an immediate family member, legal counsel or financial advisor who agrees to be bound by these confidentiality obligations); (ii) any business entity; or (iii) any government agency, except as mandated and permitted by state or federal law. This section shall not prohibit or limit either party from participating in an investigation with a state or federal agency if requested by the agency to do so or prohibit either party from disclosing the terms of this Agreement as necessary and appropriate pursuant to legal requirements and standard recordkeeping and accounting practices.

6. Non-Disparagement. Neither party shall make any statements that are professionally or personally disparaging to the other party (including Company ' s officers, directors , employees and consultants) , including any statements that disparage any person, product, service, finances, financial condition, or capability.

7. Cooperation. Following the Separation Date, Executive shall provide Executive's reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive' s employment hereunder. Company shall reimburse Executive for any reasonable out-of-pocket expenses incurred in connection with Executive' s performance of obligations under this section at the request of Company. If Executive is entitled to be paid or reimbursed for any expenses under this section, then the amount reimbursable in any one calendar year shall not affect the amount reimbursable in any other calendar year, and the reimbursement of an eligible expense must be made no later than December 31 of the year after the year in which the expense was incurred.

8. Release of Claims.

(a) Release. Executive hereby agrees and acknowledges that by signing this Agreement and accepting the Separation Benefit, and for other good and valuable consideration provided for in this Agreement, Executive is waiving and releasing Executive' s right to assert any form of legal claim against Company11 whatsoever for any alleged action, inaction or circumstance existing or arising from the beginning of time through the Execution Date. Executive ' s waiver and release herein is intended to bar any form of legal claim, charge, complaint or any other form of action (jointly referred to as “Claims”) against Company seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), the recovery of any damages or any other form of monetary recovery whatsoever (including, without limitation , back pay, front pay, compensatory damages , emotional distress damages, punitive damages, attorneys ' fees and any other costs) against Company, for any alleged action, inaction or circumstance existing or arising through the Execution Date. Without limiting the generality of the foregoing, Executive specifically waives and releases Company from any waivable claim arising from or related to Executive's employment relationship with Company through the Execution Date including, without limitation : (i) Claims under any Massachusetts or other state or federal statute, regulation or executive order (as amended) relating to employment, discrimination , fair employment practices, wages, hours or other terms and conditions of employment, including but not limited to the Age Discrimination in Employment Act and Older Workers Benefit Protection Act, the Civil Rights Acts of 1866 and 1871 and Title VII of the Civil Rights Act of 1964 and the Civil Rights Act of 1991, the Equal Pay Act, the Americans With Disabilities Act, the Genetic Information Non-Discrimination Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Lilly Ledbetter Fair Pay Act, the National Labor Relations Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act of 1974, COBRA, the Worker Adjustment and Retraining Notification Act, the Massachusetts Fair Employment Practices Statute, the Massachusetts Equal Rights Act, the Massachusetts Civil Rights Act, the Massachusetts Privacy Statute, the Massachusetts Sexual Harassment Statute, the Massachusetts Wage Act, the Massachusetts Minimum Fair Wages Act, the Massachusetts Equal Pay Act, and any similar Massachusetts or other state or federal

1 1 For purposes of this section , “Company ” means Albireo Pharma , Inc. and its divisions , affiliates , parents, subsidiaries and related entities , and its and their owners , shareholders , partners , directors , officers , employees , trustees , agents , successors and assigns.

statute, regulation or executive order (as amended) relating to or other terms and conditions of employment. Please note that this section specifically includes a waiver and release of Claims regarding payments or amounts covered by the Massachusetts Wage Act or the Massachusetts Minimum Fair Wages Act, including hourly wages, salary, overtime, minimum wages, commissions, vacation pay, holiday pay, sick leave pay, dismissal pay, bonus pay or severance pay; (ii) Claims under any Massachusetts or other state or federal common law theory including, without limitation, wrongful discharge, breach of express or implied contract, promissory estoppel, unjust enrichment, breach of a covenant of good faith and fair dealing, violation of public policy, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, misrepresentation , deceit, fraud or negligence or any claim to attorneys' fees under any applicable statute or common law theory of recovery; and (iii) any other Claim arising under other state or federal law. Notwithstanding anything in this section to the contrary, this section does not release Company from any obligation expressly set forth in this Agreement and shall not act as a waiver or release of any claims that Executive cannot by law waive or release.

(b) No Claims Filed; Release Limitation . As a condition of Company entering into this Agreement, Executive further represents that he has not filed against Company any complaints, claims or lawsuits with any court, administrative agency or arbitral tribunal prior to the Execution Date, and that he has not transferred to any other person any such complaints, claims or lawsuits. Executive understands that nothing contained in this Agreement limits his ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (the “ Government Agencies ” ) . Executive further understands that this Agreement does not limit his ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agencies, including providing documents or other information, without notice to Company. This Agreement does not limit Executive' s right to receive an award for information provided to any Government Agencies. Executive understands, however, that, except as limited by the immediately preceding sentence, by signing this Agreement, Executive waives his right to any monetary recovery in connection with Government Agencies proceedings and Executive waives his right to file a claim seeking monetary damages in any court, administrative agency or arbitral tribunal.

(c) Acknowledgement . Executive acknowledges and agrees that, but for providing this waiver and release, Executive would not be receiving the Separation Benefit provided to Executive under the terms of this Agreement.

9. ADEA/OWBP A Review and Revocation Period. Executive and Company acknowledge that Executive has specific rights under the Age Discrimination in Employment Act (“ADEA'') and the Older Workers Benefit Protection Act (the “OWBPA”), which prohibit discrimination on the basis of age. It is Company ' s desire and intent to make certain that Executive fully understands the provisions and effects of this Agreement, which includes a release of claims under the ADEA and OWBPA. To that end, Executive has been encouraged and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Agreement. Consistent with the provisions of the ADEA and OWBPA, Company also is providing Executive with twenty one (21) days from the Execution Date in which to consider and accept the terms of this Agreement by signing below and returning it to Jason Duncan, General Counsel, Albireo Pharma, Inc., 10 Post Office Square , Suite 502 South, Boston, MA 02109. Executive may rescind Executive's assent to this Agreement if, within seven (7) days after Executive signs this Agreement, Executive delivers by hand or send by mail (certified, return receipt and postmarked within such seven-day period) a notice of rescission to Jason Duncan, General Counsel, at the above- referenced address.

10. Material Breach. A breach of any of Sections 4, 5, 6, 7 or 8 of this Agreement shall

constitute a material breach of this Agreement and, in addition to any other legal or equitable remedy available to Company, shall entitle Company to recover the Separation Benefit paid to Executive hereunder.

11. Successors and Assigns. This Agreement is personal to Executive and shall not be assignable by Executive. This Agreement shall inure to the benefit of and be enforceable by Executive' s legal representatives . Company may assign this Agreement without the consent of Executive. This Agreement shall inure to the benefit of and be binding upon Company and its successors and assigns.

12. Code Section 409A . Both Executive and Company intend this Agreement to be in compliance with Section 409A of the Internal Revenue Code of 1986 (as amended). Executive acknowledges and agrees, however, that Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement, including, without limitation , to consequences related to Code Section 409A. In the event any payments or benefits are deemed by the IRS to be non-compliant, this Agreement, at Executive' s option, shall be modified to the extent practicable, so as to make it compliant by altering the payments or benefits, or the timing of their receipt, provided that no such modification shall increase Company' s obligations hereunder.

13. Miscellaneous.

(a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflict of laws.

(b) Captions. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

(c) Amendments. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(d) Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other part y or b y registered or certified mail , return receipt requested , postage prepaid , addressed as follows :


If to Executive:	Thomas A. Shea
	8 Villa Drive
	Medway , MA 02053

If to Company:	Albireo Pharma , Inc .
	10 Post Office Square
	Suite 502 South
	Boston , MA 02109
	Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(g) Waivers. Executive's or Company's failure to insist upon strict compliance with any prov1s1on of this Agreement or the failure to assert any right Executive or Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(h) Entire Agreement. This Agreement and the agreements and/or the agreement sections explicitly referenced as surviving herein (including the Incentive Plans , the Option Agreements , and Sections 7 , 8 and 9 of the Employment Agreement) , contain the entire agreement between Company and Executive with respect to the subject matter hereof and, from and after the Effective Date , shall supersede any other agreement between the parties with respect to the subject matterhereof.

(i) Counterparts; Scanned Signatures. This Agreement may be executed in one or more counterparts , all of which shall be considered one and the same agreement , and shall become a binding agreement when one or more counterparts have been signed by each party and delivered to the other party. A counterpart executed and delivered by PDF or facsimile shall be sufficient for the Agreement to become effective.

IN WITNESS WHEREOF , Executive has hereunto set Executive ' s hand and, pursuant to the authorization from the Board , Company has caused these presents to be executed in its name on its behalf , all as of the day and year first above written.

THOMAS A. SHEA		ALBIREO PHARMA , INC.


Signed Name
		By:
		Name:


Printed Name		Title: President and CEO

EXHIBIT A

SUPPLEMENTAL RELEASE

This Supplemental Release (this “ Release ” ) is made and entered into as of December 31 , 2018 (the “ Separation Date ” ) by and between Albireo Pharma , Inc. ( “ Company ” ) and Thomas A. Shea ( “ Executive ” ) .

1. Release of Claims. Executive hereby agrees and acknowledges that by signing this Release and accepting the Separation Benefit (as defined in the Separation Agreement between Compan y and Executive , dated October 4 , 2018 (the “ Separation Agreement “ )) , and for other good and valuable consideration provided for in the Separation Agreement , Executive is waiving and releasing Executive ' s right to assert any form of legal claim against Company2/ whatsoever for any alleged action , inaction or circumstance existing or arising from the beginning of time through the Separation Date . Executive's waiver and release herein is intended to bar any form of legal claim , charge , complaint or any other form of action (jointly referred to as “ Claims ” ) against Company seeking any form of relief including , without limitation , equitable relief (whether declaratory , injunctive or otherwise) , the recovery of any damages or any other form of monetary recovery whatsoever (including , without limitation , back pay , front pay, compensator y damages , emotional distress damages, punitive damages , attorneys ' fees and any other costs) against Company , for any alleged action , inaction or circumstance existing or arising through the Separation Date. Without limiting the generality of the foregoing , Executive specifically waives and releases Company from any waivable claim arising from or related to Executive ' s employment relationship with Company through the Separation Date including, without limitation: (i) Claims under any Massachusetts or other state or federal statute , regulation or executive order (as amended) relating to employment , discrimination , fair employment practices , wages , hours or other terms and conditions of employment , including but not limited to the Age Discrimination in Employment Act and Older Workers Benefit Protection Act , the Civil Rights Acts of 1866 and 1871 and Title VII of the Civil Rights Act of 1964 and the Civil Rights Act of 1991 , the Equal Pay Act , the Americans With Disabilities Act , the Genetic Information Non-Discrimination Act , the Uniformed Services Employment and Reemployment Rights Act of 1994 , the Lilly Ledbetter Fair Pa y Act , the National Labor Relations Act , the Family and Medical Leave Act , the Employee Retirement Income Security Act of 1974 , COBRA , the Worker Adjustment and Retraining Notification Act , the Massachusetts Fair Employment Practices Statute, the Massachusetts Equal Rights Act, th e Massachusetts Civil Rights Act, th e Massachusetts Privacy Statute , the Massachusetts Sexual Harassment Statute , the Massachusetts Wage Act , the Massachusetts Minimum Fair Wages Act , the Massachusetts Equal Pay Act, and any similar Massachusetts or other state or federal statute , regulation or executive order (as amended) relating to or other terms and conditions of employment. Please note that this section specifically includes a waiver and release of Claims regarding payments or amounts covered by the Massachusetts Wage Act or the Massachusetts Minimum Fair Wages Act , including hourly wages , salary , overtime, minimum wages, commissions , vacation pay, holiday pay , sick leave pay, dismissal pay , bonus pay or severance pay; (ii) Claims under any Massachusetts or other state or federal common law theory in cluding , without limitation , wrongful discharge , breach of express or implied contract, promissory estoppel , unjust enrichment, breach of a covenant of good faith and fair dealing , violation of public policy , defamation , interference with contractual relations , intentional or negligent infliction of emotional distress, invasion of privacy , misrepresentation , deceit , fraud or negligence or any claim to attorneys ' fees under any applicable statute or common law theory of recovery ; and (iii) any other Claim arising under other state or federal law. Notwithstanding anything in this section to the contrary, this section does not release Company from any

21 For purposes of this section , “ Company ” means Albireo Pharma , Inc. and its divisions , affiliates, parents , subsidiaries and related entities , and its and their owners , shareholders , partners , directors , officers , employees , trustees , agents , successors and assigns .

A-1

obligation expressl y set forth in the Separation Agreement and shall not act as a waiver or release of any claims that Executive cannot by law waive or release.

2. No Claims Filed; Release Limitation. As a condition of Company entering into this Release , Executive further represents that he has not filed against Company any complaints , claims or lawsuits with any court , administrative agency or arbitral tribunal prior to the Separation Date , and that he has not transferred to any other person any such complaints, claims or lawsuits. Executive understands that nothing contained in this Release limits his ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board , the Occupational Safety and Health Administration , the Securities and Exchange Commission or any other federal , state or local governmental agency or commission (the “ Government Agencies ” ) . Executive further understands that this Release does not limit his ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agencies, including providing documents or other information , without notice to Company . This Release does not limit Executive ' s right to receive an award for information provided to any Government Agencies. Executive understands , however , that , except as limited by the immediately preceding sentence , by signing this Release , Executive waives his right to any monetary recovery in connection with Government Agencies proceedings and Executive waives his right to file a claim seeking monetary damages in any court , administrative agency or arbitral tribunal.

3. ADEA/OWBPA Review and Revocation Period . Executive and Compan y acknowledge that Executive has specific rights under the Age Discrimination in Employment Act ( “ ADEA”) and the Older Workers Benefit Protection Act (the “ OWBPA ” ) , which prohibit discrimination on the basis of age. It is Company ' s desire and intent to make certain that Executive fully understands the provisions and effects of this Release , which includes a release of claims under the ADEA and OWBPA. To that end, Executive has been encouraged and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Release. Consistent with the provisions of the ADEA and OWBPA, Company also is providing Executive with twenty one (21) days from the Separation Date in which to consider and accept the terms of this Release by signing below and returning it to Jason Duncan , General Counsel, Albireo Pharma , Inc., 10 Post Office Square, Suite 502 South, Boston, MA 02109. Executive may rescind Executive ' s assent to this Rel e as e if , within sev e n (7) days after Executive signs this Release , Executiv e delivers by hand or send by mail (certified , return receipt and postmarked within such seven - day period) a notice of rescission to Jason Duncan , General Counsel, at the above-referenced address. The eighth (8th ) day following Executive ' s signing of this Release is the effective date of this Release (such date , the “ Supplemental Effective Date ” ) .

4. Acknowledgement . Executive acknowledges and agrees that , but for providing this waiver and release , Executive would not be receiving the Separation Benefit provided to Executive under the terms of the Separation Agreement.

Confirmed And Agreed :



Thomas A. Shea

Dated:

A-2

Exhibit 10.5

Option No . 86

ALBIREO PHARMA, INC.

Non-Qualified Stock Option Grant Notice

I. Name and Address of Participant:	Simon N.R. Harford 50 Malden Street, Apt. 301 Boston , MA 02118

2. Date of Option Grant :	October 10, 2018

3. Maximum Number of Shares for which this Option is exercisable:	37,500 shares of Common Stock

4. Exercise (purchase) price per share:	$27 . 98

5. Option Expiration Date:	October 9, 2028

6. Vesting Start Date:	October 10, 2018

7. Vesting Schedule: This Option shall become exercisable (and the Shares issued upon exercise shall be vested) as follows provided the Participant is an Employee of the Company or of an Affiliate on the applicable vesting date :

This Option vests and becomes exercisable as to 25% of the underlying Shares on October 10 , 2019 and as to the remainder of the underlying Shares in equal installments on the 10th day of 12 consecutive calendar quarters beginning on January 10 , 2020 and ending on October 10, 2022 .

The foregoing rights are cumulative and are subject to the other terms and conditions of this Agreement.

The Company and the Participant acknowledge receipt of this Non-Qualified Stock Option Grant Notice and agree to the terms of the Non-Qualified Stock Option Agreement attached hereto , and the terms of this Option Grant as set forth above.


		ALBIREO PHARMA, INC.

	By:
		Name: Ronald H.W. Cooper
		Title: President and Chief Executive Officer




		Participant:

ALBIREO PHARMA, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

AGREEMENT made as of the date of grant set forth in the Non-Qualified Stock Option Grant Notice (the " Stock Option Grant Notice") by and between Albireo Pharma, Inc . (the “ Company") , a Delaware corporation , and the individual whose name appears on the Stock Option Grant Notice (the "Participant").

WHEREAS , the Company desires to grant to the Participant an Option to purchase shares (the " Shares") of its common stock, $0.01 par value per share ("Common Stock"), as an inducement material to the Participant's entering into employment as Chief Financial Officer of the Company starting October 10, 2018 (the " Start Date"), in accordance with the terms of an employment agreement with the Company dated October 4, 2018; and

WHEREAS, the Company and the Participant each intend that the Option granted herein shall be a non - qualified stock option.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

1. DEFINITIONS .

Unless otherwise specified or unless the context otherwise requires , the following terms , as used in this Agreement, have the following meanings:

Administrator means the Board of Directors, unless it has delegated power to act on its behalf to the Committee , in which case the term A dministrator m ea n s the Committee.

Affiliate means a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company , direct or indirect.

Board of Directors means the Board of Directors of the Company .

Cause means , with respect to the Participant : (a) dishonesty with respect to the Company or any Affiliate , (b) insubordination , substantial malfeasance or non-feasance of duty, (c) unauthorized disclosure of confidential information,

(d) breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company or any Affiliate, and (e) conduct substantially prejudicial to the business of the Company or any Affiliate ; provided , however, that any provision in an agreement between the Participant and the Company or an Affiliate, which contains a conflicting definition of Cause for termination and which is in effect at the time of such termination , shall supersede this definition. The determination of the Administrator as to the existence of Cause will be conclusive on the Participant and the Company .

Code means the United States Internal Revenue Code of 1986, as amended, including any successor statute, regulation and guidance thereto.

Committee means the committee of the Board of Directors to which the Board of Directors has delegated power to act.

Corporate Transaction means the Company is consolidated with or acquired by another entity in a merger, consolidation, or sale of all or substantially all of the Company's assets or the acquisition of all of the outstanding voting stock of the Company in a single transaction or a series of related transactions by a single entity , other than a transaction to merely change the state of incorporation .

Disability or Disabled means permanent and total disability as defined in Section 22(e)(3) of the Code .

Director means any member of the Board of Directors.

Employee means any employee of the Company or of an Affiliate (including, without limitation, an employee who is also serving as an officer or director of the Company or of an Affiliate) .

Exchange Act means the Securities Exchange Act of 1934, as amended.

Fair Market Value of a Share of Common Stock means:

If the Common Stock is listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for the Common Stock , the closing or, if not applicable, the last price of the Common Stock on the composite tape or other comparable reporting system for the trading day on the applicable date and if such applicable date is not a trading day , the last market trading day prior to such date;

If the Common Stock is not traded on a national securities exchange but is traded on the over-the-counter market, if sales prices are not regularly reported for the Common Stock for the trading day referred to in clause (1) , and if bid and asked prices for the Common Stock are regularly reported, the mean between the bid and the asked price for the Common Stock at the close of trading in the over-the-counter market for the trading day on which Common Stock was traded on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date; and

If the Common Stock is neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Administrator, in good faith, shall determine in compliance with applicable laws.

Non-Qualified Option means an option which is not intended to qualify as an incentive stock option under Section 422 of the Code.

Option means a Non-Qualified Option granted as an inducement award under Nasdaq Listing Rule 5635(c)(4) .

Securities Act means the Securities Act of 1933 , as amended.

Survivor means the deceased Participant's legal representatives and/or any person or persons who acquire the Option by will or by the laws of descent and distribution.

2. GRANT OF OPTION .

The Company hereby grants to the Participant the right and option to purchase all or any part of an aggregate of the number of Shares set forth in the Stock Option Grant Notice , on the terms and conditions and subject to all the limitations set forth herein and under United States securities and tax laws.

3. EXERCISE PRICE .

The exercise price of the Shares covered by the Option shall be the amount per Share set forth in the Stock Option Grant Notice , subject to adjustment, as provided in Section 10 , in the event of a stock split , reverse stock split or other events affecting the holders of Shares after the date hereof (the "Exercise Price"). Payment shall be made in accordance with Section 6 of this Agreement.

4. EXERCISABILITY OF OPTION .

Subject to the terms and conditions set forth in this Agreement, the Option granted hereby shall become vested and exercisable as set forth in the Stock Option Grant Notice and is subject to the other terms and conditions of this Agreement.

5. TERM OF OPTION .

This Option shall terminate on the Option Expiration Date as specified in the Stock Option Grant Notice but shall be subject to earlier termination as provided herein .

If the Participant ceases to be an Employee of the Company or of an Affiliate for any reason other than the death or Disability of the Participant, or termination of the Participant for Cause (the "Termination Date") , the Option to the extent then vested and exercisable pursuant to Section 4 hereof as of the Termination Date, and not previously terminated in accordance with this Agreement, may be exercised within three months after the Termination Date, or on or prior to the Option Expiration Date as specified in the Stock Option Grant Notice, whichever is earlier, but may not be exercised thereafter except as set forth below . In such event , the unvested portion of the Option shall not be exercisable and shall expire and be cancelled on the Termination Date .

Notwithstanding the foregoing, in the event of the Participant's Disability or death within three months after the Termination Date, the Participant or the Participant's Survivors may exercise the Option within one year after the Termination Date , but in no event after the Option Expiration Date as specified in the Stock Option Grant Notice.

In the event the Participant's service is terminated by the Company or an Affiliate for Cause , the Participant's right to exercise any unexercised portion of this Option even if vested shall cease immediately as of the time the Participant is notified his or her service is terminated for Cause, and this Option shall thereupon terminate . Notwithstanding anything herein to the contrary , if subsequent to the Participant's termination, but prior to the exercise of the Option, the Administrator determines that, either prior or subsequent to the Participant's termination , the Participant engaged in conduct which would constitute Cause , then the Participant shall immediately cease to have any right to exercise the Option and this Option shall thereupon terminate.

In the event of the Disability of the Participant, the Option shall be exercisable within one year after the Participant's termination of service due to Disability or, if earlier, on or prior to the Option Expiration Date as specified in the Stock Option Grant Notice . In such event , the Option shall be exercisable :

(a) to the extent that the Option has become exercisable but has not been exercised as of the date of the Participant's termination of service due to Disability; and

(b) in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of the Participant's termination of service due to Disability of any additional vesting rights that would have accrued on the next vesting date had the Participant not become Disabled . The proration shall be based upon the number of days accrued in the current vesting period prior to the date of the Participant's termination of service due to Disability.

In the event of the death of the Participant while an Employee of the Company or of an Affiliate, the Option shall be exercisable by the Participant's Survivors within one year after the date of death of the Participant or , if earlier , on or prior to the Option Expiration Date as specified in the Stock Option Grant Notice. In such event , the Option shall be exercisable:

(x) to the extent that the Option has become exercisable but has not been exercised as of the date of death ; and

(y) in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any additional vesting rights that would have accrued on the next vesting date had the Participant not died . The proration shall be based upon the number of days accrued in the current vesting period prior to the Participant's date of death.

6. l\.1ETHOD OF EXERCISING OPTION.

Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company or its designee , in substantially the form of Exhibit A attached

hereto (or in such other form acceptable to the Company, which may include electronic notice). Such notice shall state the number of Shares with respect to which the Option is being exercised and shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Company). Payment of the Exercise Price for such Shares shall be made (a) in United States dollars in cash or by check ; or (b) at the discretion of the Administrator , through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment) having a Fair Market Value equal as of the date of the exercise to the aggregate cash exercise price for the number of Shares as to which the Option is being exercised; or (c) at the discretion of the Administrator, by having the Company retain from the Shares otherwise issuable upon exercise of the Option, a number of Shares having a Fair Market Value equal as of the date of exercise to the aggregate exercise price for the number of Shares as to which the Option is being exercised ; or (d) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm , and approved by the Administrator ; or (e) at the discretion of the Administrator , by any combination of (a) , (b) , (c) and (d) above ; or (f) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine . The Company shall deliver such Shares as soon as practicable after the notice shall be received , provided, however, that the Company may delay issuance of such Shares until completion of any action or obtaining of any consent , which the Company deems necessary under any applicable law (including , without limitation, state securities or " blue sky" laws). The Shares as to which the Option shall have been so exercised shall be registered in the Company's share register in the name of the person so exercising the Option (or, if the Option shall be exercised by the Participant and if the Participant shall so request in the notice exercising the Option , shall be registered in the Company's share register in the name of the Participant and another person jointly , with right of survivorship) and shall be delivered as provided above to or upon the written order of the person exercising the Option . In the event the Option shall be exercised, pursuant to Section 5 hereof, by any person other than the Participant, such notice shall be accompanied by appropriate proof of the right of such person to exercise the Option . All Shares that shall b e purcha se d upon the ex ercise of the Option as provided herein shall be fully paid and nonassessable.

7. PARTIAL EXERCISE.

Exercise of this Option to the extent above stated may be made in part at any time and from time to time within the above limits, except that no fractional share shall be issued pursuant to this Option .

8. NON-ASSIGN ABILITY.

The Option shall not be transferable by the Participant otherwise than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act or the rules thereunder and the Participant , with the approval of the Administrator , may transfer the Option for no consideration to or for the benefit of the Participant's Immediate Family (including, without limitation, to a trust for the benefit of the Participant's Immediate Family or to a partnership or limited liability company for one or more members of the Participant's Immediate Family), subject to such limits as the Administrator may establish , and the transferee shall remain subject to all the

terms and conditions applicable to the Option prior to such transfer and each such transferee shall so acknowledge in writing as a condition precedent to the effectiveness of such transfer. The term "Immediate Family" shall mean the Participant's spouse, former spouse, parents, children, stepchildren, adoptive relationships, sisters, brothers, nieces, nephews and grandchildren (and, for this purpose, shall also include the Participant). Except as provided above in this paragraph, the Option shall be exercisable, during the Participant's lifetime, only by the Participant (or, in the event of legal incapacity or incompetency, by the Participant's guardian or representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 8, or the levy of any attachment or similar process upon the Option shall be null and void.

9. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.

The Participant shall have no rights as a stockholder with respect to Shares subject to this Agreement until registration of the Shares in the Company's share register in the name of the Participant. Except as is expressly provided in Section 10 of this Agreement with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to the date of such registration.

10. ADJUSTMENTS.

Upon the occurrence of any of the following events, the Participant's rights with respect to the Option shall be adjusted as hereinafter provided.

(a) Stock Dividends and Stock Splits . If (i) the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, or (ii) additional shares or new or different shares or other securities of the Company or other non cash assets are distributed with respect to such shares of Common Stock, the Option and the number of Shares deliverable thereunder shall be increased or decreased proportionately, and appropriate adjustments shall be made, including in the exercise price per share, to reflect such events.

(b) Corporate Transactions. In the case of a Corporate Transaction, the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board"), shall, as to the unexercised portion of the Option, either (i) make appropriate provision for the continuation of the Option by substituting on an equitable basis for the Shares then subject to the Option either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity; or (ii) upon written notice to the Participant, provide that the Option must be exercised (either (A) to the extent then exercisable or (B) at the discretion of the Administrator, the Option being made partially or fully exercisable for purposes of this Subclause), within a specified number of days of the date of such notice, at the end of which period the Option shall terminate); or (iii) terminate the Option in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to the holder of the

number of shares of Common Stock into which the Option would have been exercisable (either (A) to the extent then exercisable or , (B) at the discretion of the Administrator , any such Options being made partially or fully exercisable for purposes of this Subclause) less the aggregate exercise price thereof For purposes of determining the payments to be made pursuant to Subclause (iii) above , in the case of a Corporate Transaction the consideration for which , in whole or in part , is other than cash, the consideration other than cash shall be valued at the fair value thereof as determined in good faith by the Board of Directors .

(c) Recapitalization or Reorganization . In the event of a recapitalization or reorganization of the Company other than a Corporate Transaction pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, the Participant upon exercising the Option after the recapitalization or reorganization shall be entitled to receive for the price paid upon such exercise or acceptance if any , the number of replacement securities which would have been received if the Option had been exercised prior to such recapitalization or reorganization.

(d) Modification of Options . Notwithstanding the foregoing, any adjustments made pursuant to Subsection (a) , (b) or (c) above shall be made only after the Administrator determines whether such adjustments would cause any adverse tax consequences , including, but not limited to, pursuant to Section 409A of the Code. If the Administrator determines that such adjustments would constitute a modification of the Option or other adverse tax consequence to the Participant, it may in its discretion refrain from making such adjustments , unless the Participant specifically agrees in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such “modification " on his or her income tax treatment with respect to the Option.

(e) Dissolution or Liquidation of the Company . Upon the dissolution or liquidation of the Company , the Option will terminate and become null and void ; provided , however , that if the rights of the Participant or the Participant's Survivors have not otherwise terminated and expired , the Participant or the Participant's Survivors will have the right immediately prior to such dissolution or liquidation to exercise the Option to the extent that the Option is exercisable as of the date immediately prior to such dissolution or liquidation.

11. TAXES.

The Participant acknowledges and agrees that (i) any income or other taxes due from the Participant with respect to this Option or the Shares issuable pursuant to this Option shall be the Participant's responsibility ; (ii) the Participant was free to use professional advisors of his or her choice in connection with this Agreement, has received advice from his or her professional advisors in connection with this Agreement, understands its meaning and import, and is entering into this Agreement freely and without coercion or duress; (iii) the Participant has not received and is not relying upon any advice, representations or assurances made by or on behalf of the Company or any Affiliate or any employee of or counsel to the Company or any Affiliate regarding any tax or other effects or implications of the Option, the Shares or other matters contemplated by this Agreement; and (iv) neither the Administrator , the Company , its Affiliates, nor any of its officers or directors, shall be held liable for any applicable costs , taxes, or penalties associated

with the Option if, in fact, the Internal Revenue Service were to determine that the Option constitutes deferred compensation under Section 409A of the Code.

The Participant agrees that the Company may withhold from the Participant's remuneration, if any , the minimum statutory amount of federal , state and local withholding taxes attributable to such amount that is considered compensation includable in such person's gross income. At the Company's discretion, the amount required to be withheld may be withheld in cash from such remuneration , or in kind from the Shares otherwise deliverable to the Participant on exercise of the Option . The Participant further agrees that, if the Company does not withhold an amount from the Participant's remuneration sufficient to satisfy the Company's income tax withholding obligation, the Participant will reimburse the Company on demand, in cash, for the amount under - withheld .

12. PURCHASE FOR INVESTMENT.

Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue the Shares covered by such exercise unless the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act and until the following conditions have been fulfilled:

(a) The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon any certificate(s) evidencing the Shar e s issued pursuant to such exerci s e :

"The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws;" and

(b) If the Company so requires, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Securities Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws) .

13. RESTRICTIONS ON TRANSFER OF SHARES.

13.1 The Participant agrees that in the event the Company proposes to offer for sale to the public any of its equity securities and such Participant is requested by the Company and any underwriter engaged by the Company in connection with such offering to sign an agreement restricting the sale or other transfer of Shares, then it will promptly sign such agreement and will not transfer, whether in privately negotiated transactions or to the public in open market transactions or otherwise, any Shares or other securities of the Company held by the Participant during such period as is determined by the Company and the underwriters, not to exceed 180 days following the closing of the offering, plus such additional period of time as may be required to comply with FINRA rules or similar rules thereto promulgated by another regulatory authority (such period, the "Lock - Up Period") . Such agreement shall be in writing and in form and substance reasonably satisfactory to the Company and such underwriter and pursuant to customary and prevailing terms and conditions. Whether or not the Participant has signed such an agreement, the Company may impose stop-transfer instructions with respect to the Shares or other securities of the Company subject to the foregoing restrictions until the end of the Lock-Up Period.

13.2 The Participant acknowledges and agrees that neither the Company, its stockholders nor its directors and officers, has any duty or obligation to disclose to the Participant any material information regarding the business of the Company or affecting the value of the Shares before, at the time of, or following a termination of the service of the Participant by the Company, including, without limitation, any information concerning plans for the Company to make a public offering of its securities or to be acquired by or merged with or into another firm or entity.

14. NO OBLIGATION TO MAINTAIN RELATIONSHIP .

The Participant acknowledges that : (i) the Company is not by this Agreement obligated to continue the Participant as an employee of the Company or an Affiliate; (ii) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the number of shares subject to each option, the option price, and the time or times when each option shall be exercisable, will be at the sole discretion of the Company; (iv) the value of the Option is an extraordinary item of compensation which is outside the scope of the Participant's employment or consulting contract, if any; and (v) the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

15. NOTICES.

Any notices required or permitted by the terms of this Agreement shall be given by recognized courier service, facsimile, registered or certified mail, return receipt requested, addressed as follows:

Ifto the Company:

Albireo Pharma, Inc .

10 Post Office Square, Suite 502 South

Boston, MA 02109

Attention: General Counsel

If to the Participant at the address set forth on the Stock Option Grant Notice

or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given upon the earlier of receipt, one business day following delivery to a recognized courier service or three business days following mailing by registered or certified mail.

16. GOVERNING LAW.

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware , without giving effect to the conflict of law principles thereof For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive jurisdiction in Massachusetts and agree that such litigation shall be conducted in the state courts of Massachusetts or the federal courts of the United States for the District of Massachusetts.

17. BENEFIT OF AGREEMENT.

Subject to the provisions hereof, this Agreement shall be for the benefit of and shall be binding upon the heirs , executors, administrators , successors and assigns of the parties hereto .

18. ENTIRE AGREEMENT.

Thi s Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof (with the exception of acceleration of vesting provisions contained in any other agreement with the Company) . No statement , representation , warranty, covenant or agreement not expressly set forth in this Agreement shall affect or be used to interpret , change or restrict the e x pres s terms and provisions of this Agreement.

19. MODIFICATIONS AND AMENDMENTS.

The terms and provisions of this Agreement may be modified or amended by the Administrator; provided, however , the Administrator not take any action that is considered a direct or indirect “ repricing" for purposes of the stockholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the Shares are listed , including any other action that is treated as a repricing under generally accepted accounting principles . Any modification or amendment of this Agreement shall not , without the consent of the Participant , adversely affect the Participant's rights under this Agreement , unless such amendment is required by applicable law .

20. WAIVERS AND CONSENTS.

The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions . No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement , whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given and shall not constitute a continuing waiver or consent.

21. DATAPRIVACY.

By entering into this Agreement, the Participant: (i) authorizes the Company and each Affiliate , and any agent of the Company or any Affiliate facilitating the grant of options under this Agreement, to disclose to the Company or any of its Affiliates such information and data as the Company or any such Affiliate shall request in order to facilitate the grant of options; and (ii) authorizes the Company and each Affiliate to store and transmit such information in electronic form for the purposes set forth in this Agreement.

Exhibit A

NOTICE OF EXERCISE OF STOCK OPTION

[Form for Shares registered in the United States]

To: Albireo Pharma, Inc .

IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time as the Company has filed a Registration Statement with the Securities and Exchange Commission under which the issuance of the Shares for which this exercise is being made is registered and such Registration Statement remains effective.

Ladies and Gentlemen :

I hereby exercise my Stock Option to purchase shares (the "Shares") of the common stock, $0.01 par value, of Albireo Pharma, Inc. (the "Company”) , at the exercise price of $ per share, pursuant to and subject to the terms of that Stock Option Grant Notice dated ------' 201_.

I understand the nature of the investment I am making and the financial risks thereof. I am aware that it is my responsibility to have consulted with competent tax and legal advisors about the relevant national, state and local income tax and securities laws affecting the exercise of the Option and the purchase and subsequent sale of the Shares .

I am paying the option exercise price for the Shares as follows:



Please issue the Shares (check one):

D to me; or

D to me and as joint tenants with right of survivorship,

at the following address:

Exhibit A-1

My mailing address for stockholder communications, if different from the address listed above, is :






	Very truly yours,


	Participant (signature)


	Print Name


	Date

Exhibit A-2

Exhibit 10.6

Restricted Stock Unit No. 87

ALBIREO PHARMA, INC.

Restricted Stock Unit Award Grant Notice

1. Name and Address of Participant:	Simon N.R. Harford
	50 Malden Street, Apt. 301
	Boston, MA 02118

2. Date of Grant of Restricted Stock Unit Award:	October 10, 2018

3. Maximum Number of Shares underlying Restricted Stock Unit Award:	5,000 shares of Common Stock

4. Vesting of Award: This Restricted Stock Unit Award shall vest as follows provided the Participant is an Employee of the Company or of an Affiliate on the applicable vesting: date:

This Restricted Stock Unit Award vests and becomes exercisable as to 25% of the underlying Shares on October 10, 2019 and as to the remainder of the underlying Shares in equal installments on the 10th day of 12 consecutive calendar quarters beginning on January 10, 2020 and ending on October 10, 2022 .

The Company and the Participant acknowledge receipt of this Restricted Stock Unit Award Grant Notice and agree to the terms of the Restricted Stock Unit Agreement attached hereto and incorporated by reference herein and the terms of this Restricted Stock Unit Award as set forth above.

	ALBIREO PHARMA, INC.


	By:
		Name: Ronald H.W. Cooper
		Title: President and Chief Executive Officer



	Participant:

ALBIREO PHARMA, INC.

RESTRICTED STOCK UNIT AGREEMENT -

INCORPORA TED TERMS AND CONDITIONS

AGREEMENT made as of the date of grant set forth in the Restricted Stock Unit Award Grant Notice (the "Grant Detail") between Albireo Pharma, Inc. (the "Company"), a Delaware corporation, and the individual whose name appears on the Grant Detail (the "Participant") .

WHEREAS, the Company desires to grant to the Participant restricted stock units ("RSUs") related to the Company's common stock, $0.01 par value per share ("Common Stock"), as an inducement material to the Participant's entering into employment as Chief Financial Officer of the Company, starting October 10, 2018 (the "Start Date"), in accordance with the terms of an employment agreement with the Company dated October 4, 2018;

NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Definitions.

Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Agreement, have the following meanings:

Administrator means the Board of Directors, unless it has delegated power to act on its behalf to the Committee, in which case the term Administrator means the Committee.

Affiliate means a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, direct or indirect.

Board of Directors means the Board of Directors of the Company.

Code means the United States Internal Revenue Code of 1986, as amended, including any successor statute, regulation and guidance thereto.

Committee means the committee of the Board of Directors to which the Board of Directors has delegated power to act.

Corporate Transaction means the Company is consolidated with or acquired by another entity in a merger, consolidation, or sale of all or substantially all of the Company's assets or the acquisition of all of the outstanding voting stock of the Company in a single transaction or a series of related transactions by a single entity, other than a transaction to merely change the state of incorporation.

Director means any member of the Board of Directors.

Disability or Disabled means permanent and total disability as defined in Section 22(e)(3) of the Code.

Employee means any employee of the Company or of an Affiliate (including, without limitation, an employee who is also serving as an officer or director of the Company or of an Affiliate).

Exchange Act means the Securities Exchange Act of 1934 , as amended.

Securities Act means the Securities Act of 1933, as amended.

2. Grant of Award . The Company has granted to the Participant an award for the number of restricted stock units referenced in the Grant Detail (the “Award") . Each RSU referenced in the Grant Detail, represents a contingent entitlement of the Participant to receive one share of the Company's Common Stock (the "Shares") on the terms and conditions and subject to all the limitations set forth herein and under United States securities and tax laws.

3. Vesting of Award.

(a) Subject to the terms and conditions set forth in this Agreement, the Award granted hereby shall vest as set forth in the Grant Detail and is subject to the other terms and conditions of this Agreement.

(b) On each vesting date set forth in the Grant Detail, the Participant shall be entitled to receive such number of Shares equivalent to the number of RSUs as set forth in the Grant Detail provided that the Participant is employed by the Company or an Affiliate on the applicable vesting date. Such Shares shall thereafter be delivered by the Company to the Participant within five days of the applicable vesting date and in accordance with this Agreement.

(c) Except as otherwise set forth in this Agreement, if the Participant ceases to be employed for any reason by the Company or by an Affiliate (the "Termination") prior to a vesting date set forth in the Grant Detail, then as of the date on which the Participant's employment terminates, all unvested RSUs shall immediately be forfeited to the Company and this Agreement shall terminate and be of no further force or effect.

(d) In the event that the Participant ceases to be employed by the Company or by an Affiliate due to Disability, the Award shall vest to the extent of a pro rata portion through the date of the Participant's termination of employment due to Disability of any Shares that would have vested on the next vesting date had the Participant not become Disabled. The proration shall be based upon the number of days accrued prior to the Participant's date of Disability. The Administrator shall make the determination both as to whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination). If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company.

(e) In the event of the death of the Participant while the Participant is employed by the Company or by an Affiliate, the Award shall vest to the extent of a pro rata portion through the date of the Participant's death of any Shares that would have vested on the next vesting date had the Participant not died. The proration shall be based upon the number of days accrued prior to the Participant's date of death.

4. Prohibitions on Transfer and Sale . This Award (including any additional RSUs received by the Participant as a result of stock dividends, stock splits or any other similar transaction affecting the Company ' s securities without receipt of consideration) shall not be transferable by the Participant otherwise than (i) by will or by the laws of descent and distribution, or (ii) pursuant to a qualified domestic relations order as defined by the Internal Revenue Code or Title I of the Employee Retirement Income Security Act or the rules thereunder. Except as provided in the previous sentence, the shares of Common Stock to be issued pursuant to this Agreement shall be issued , during the Participant's lifetime, only to the Participant (or , in the event of legal incapacity or in competence , to the Participant's guardian or representative) . This Award shall not be assigned , pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process . Any attempted transfer, assignment , pledge , hypothecation or other disposition of this Award or of any rights granted hereunder contrary to the provisions of this Section 4, or the levy of any attachment or similar process upon this Award shall be null and void .

5. Adjustments. Upon the occurrence of any of the following events , the Participant's rights with respect to the Award shall be adjusted as hereinafter provided .

(ii) additional shares or new or different shares or other securities of the Company or other non- cash assets are distributed with respect to such shares of Common Stock, the Award and the number of Shares deliverable thereunder shall be increased or decreased proportionately, and appropriate adjustments shall be made to reflect such events.

(b) Corporate Transactions. In the case of a Corporate Transaction, the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board ” ) shall make appropriate provision for the continuation of the Award on the same terms and conditions by substituting on an equitable basis for the unvested Shares then subject to the Award either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity . In lieu of the foregoing, in connection with any Corporate Transaction, the Administrator may provide that, upon consummation of the Corporate Transaction, (i) the Award shall be terminated in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to a holder of the number of shares of Common Stock comprising the unvested Shares subject to the Award , or (ii) the Award shall be terminated .

(c) Recapitalization or Reorganization . In the event of a recapitalization or reorganization of the Company other than a Corporate Transaction pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock , the Participant upon each vesting of the Award after the recapitalization or reorganization shall be entitled to receive the number of replacement securities which would have been received if the Award had so vested prior to such recapitalization or reorganization.

(d) Dissolution or Liquidation of the Company. Upon the dissolution or liquidation of the Company, the Award, to the extent then unvested, will terminate and become null and void.

6. Securities Law Compliance. Unless the offering and sale of the Shares to be issued upon the particular vesting of the Award shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue the Shares covered by such vesting unless the Company has determined that such vesting and issuance would be exempt from the registration requirements of the Securities Act and until the following conditions have been fulfilled:

(a) The person(s) who for whom the Award vests shall warrant to the Company , at the time of such vesting, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to , or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon any certificate(s) evidencing the Shares issued pursuant to such vesting :

"The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person , includin g a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws;" and

(b) If the Company so requires, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular vesting in compliance with the Securities Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws).

7. Rights as a Stockholder. The Participant shall have no right as a stockholder, including voting and dividend rights, with respect to the RSUs subject to this Agreement.

8. Fractional Shares . No fractional shares shall be issued under this Agreement.

9. Tax Liability of the Participant and Payment of Taxes. The Participant acknowledges and agrees that any income or other taxes due from the Participant with respect to this Award or the shares of Common Stock to be issued pursuant to this Agreement or otherwise sold shall be the Participant's responsibility . Without limiting the foregoing, the Participant agrees that if under applicable law the Participant will owe taxes at each vesting date on the portion of the Award then vested the Company shall be entitled to immediate payment from the Participant of the amount of any tax or other amounts required to be withheld by the Company by applicable law or regulation. Any taxes or other amounts due shall be paid, at the option of the Administrator as follows:

(a) through reducing the number of shares of Common Stock entitled to be issued to the Participant on the applicable vesting date in an amount equal to the statutory minimum of the Participant's total tax and other withholding obligations due and payable by the Company . Fractional shares will not be retained to satisfy any portion of the Company's withholding obligation . Accordingly, the Participant agrees that in the event that the amount of withholding required would result in a fraction of a share being owed, that amount will be satisfied by withholding the fractional amount from the Participant's paycheck;

(b) requiring the Participant to deposit with the Company an amount of cash equal to the amount determined by the Company to be required to be withheld with respect to the statutory minimum amount of the Participant's total tax and other withholding obligations due and payable by the Company or otherwise withholding from the Participant's paycheck an amount equal to such amounts due and payable by the Company; or

(c) if the Company believes that the sale of shares can be made in compliance with applicable securities laws, authorizing, at a time when the Participant is not in possession of material nonpublic information, the sale by the Participant on the applicable vesting date of such number of shares of Common Stock as the Company instructs a registered broker to sell to satisfy the Company's withholding obligation, after deduction of the broker's commission, and the broker shall be required to remit to the Company the cash necessary in order for the Company to satisfy its withholding obligation. To the extent the proceeds of such sale exceed the Company's withholding obligation the Company agrees to pay such excess cash to the Participant as soon as practicable. In addition, if such sale is not sufficient to pay the Company's withholding obligation the Participant agrees to pay to the Company as soon as practicable, including through additional payroll withholding, the amount of any withholding obligation that is not satisfied by the sale of shares of Common Stock. The Participant agrees to hold the Company and the broker harmless from all costs, damages or expenses relating to any such sale. The Participant acknowledges that the Company and the broker are under no obligation to arrange for such sale at any particular price. In connection with such sale of shares of Common Stock, the Participant shall execute any such documents requested by the broker in order to effectuate the sale of shares of Common Stock and payment of the withholding obligation to the Company. Sales pursuant to this paragraph may be structured, to the extent practicable, with the intention to comply with Section 10b5-l(c)(l(i)(B) under the Exchange Act.

The Company shall not deliver any shares of Common Stock to the Participant until it is satisfied that all required withholdings have been made.

10. Participant Acknowledgements and Authorizations .

The Participant acknowledges the following:

(a) The Company is not by this Award obligated to continue the Participant as an employee of the Company or an Affiliate.

(b) The grant of this Award is considered a one-time benefit and does not create a contractual or other right to receive any other award, benefits in lieu of awards or any other benefits in the future .

(c) The value of this Award is an extraordinary item of compensation outside of the scope of the Participant's employment or consulting contract , if any . As such the Award is not part of normal or expected compensation for purposes of calculating any severance , resignation, redundancy , end of service payments, bonuses , long-service awards , pension or retirement benefits or similar payments. The future value of the shares of Common Stock is unknown and cannot be predicted with certainty.

11. Notices. Any notices to the Company required or permitted by the terms of this Agreement shall be given by recognized courier service , facsimile, registered or certified mail, return receipt requested , addressed as follows:

Albireo Pharma, Inc.

10 Post Office Square , Suite 502 South

Boston , MA 02109

Attention: General Counsel

12. Assignment and Successors.

This Agreement is personal to the Participant and without the prior written consent of the Company shall not be assignable by the Participant otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Participant's legal representatives.

13. BENEFIT OF AGREEMENT.

Subject to the provisions hereof, this Agreement shall be for the benefit of and shall be binding upon the heirs , executors, administrators , successors and assigns of the parties hereto.

14. Governing Law. This Agreement shall be construed and enforced in accordance with the law of the State of Delaware, without giving effect to the conflict of law principles thereof.

15. Severability . If any prov1s1on of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction , then such provision or provisions shall be modified to the extent necessary to make such provision valid and enforceable, and to the extent that this is impossible, then such provision shall be deemed to be excised from this Agreement, and the validity, legality and enforceability of the rest of this Agreement shall not be affected thereby.

16. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof (with the exception of acceleration of vesting provisions contained in any other agreement with the Company). No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement shall affect or be used to interpret, change or restrict the express terms and provisions of this Agreement.

17. Modifications and Amendments . The terms and provisions of this Agreement may be modified or amended by the Administrator; provided , however , any modification or amendment of this Agreement shall not, without the consent of the Participant, adversely affect the Participant's rights under this Agreement , unless such amendment is required by applicable law.

18. Waivers and Consents . The terms and prov1s1ons of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given and shall not constitute a continuing waiver or consent.

19. Data Privacy . By entering into this Agreement, the Participant: (i) authorizes the Company and each Affiliate, and any agent of the Company or any Affiliate facilitating the grant of RSUs under this Agreement, to disclose to the Company or any of its Affiliates such information and data as the Company or any such Affiliate shall request in order to facilitate the grant of RSUs; and (ii) authorizes the Company and each Affiliate to store and transmit such information in electronic form for the purposes set forth in this Agreement.

20. Section 409A. The Award evidenced by this Agreement is intended to be exempt from the nonqualified deferred compensation rules of Section 409A of the Code as a "short term deferral" (as that term is used in the final regulations and other guidance issued under Section 409A of the Code, including Treasury Regulation Section 1.409A-l(b)(4)(i)), and shall be construed accordingly.

Exhibit 31.1

CERTIFICATIONS UNDER SECTION 302

I, Ronald H.W. Cooper, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Albireo Pharma, Inc.;

2. 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;

3. 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;

4. 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:

a) 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;

b) 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;

c) 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

d) 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

5. 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):

a) 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

b) 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.

Date: November 8, 2018

/s/ Ronald H.W. Cooper

Ronald H.W. Cooper

President and Chief Executive Officer

(principal executive officer)

Exhibit 31.2

CERTIFICATIONS UNDER SECTION 302

I, Simon N.R. Harford, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Albireo Pharma, Inc.;

b) 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.

Date: November 8, 2018

/s/ Simon Harford
Simon N.R. Harford
Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)

Exhibit 32.1

CERTIFICATIONS UNDER SECTION 906

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Albireo Pharma, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report for the quarter ended September 30, 2018 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 8, 2018		/s/ Ronald H.W. Cooper
		Ronald H.W. Cooper
		President and Chief Executive Officer
		(principal executive officer)

Dated: November 8, 2018		/s/ Simon Harford
		Simon N.R. Harford
		Chief Financial Officer and Treasurer
		(principal financial officer and principal accounting officer)