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•	our expectations regarding commercialization of TYMLOS® in the U.S., including our market access coverage expectations, and our ability to successfully commercialize TYMLOS in the U.S.;

•	the therapeutic benefits and effectiveness of TYMLOS and our investigational product candidates and the potential indications and market opportunities therefor;

•	our ability to obtain U.S. and foreign regulatory approval for our product candidates, including supplemental regulatory approvals for TYMLOS, and the timing thereof;

•	our ability to compete with other companies that are or may be developing or selling products that are competitive with TYMLOS or our investigational product candidates;

•	anticipated trends and challenges in the market in which TYMLOS will compete and in other potential markets in which we may compete;

•	our expectations regarding the timing of our regulatory submissions;

•	our expectations for our Phase 3 studies of elacestrant and abaloparatide transdermal patch (abaloparatide-patch) or our other clinical trials, including projected costs, study designs or the timing for initiation, recruitment, completion, or reporting top-line data;

•	our plans with respect to collaborations and licenses related to the development, manufacture or sale of TYMLOS and our investigational product candidates, including our plans to explore all strategic options for our oncology programs, including elacestrant (RAD1901) and RAD140;

•	our plans with respect to expanding our product portfolio;

•	the progress of, timing of and amount of expenses associated with our research, development and commercialization activities;

•	the safety profile and related adverse events of TYMLOS and our investigational product candidates;

•	the ability of our investigational product candidates to meet existing or future regulatory standards;

•	our expectations regarding federal, state and foreign regulatory requirements;

•	the success of our clinical studies for our investigational product candidates;

•	our expectations as to future financial performance, expense levels, future payment obligations and liquidity sources;

•	our ability to attract, motivate, and retain key personnel; and

•	other factors discussed elsewhere in this report.

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•	preclinical laboratory tests, animal studies, and formulation studies, all performed in accordance with the FDA’s Good Laboratory Practice (“GLP”) regulations;

•	submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin and for which progress reports must be submitted annually to the FDA;

•	approval by an independent institutional review board (“IRB”) or Ethics Committee at each clinical trial site before each trial may be initiated;

•	adequate and well-controlled human clinical trials, conducted in accordance with applicable IND regulations, Good Clinical Practices (“GCP”), and other clinical trial related regulations, to establish the safety and efficacy of the drug for each proposed indication to FDA’s satisfaction;

•	submission to the FDA of an NDA and payment of user fees for FDA review of the NDA (unless a fee waiver applies);

•	satisfactory completion of an FDA pre-approval inspection of one or more clinical trial site(s) at which the drug was studied in a clinical trial(s) and/or of us as a clinical trial sponsor to assess compliance with GCP regulations;

•	satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current Good Manufacturing Practices (“cGMPs”) regulations;

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•	agreement with FDA on the final labeling for the product and the design and implementation of any required Risk Evaluation and Mitigation Strategy (“REMS”); and

•	FDA review and approval of the NDA, including satisfactory completion of an FDA advisory committee review, if applicable, based on a determination that the drug is safe and effective for the proposed indication(s).

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Decentralized procedure.  Where a medicinal product has not been authorized anywhere in the EEA and the product does not fall within the mandatory centralized procedure, an applicant may request a Member State to act as the Reference Member State to lead the assessment of the marketing authorization for it to be considered by the selected number of Member States which are concerned by the procedure. A positive decision adopted during the decentralized procedure will result in national marketing authorizations being granted by the Reference and Concerned Member States. Concerned Member States may refuse to approve the assessment made by the Reference Member State only on the basis of a potential serious risk to public health. In these circumstances, the

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•	Mutual recognition procedure.  Where the medicinal product has been authorized in an EU Member State, the applicant can request the Member State to act as the Reference Member State for the national marketing authorization to be recognized progressively in the other Concerned Member States.

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•	continue to maintain and build our commercial infrastructure, including adding internal systems and hiring additional personnel that may be required for our existing or any future product candidates, including product candidates that we acquire from other companies;

•	continue to commercialize TYMLOS or any product candidates, if approved;

•	continue to undertake preclinical development and clinical trials for product candidates; and

•	seek regulatory approvals for product candidates.

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•	conducting sales and marketing activities for products if and when approved;

•	continuing to undertake preclinical development and clinical trials;

•	participating in regulatory approval processes; and

•	formulating and manufacturing products.

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•	the acceptance of TYMLOS by patients and the medical community and the availability, perceived advantages and relative cost, safety and efficacy of alternative and competing treatments;

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•	the cost-effectiveness of TYMLOS, availability and level of coverage and reimbursement by third-party payors, including state and federal governments, pharmacy benefit managers and health insurance plans, the willingness and ability of patients to pay for TYMLOS, and the commensurate discounts, price concessions or rebates required to secure coverage and reimbursement by third-party payors;

•	the effectiveness of our marketing, sales, and distribution strategy and efforts and the degree to which the approved labeling supports promotional initiatives for commercial success;

•	the occurrence of any side effects, adverse reactions or misuse, or any unfavorable publicity in these areas;

•	the ability of our third-party manufacturer(s) to manufacture commercial supplies of TYMLOS at acceptable costs, to remain in good standing with regulatory agencies, and to develop, validate and maintain commercially viable manufacturing processes that are, to the extent required, compliant with current good manufacturing practice regulations;

•	our ability to remain compliant with laws and regulations that apply to us and our commercial activities;

•	our ability to comply with changes in legislation or regulations in state or federal government programs that increase manufacturer financial obligations;

•	our ability to obtain marketing approvals from foreign regulatory authorities, where and as applicable;

•	FDA-mandated package inserts or labeling requirements;

•	the actual market size for TYMLOS, which may be different than expected;

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the sufficiency of our drug supply to meet commercial and clinical demands which could be negatively impacted if our projections regarding the potential number of patients are inaccurate, we are subject to unanticipated regulatory requirements, our current drug supply is destroyed or negatively impacted at our manufacturing sites, storage sites or in transit, or any significant portion of our TYMLOS supply expires before we are able to sell it; and

•	our ability to maintain, enforce and defend third-party challenges to our intellectual property rights in and to TYMLOS.

•	we may not be able to demonstrate that the product candidate is safe and effective to the satisfaction of the FDA or foreign regulatory authorities;

•	the results of our clinical studies may not meet the level of statistical or clinical significance required for marketing approval;

•	the FDA or foreign regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical studies;

•	any clinical research organizations, or CROs, that we have retained or may in the future retain, to conduct clinical studies may not perform sufficiently and may have taken or may take actions, or may have failed to take or may fail to take actions, outside of our control that materially adversely impact our clinical studies;

•	the FDA or foreign regulatory authorities may not accept data generated at our clinical trial sites;

•	the FDA or foreign regulatory authorities may not find the data from preclinical studies and clinical studies sufficient to demonstrate that the product candidate’s clinical and other benefits outweigh its safety risks;

•	the FDA or foreign regulatory authorities may disagree with our interpretation of data from our preclinical studies and clinical studies or may require that we conduct additional studies;

•	the FDA or foreign regulatory authorities may not agree with our proposed labeling and may require labeling that undermines or otherwise significantly impairs the commercial value of the product if it were to be approved with such labeling;

•	the FDA may require development of a Risk Evaluation and Mitigation Strategy, or REMS, as a condition of approval;

•	if our NDA is reviewed by an advisory committee, the FDA may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may

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•	the FDA or foreign regulatory authorities may identify deficiencies in the manufacturing processes or facilities of our third-party manufacturers.

•	delay commercialization of, and our ability to derive product revenues from, our product candidates;

•	impose costly procedures on us; and

•	diminish any competitive advantages that we may otherwise enjoy.

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•	changes in government regulation, administrative action or changes in FDA or foreign regulatory authority policy or guidance with respect to clinical trials that change the requirements for approval, including the size of any such trials;

•	unforeseen safety issues;

•	determination of dosing issues;

•	unforeseen issues with drug supply, including batch failures and other supply chain issues;

•	lack of effectiveness during clinical trials;

•	actions, or failures to act, by clinical research organizations or other organizations contracted to perform services for a clinical trial(s);

•	slower than expected rates of patient recruitment and enrollment in the overall population or other prespecified populations;

•	higher than expected screen failure rates;

•	failure of sites to comply with requirements for conducting clinical trials;

•	inability to monitor patients adequately during or after treatment; and

•	inability or unwillingness of medical investigators to follow our clinical protocols.

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•	regulatory authorities may withdraw approvals of such product;

•	regulatory authorities may require additional warnings on the label;

•	regulatory authorities may require us to adopt a Risk Evaluation and Mitigation Strategy, or REMS;

•	regulatory authorities may require us to conduct additional post-market studies, including clinical studies, to assess the safety of the product;

•	we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

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

•	our reputation may suffer.

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•	restrictions on such products, manufacturers or manufacturing processes;

•	restrictions on the labeling or marketing of a product;

•	restrictions on product distribution or use;

•	requirements to conduct post-marketing clinical trials;

•	warning or untitled letters;

•	withdrawal of the products from the market;

•	refusal to approve pending applications or supplements to approved applications that we submit;

•	voluntary or mandatory recall of products and related publicity requirements;

•	fines, restitution or disgorgement of profits or revenue;

•	suspension or withdrawal of marketing approvals;

•	refusal to permit the import or export of our products;

•	product seizure; or

•	injunctions or the imposition of civil or criminal penalties.

•	perceptions by members of the healthcare community, including physicians and key opinion leaders, about the safety and effectiveness of our drug;

•	the approved indicated uses for our product;

•	cost-effectiveness of our product relative to competing products;

•	availability and level of coverage and reimbursement by third-party payors, including state and federal governments, pharmacy benefit managers and health insurance plans, the willingness and ability of patients to pay for TYMLOS, and the commensurate discounts, price concessions or rebates required to secure coverage and reimbursement by third-party payors; and

•	effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.

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We may be unable to identify manufacturers on acceptable terms, or at all, because the number of potential manufacturers is limited and the FDA must approve any replacement contractor. This approval would require new testing and compliance inspections. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA approval, if any.

•	Our third-party manufacturers might be unable to formulate and manufacture our drugs or related components in the volume and of the quality required to meet our clinical needs and commercial needs.

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•	Our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products.

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Drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP, and other government regulations and corresponding foreign standards, and failure to comply with cGMP or corresponding foreign standards can result in compliance actions that may limit a manufacturer’s production or prohibit a manufacturer from producing some or all products at a facility and/or importing it into the United States or a foreign country. We do not have control over third-party manufacturers’ compliance with these regulations and standards.

•	If any third-party manufacturer makes improvements in the manufacturing process for our products, any such improvement(s) could be subject to FDA review and prior approval, and we may not own, or may have to share, the intellectual property rights to the innovation.

•	Our third-party manufacturers may be subject to litigation or arbitration with respect to the manufacturing and supply of our products, including claims of intellectual property infringement by third parties.

•	identify, recruit, hire, train, incentivize and retain a significant number of commercial and medical affairs personnel, including a specialty sales force with appropriate technical expertise;

•	train our sales representatives, to deliver clear and compelling messages within the scope of the approved labeling and in accordance with other applicable FDA requirements regarding TYMLOS, or any of our product candidates that may be approved, and to be credible and persuasive in educating physicians on the appropriate situations to consider prescribing as set forth in the approved labeling;

•	ensure our commercial customer-facing team, including sales, market access, and field logistics professionals, effectively build relationships with their respective customers;

•	manage a geographically dispersed national commercial customer-facing organization; and

•	manage our growth and the integration of new personnel.

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•	developing drugs;

•	undertaking preclinical testing and human clinical trials;

•	obtaining FDA and other regulatory approvals of drugs;

•	formulating and manufacturing drugs; and

•	launching, marketing, distributing, and selling drugs.

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•	obtain licenses, which may not be available on commercially reasonable terms, if at all;

•	abandon an infringing drug candidate;

•	redesign our products or processes to avoid infringement;

•	stop using the subject matter claimed in the patents held by others;

•	pay damages; or

•	defend litigation or administrative proceedings which may be costly whether we win or lose, which could result in a substantial diversion of our financial and management resources.

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•	the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of various electronic healthcare transactions and protects the security and privacy of protected health information;

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the federal healthcare programs' Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation; in addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

•	federal false claims laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

•	federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation;

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the federal Physician Payment Sunshine Act, or the Sunshine Act, requires applicable manufacturers of covered drugs to report payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members. Manufacturers are required to submit reports to the government by the 90th day of each calendar year; and

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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the industry's voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require drug manufacturers to report and make public drug prices and/or price increases; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

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•	manage our development efforts effectively;

•	integrate additional management, administrative and manufacturing personnel;

•	build a marketing and sales organization; and

•	maintain sufficient administrative, accounting and management information systems and controls.

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•	an inability to retain an adequate number of effective commercial personnel;

•	our ability to train sales personnel, who may have limited experience with our company or TYMLOS, to deliver a consistent and compliant message regarding TYMLOS that will be compelling to physicians who may prescribe TYMLOS;

•	an inability to equip sales personnel with effective materials, including medical and sales literature to help them educate physicians and our healthcare providers regarding TYMLOS and its proper administration;

•	unforeseen costs and expenses associated with maintaining and further developing an independent sales and marketing organization.

•	the difficulty of integrating the operations and personnel of the acquired companies;

•	the potential disruption of our ongoing business and distraction of management;

•	the potential for unknown liabilities and expenses;

•	the failure to achieve the expected benefits of the combination or acquisition;

•	the maintenance of acceptable standards, controls, procedures and policies; and

•	the impairment of relationships with employees as a result of any integration of new management and other personnel.

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•	actions or delays by the FDA, EMA or other foreign regulatory authority in respect of any NDA, MAA or other application we may submit for any of our product candidates;

•	results of clinical trials of our product candidates or those of our competitors;

•	our operating performance and the operating performance of similar companies;

•	the success of competitive products;

•	the overall performance of the equity markets;

•	the number of shares of our common stock publicly owned and available for trading;

•	threatened or actual litigation;

•	changes in laws or regulations relating to our products, including changes in the structure of healthcare payment systems;

•	any major change in our board of directors or management;

•	publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;

•	large volumes of sales or other transfers of our shares of common stock by existing stockholders;

•	general political, economic and market conditions; and

•	the other factors described in this "Risk Factors" section.

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•	delaying, deferring or preventing a change in corporate control;

•	impeding a merger, consolidation, takeover or other business combination involving us; or

•	discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

•	a staggered board of directors;

•	authorizing the board to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;

•	authorizing the board to amend our bylaws and to fill board vacancies until the next annual meeting of the stockholders;

•	prohibiting stockholder action by written consent;

•	limiting the liability of, and providing indemnification to, our directors and officers;

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•	eliminating the ability of our stockholders to call special meetings; and

•	requiring advance notification of stockholder nominations and proposals.

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•	fees paid to investigative sites and laboratories in connection with clinical studies;

•	fees paid to CROs in connection with clinical studies, if CROs are used; and

•	fees paid to contract manufacturers in connection with the production of clinical trial materials.

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•	Shipment errors that were the result of an error by us;

•	Quantity delivered that is greater than the quantity ordered;

•	Product distributed by us that is damaged in transit prior to receipt by the customer;

•	Expired product, previously purchased directly from us, that is returned during the period beginning six months prior to the product’s expiration date and ending twelve months after the product’s expiration date;

•	Product subject to a recall; and

•	Product that we, at our sole discretion, have specified to be returned.

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•	Expired product that is returned during the period beginning six months prior to the product’s expiration date and ending twelve months after the product’s expiration date;

•	Product subject to a recall; and

•	Product that we, at our sole discretion, have specified to be returned.

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Radius Health, Inc. ("Radius" or the "Company") is a science-driven fully integrated biopharmaceutical company that is committed to developing and commercializing innovative endocrine therapeutics. In April 2017, the Company’s first commercial product, TYMLOS (abaloparatide) injection, was approved by the U.S. Food and Drug Administration ("FDA") for the treatment of postmenopausal women with osteoporosis at high risk for fracture defined as history of osteoporotic fracture, multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy. In January 2019, the European Commission adopted a decision refusing approval of the Company’s European Marketing Authorisation Application (“MAA”) for abaloparatide-SC. In July 2017, the Company entered into a license and development agreement with Teijin Limited (“Teijin”) for abaloparatide for subcutaneous injection (“abaloparatide-SC”) in Japan, under which the Company received an upfront payment and is entitled to receive milestone payments upon the achievement of certain regulatory and sales milestones, and a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan during the royalty term. The Company is developing an abaloparatide transdermal patch, or abaloparatide-patch, for potential use in the treatment of postmenopausal women with osteoporosis. The Company is also developing an investigational product candidate, elacestrant ("RAD1901"), a selective estrogen receptor degrader (“SERD”), for potential use in the treatment of hormone receptor-positive breast cancer. The Company investigated its internally discovered investigational product candidate, RAD140, a non-steroidal selective androgen receptor modulator ("SARM") for potential use in the treatment of hormone receptor-positive breast cancer.

The Company is subject to the risks associated with emerging companies with a limited operating history, including dependence on key individuals, a developing business model, the necessity of securing regulatory approvals to market its investigational product candidates, market acceptance of the Company’s investigational product candidates following receipt of regulatory approval, competition for its investigational product candidates following receipt of regulatory approval, and the continued ability to obtain adequate financing to fund the Company’s future operations. The Company has incurred losses and expects to continue to incur additional losses for the foreseeable future. As of December 31, 2019, the Company had an accumulated deficit of $1.2 billion, and total cash, cash equivalents, marketable securities, and investments of $160.9 million.

Based upon its cash, cash equivalents, marketable securities, and investments balance as of December 31, 2019, the Company believes that, prior to the consideration of revenue from the potential future sales of any of its investigational products that may receive regulatory approval or proceeds from partnering and/or collaboration activities, it has sufficient capital to fund its development plans, U.S. commercial scale-up and other operational activities, for at least one year from the date of this filing. The Company expects to finance the future development costs of its clinical product portfolio with its existing cash and cash equivalents, marketable securities, and investments, or through strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company fails to obtain additional future capital, it may be unable to complete its clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities. On January 10, 2020, the Company entered into entered into a secured, non-dilutive credit facility for up to an aggregate amount of $95 million, comprised of a term loan of up to $55.0 million and a $20.0 million revolving credit facility based on accounts receivable and inventory, with the right, subject to certain conditions, to increase the revolver by $20.0 million.

Basis of Presentation—The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates—The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Company’s management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The Company considers events or transactions that occur after the balance sheet date but before the consolidated financial statements are issued as additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated up to the date of issuance of these consolidated financial statements.

Cash Equivalents—The Company considers all highly liquid investment instruments with an original maturity when purchased of three months or less to be cash equivalents. Money market funds represents a majority of the cash equivalents balance at December 31, 2019 and 2018.

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Accounts Receivable—Accounts receivable primarily relates to amounts due from customers. Accounts receivable are typically due within 31 days. The Company analyzes accounts that are past due for collectability. Given the nature and historical collectability of the Company’s accounts receivable, an allowance for doubtful accounts is not deemed necessary at December 31, 2019 and 2018.

Marketable Securities—All investment instruments with an original maturity date, when purchased, in excess of three months have been classified as current marketable securities. The Company classifies securities that are available to fund current operations as current assets. These marketable securities are classified as available-for-sale and are carried at fair value. The Company records unrealized gains and losses on available-for-sale debt securities as a component of Accumulated other comprehensive (loss), which is a separate component of shareholders’ equity on its consolidated balance sheet, until such gains and losses are realized. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific identification method. The Company periodically reviews the portfolio of securities to determine whether an other-than-temporary impairment has occurred. No such losses have occurred to date. There were no realized gains or losses on the sale of securities for the years ended December 31, 2019 and 2018.

Fair Value Measurements—Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal market for the asset or liability in an orderly transaction between market participants. Authoritative guidance specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the Company’s own assumptions of market participant valuation (unobservable inputs). The fair value hierarchy consists of three levels:

Level 1 - Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The authoritative guidance requires the use of observable market data if such data is available without undue cost and effort. When available, the Company uses unadjusted quoted market prices to measure fair value and classify such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based or independently-sourced market parameters, such as interest and currency rates and comparable transactions. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, items may be classified in Level 3 even though there may be inputs that are readily observable. If quoted market prices are not available, the valuation model used generally depends on the specific asset or liability being valued.

Some assets and liabilities are required to be recorded at fair value on a recurring basis, while other assets and liabilities are recorded at fair value on a nonrecurring basis. The Company records the fair value of long-lived assets and other intangible assets on a nonrecurring basis. The carrying amounts of current financial instruments, which include accounts receivable, accounts payable and accrued expenses, approximate their fair values due to the short-term nature of these instruments. The fair value of notes payable is determined based upon data from readily available pricing sources which utilize market observable inputs and other characteristics for similar types of instruments.

The Company reviews the carrying value of long-lived assets and other intangible assets on an annual basis or whenever events or changes in circumstances indicate the fair value of the asset is below its carrying amount. Fair value is determined using various valuation techniques, including discounted cash flows, market-related multiples, and recently reported transactions for similar assets in the marketplace.

Concentrations of Credit Risk and Off-Balance-Sheet Risk—Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents and available-for-sale marketable securities. The Company mitigates its risk with respect to cash and cash equivalents and marketable securities by maintaining its deposits and investments at high-quality financial institutions. The Company invests any excess cash in money market funds and other securities, and the management of these investments is not discretionary on the part of the financial institution. The Company has no significant off-balance-sheet risks such as foreign exchange contracts, option contracts, or other hedging arrangements.

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The Company is also subject to credit risk from its accounts receivable related to its product sales. As part of its credit management policy, the Company performs ongoing credit evaluations of its customers, and the Company has not required collateral from any customer.

Property and Equipment—Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets.

Research and Development Costs—The Company accounts for research and development costs by expensing such costs to operations as incurred. Research and development costs primarily consist of clinical testing costs, including payments made to contract research organizations, personnel costs, outsourced research activities, laboratory supplies, and license fees.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

Licensing Agreements—Costs associated with licensing early-stage technologies are expensed as incurred and are included in research and development expenses.

Impairment of Long-Lived Assets—The Company maintains definite-lived intangible assets related to certain capitalized milestones. These assets are amortized over their remaining useful lives, which are estimated based on the shorter of the remaining patent life or the estimated useful life of the underlying product. Intangible assets are amortized using the economic consumption method if anticipated future revenues can be reasonably estimated. The straight-line method is used when future revenues cannot be reasonably estimated. 

The Company assesses its intangible assets for impairment if indicators are present or changes in circumstance suggest that impairment may exist. Events that could result in an impairment, or trigger an interim impairment assessment, include the receipt of additional clinical or nonclinical data regarding one of the Company’s drug candidates or a potentially competitive drug candidate, changes in the clinical development program for a drug candidate, or new information regarding potential sales for the drug. If impairment indicators are present or changes in circumstance suggest that impairment may exist, the Company performs a recoverability test by comparing the sum of the estimated undiscounted cash flows of each intangible asset to its carrying value on the consolidated balance sheet. If the undiscounted cash flows used in the recoverability test are less than the carrying value, the Company would determine the fair value of the intangible asset and recognize an impairment loss if the carrying value of the intangible asset exceeds its fair value. No impairment charges have been recognized since the Company’s inception.

Segment Information—Operating segments are defined as components of an enterprise engaged in business activities for which discrete financial information is available and regularly reviewed by the chief decision maker in determining how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment and operates in one geographic area.

Income Taxes—The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as operating loss and tax credit carryforwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization. The effect on deferred tax assets and liabilities as a result of a change in tax rates is recognized as income in the period that includes the enactment date.

The Company uses judgment to determine the recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Any material interest and penalties related to unrecognized tax benefits are recognized in income tax expense.

Due to uncertainty surrounding the realization of the favorable tax attributes in future tax returns the Company has recorded a full valuation allowance against otherwise realizable net deferred tax assets as of December 31, 2019 and 2018.

Stock-Based Compensation-Options—The Company measures stock-based compensation cost at the accounting measurement date based on the fair value of the option and recognizes the expense related to awards to employees on a straight-line basis over the requisite service period of the option, which is typically the vesting period. Forfeitures are recognized as they occur.

The Company estimates the fair value of each option using the Black-Scholes option pricing model that considers the fair value of its common stock, the exercise price, the expected life of the option, the expected volatility of its common stock, expected dividends on its common stock, and the risk-free interest rate over the expected life of the option. Due to the limited

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trading history of the Company’s common stock since its initial public offering in June 2014, the Company uses the simplified method described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, to determine the expected life of the option grants. The estimate of expected volatility is based on a review of the historical volatility of similar publicly held companies in the biotechnology field over a period commensurate with the option’s expected term. The Company has never declared or paid any cash dividends on its common stock and does not expect to do so in the foreseeable future. Accordingly, it uses an expected dividend yield of zero. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant valuation for a period commensurate with the option’s expected term. These assumptions are subjective and changes in them could significantly impact the value of the option and hence the related compensation expense.

Stock-based compensation expense recognized for options granted to consultants is also based upon the grant date fair value of the options issued, as determined by the Black-Scholes option pricing model.

Revenue Recognition— In April 2017, the FDA approved TYMLOS. Subsequent to receiving FDA approval, the Company entered into a limited number of arrangements with wholesalers in the U.S. (collectively, its “Customers”) to distribute TYMLOS. Additionally, in July 2017, the Company entered into a License and Development Agreement (the “Teijin Agreement”) with Teijin Limited (“Teijin”) for abaloparatide-SC in Japan. These arrangements are the Company’s initial contracts with customers and, as such, were evaluated and accounted for in compliance with Accounting Standards Codification (“ASC”) Topic 606 - Revenue from Contracts with Customers (“Topic 606”), which was adopted during the quarter ended June 30, 2017. In connection therewith, there was no transition to Topic 606 because the Company had no historical revenue. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards. Under Topic 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 be entitled in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (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 model to arrangements that meet the definition of a contract under Topic 606, including 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 Topic 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. For a complete discussion of accounting for product revenue, see Product Revenue, Net (below).

Product Revenue, Net— The Company sells TYMLOS to a limited number of wholesalers in the U.S. (collectively, its “Customers”). These Customers subsequently resell the Company’s products to specialty pharmacy providers, as well as other retail pharmacies and certain medical centers or hospitals. In addition to distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products.

The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time (upon delivery). Product revenues are recorded net of applicable reserves for variable consideration, including discounts and allowances.

If taxes should be collected from Customers relating to product sales and remitted to governmental authorities, they will be excluded from revenue. The Company expenses incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that the Company would have recognized is one year or less. However, no such costs were incurred during the twelve months ended December 31, 2019 and 2018.

Reserves for Variable Consideration— Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, provider chargebacks and discounts, government rebates, third-party payor rebates, and other incentives, such as voluntary patient assistance, and other allowances that are offered within contracts between the Company and its Customers, payors, and other indirect customers relating to the Company’s sale of its products. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than a Customer). These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

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The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. The Company’s analyses also contemplated application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period, for the estimates detailed below, as of December 31, 2019 and, therefore, the transaction price was not reduced further during the twelve months ended December 31, 2019 and 2018. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Trade Discounts and Allowances— The Company generally provides Customers with discounts which include incentive fees that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, the Company compensates (through trade discounts and allowances) its Customers for sales order management, data, and distribution services. However, the Company has determined such services received to date are not distinct from the Company’s sale of products to the Customer and, therefore, these payments have been recorded as a reduction of revenue within the statement of operations and comprehensive loss through December 31, 2019, as well as a reduction to trade receivables, net on the consolidated balance sheets.

Product Returns— Consistent with industry practice, the Company generally offers Customers a limited right of return for product that has been purchased from the Company based on the product’s expiration date, which lapses upon shipment to a patient. The Company estimates the amount of its product sales that may be returned by its Customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized, as well as reductions to trade receivables, net on the consolidated balance sheets. The Company currently estimates product return liabilities using available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel. The Company has received an immaterial amount of returns to date and believes that returns of product in future periods will be minimal.

The Company’s limited right of return policy allows for eligible returns of TYMLOS in the following circumstances:

•	Shipment errors that were the result of an error by us;

•	Quantity delivered that is greater than the quantity ordered;

•	Product distributed by us that is damaged in transit prior to receipt by the customer;

•	Expired product, previously purchased directly from us, that is returned during the period beginning six months prior to the product’s expiration date and ending twelve months after the product’s expiration date;

•	Product subject to a recall; and

•	Product that we, at our sole discretion, have specified to be returned.

In addition, our limited right of return policy allows for eligible returns of TYMLOS from indirect purchasers in the following circumstances:

•	Expired product that is returned during the period beginning six months prior to the product’s expiration date and ending twelve months after the product’s expiration date;

•	Product subject to a recall; and

•	Product that we, at our sole discretion, have specified to be returned.

Provider Chargebacks and Discounts— Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and trade receivables, net. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider by Customers, and the Company generally issues credits for such amounts within a few weeks of the Customer’s notification to the Company of the resale. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel inventories at each reporting period-end that the Company expects will be sold to qualified healthcare providers, and chargebacks that Customers have claimed, but for which the Company has not yet issued a credit.

Government Rebates— The Company is subject to discount obligations under state Medicaid programs and Medicare. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue

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and the establishment of a current liability which is included in accrued expenses and other current liabilities on the consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.

Payor Rebates— The Company contracts with certain third-party payors, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

Other Incentives— Other incentives which the Company offers include voluntary patient assistance programs, such as the Company’s co-pay assistance program, which are intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period. The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as a component of accrued expenses and other current liabilities on the consolidated balance sheets.

Product Revenue Reserves and Allowances— Chargebacks, discounts, fees, and returns are recorded as reductions of trade receivables, net on the consolidated balance sheets. Government and other rebates are recoded as a component of accrued expenses and other current liabilities on the consolidated balance sheets.

Licenses of Intellectual Property— We enter into out-licensing agreements within the scope of Topic 606, under which we license certain rights to our product candidates to third parties. Such agreements may include the transfer of intellectual property rights in the form of licenses, transfer of technological know-how, delivery of drug substances, research and development services, and participation on certain committees with the counterparty. Payments made by the customers may include one or more of the following: non-refundable, up-front license fees; payments upon the exercise of customer options; development, regulatory, and commercial milestone payments; payments for manufacturing supply services we provide through our contract manufacturers; and royalties on net sales of licensed products if they are successfully approved and commercialized. Each of these payments may result in license, collaboration, or other revenue, except revenue from royalties on net sales of licensed products, which would be classified as royalty revenue.

In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our out-licensing agreements, we perform 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) we satisfy each performance obligation. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from the transaction price allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. We evaluate all other promised goods or services in the agreement to determine if they are distinct. If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct. Optional future services where any additional consideration paid to us reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations. If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as performance obligations.

We utilize judgment to determine the transaction price. In connection therewith, we evaluate contingent milestones at contract inception to estimate the amount which is not probable of a material reversal to include in the transaction price using the most likely amount method. Milestone payments that are not within our control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and, therefore, the variable consideration is constrained. At the end of each reporting period, we re-evaluate the probability of achieving development milestone payments which may not be subject to a material reversal and, if necessary, adjust our estimate of the overall transaction price. Any such

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adjustments are recorded on a cumulative catch-up basis, which would affect license and other revenue, as well as earnings, in the period of adjustment.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.

We then determine whether the performance obligations or combined performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress, as applicable, each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded within deferred revenue. Contract liabilities within deferred revenue are recognized as revenue after control of the goods or services is transferred to the customer and all revenue recognition criteria have been met.

For arrangements that include sales-based royalties, including sales-based milestone payments, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of when the related sales occur or when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any royalty revenue resulting from our out-licensing arrangements.

Manufacturing Supply Services— Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply, at the customer’s discretion, are generally considered as options. The Company assesses if these options provide a material right to the licensee and, if so, they are accounted for as separate performance obligations. If the Company is entitled to additional payments when the licensee exercises these options, any additional payments are recorded in license, collaboration, or other revenue when the customer obtains control of the goods, which is upon delivery.

Inventory—The Company values its inventories at the lower of cost or estimated net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded within cost of product revenues. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required which would be recorded as a cost of product sales in the consolidated statements of operations and comprehensive loss.

The Company capitalizes inventory costs associated with the Company’s products after regulatory approval when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. Inventory acquired prior to receipt of marketing approval of a product candidate is expensed as research and development expense as incurred. Inventory that can be used in either the production of clinical or commercial product is expensed as research and development expense when selected for use in a clinical manufacturing campaign.

Shipping and handling costs for product shipments are recorded as incurred in cost of product revenues along with costs associated with manufacturing the product and any inventory write-downs.

Intangible Assets—The Company maintains definite-lived intangible assets related to certain capitalized milestones. These assets are amortized over their remaining useful lives, which are estimated based on the shorter of the remaining patent life or the estimated useful life of the underlying product. Intangible assets are amortized using the economic consumption method if anticipated future revenues can be reasonably estimated. The straight-line method is used when future revenues cannot be reasonably estimated. 

Accrued Clinical Expenses—The Company estimates its accrued clinical expenses, which involves reviewing open contracts and purchase orders, communicating with Company personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual cost. Payments under some of the contracts the Company has with parties depend on factors such as successful enrollment of certain numbers of patients, site initiation and the completion of clinical trial milestones. Examples of estimated accrued clinical expenses include:

•fees paid to investigative sites and laboratories in connection with clinical studies;

•fees paid to CROs in connection with clinical studies, if CROs are used; and

•fees paid to contract manufacturers in connection with the production of clinical trial materials.

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When accruing clinical expenses, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If possible, the Company obtains information regarding unbilled services directly from its service providers. However, the Company may be required to estimate the cost of these services based only on internally developed estimates. If the Company underestimates or overestimates the cost associated with a trial or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, the Company’s estimated accrued clinical expenses have approximated actual expense incurred. Subsequent changes in estimates may result in a material change in the Company’s accruals.

Convertible Note Payable— In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the liability and equity components of the Company’s 3% Convertible Senior Notes due by 2024 (the “Convertible Notes”) by allocating the proceeds between the liability component and the embedded conversion option (the “Equity Component”) due to the Company’s ability to settle the Convertible Notes in cash, common stock or a combination of cash and common stock, at its option. The carrying amount of the liability components was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected the Company’s non-convertible debt borrowing rate for similar debt. The Equity Component of the Convertible Notes was recognized as a debt discount and represents the difference between the proceeds from the issuance of the Convertible Notes and the fair value of the liability of the Convertible Notes on their respective dates of issuance. The excess of the principal amount of the liability component over its carrying amount (the “Debt Discount”) is amortized to interest expense using the effective interest method over seven years. The Equity Component is not remeasured as long as it continues to meet the conditions for equity classification. In connection with issuance of the Convertible Notes, the Company also incurred certain offering costs directly attributable to the offering. Such costs are deferred and amortized over the term of the debt to interest expense using the effective interest method. A portion of the deferred financing costs incurred in connection with the Convertible Notes was deemed to relate to the Equity Component and was allocated to additional paid-in capital.

Net Loss Per Common Share—Net loss per common share is calculated using an earnings allocation formula that determines net loss per share for the holders of the Company's common shares. Prior to the initial public offering, all of the Company's series of preferred stock contained participation rights in any dividend paid by the Company and were deemed to be participating securities. Net income available to common shareholders was allocated to each share on an as-converted basis as if all of the earnings for the period had been distributed.

Diluted net income per share is computed using the more dilutive of (a) the two-class method, or (b) the if-converted method. The weighted-average number of common shares outstanding gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, and warrants. Common equivalent shares are excluded from the computation of diluted net income per share if their effect is anti-dilutive.

Comprehensive Income (Loss)—Comprehensive income (loss) refers to revenues, expenses, gains and losses that are excluded from net income (loss), as these amounts are recorded directly as an adjustment to stockholders’ equity, net of tax. The Company’s other comprehensive (loss) income is comprised of unrealized gains (losses) on its available-for-sale marketable securities.

Accounting Standards Updates—Recently Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 supersedes the lease guidance under FASB ASC Topic 840, Leases, resulting in the creation of FASB Accounting Standards Codification (“ASC”) Topic 842, Leases. ASU 2016-02 requires a lessee to recognize a liability to make lease payments and a right-of-use asset in the statement of financial position, representing its right to use the underlying asset for the lease term for both finance and operating leases.

In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU No. 2018-11, Target Improvements to Topic 842, Leases (“ASU 2018-11”). The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of ASU 2016-02 and have the same effective and transition requirements as ASU 2016-02. ASU 2018-11 gives entities the option to not provide comparative period financial statements and instead apply the transition requirements as of the effective date of ASU 2016-02. ASU 2016-02, ASU 2018-10 and ASU 2018-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted the standard effective January 1, 2019 using the optional method under ASU 2018-11 and therefore, prior period financial information has not been retrospectively adjusted.

The Company applied the package of practical expedients to leases that commenced prior to the effective date whereby it elected to not reassess: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The Company also elected the short-term lease recognition exemption for all leases that qualify, where a right-of-use asset or lease liability will not be recognized for short term leases. Furthermore, for all leases entered into or modified after the effective date, the Company has made an accounting policy

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election, by class of underlying asset, to not separate nonlease components from lease components. The Company did not elect the use-of-hindsight to estimate the lease term or to assess impairment of right-of-use assets for existing leases.

As summarized in the table below, the standard had a material impact on the Company’s consolidated balance sheet as of December 31, 2019, specifically through recognition of right-of-use assets and lease liabilities for operating leases of $8.3 million on the effective date. However, the standard did not have a material impact on the Company’s consolidated statement of operations and comprehensive loss, as expense for the Company’s existing operating leases continues to be recognized consistent with the recognition pattern before adoption.

Consolidated Balance Sheet Data (in thousands)	January 1, 2019 Prior to ASC 842 Adoption				ASC 842 Adjustment				January 1, 2019 As Adjusted
Right of use assets - operating leases (1)	$	—			$	8,289			$	8,289
Operating lease liability, current (2)	$	—			$	2,245			$	2,245
Operating lease liability, long term (2)	$	—			$	6,044			$	6,044

(1)                           Represents capitalization of operating lease right of use assets.

(2)                           Represents recognition of operating lease liabilities.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 amends ASC 718, Compensation-Stock Compensation, to expand the scope of the standard to include accounting for share-based payment transactions for acquiring goods and services from non-employees. The amendments in ASU 2018-07 are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The Company adopted ASU 2018-07 on January 1, 2019, and it did not have a material impact on the Company’s consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). The amendments in ASU 2018-18 clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. The amendments under ASU 2018-18 are effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. The amendments in ASU 2018-18 should be applied retrospectively to the date of initial application of Topic 606. The Company adopted ASU 2018-18 as of January 1, 2019 and it did not have a material impact on the Company’s consolidated financial statements, as each of the Company’s arrangements detailed within Note 13, “License Agreements,” were previously accounted for under Topic 606 and/or other topics of the ASC, not ASC 808, and the Company has no other arrangements within the scope of ASC 808.

Accounting Standards Updates—Recently Issued

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. These amendments under ASU 2016-13 are effective for interim and annual fiscal periods beginning after December 15, 2019. The Company does not expect the adoption of ASU 2016-13 to have a material impact of its results of operations, financial position, or cash flows.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework-Changes to the Disclosure Requirement for Fair Value Measurement, or (“ASU 2018-13”). The amendments in this ASU 2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments under ASU 2018-13 are effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of ASU 2018-13 to have a material impact on its results of operations, financial position or cash flows.

In August 2018, the FASB issued ASU 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40 (“ASU 2018-15”). ASU 2018-15 updates guidance regarding accounting for a cloud computing arrangement that is a service contract. The amendments under ASU 2018-15 are effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of ASU 2018-15 to have a material impact on its results of operations, financial position or cash flows.

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Available-for-sale marketable securities and cash and cash equivalents consist of the following (in thousands):

	December 31, 2019
	Amortized Cost Value				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Cash and cash equivalents:
Cash	$	34,726			$	—			$	—			$	34,726
Money market	35,160				—				—				35,160
Domestic corporate commercial paper	—				—				—				—
Total	$	69,886			$	—			$	—			$	69,886
Marketable securities:
Domestic corporate debt securities	$	41,229			$	3			$	(3	)		$	41,229
Domestic corporate commercial paper	24,900				5				—				24,905
Agency bonds	12,391				1				(3		)		12,389
US treasury bonds	12,492				—				—				12,492
Total	$	91,012			$	9			$	(6	)		$	91,015

	December 31, 2018
	Amortized Cost Value				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
Cash and cash equivalents:
Cash	$	20,448			$	—			$	—			$	20,448
Money market	38,873				—				—				38,873
Domestic corporate commercial paper	—				—				—				—
Total	$	59,321			$	—			$	—			$	59,321
Marketable securities:
Domestic corporate debt securities	$	132,886			$	—			$	(530	)		$	132,356
Domestic corporate commercial paper	—				—				—				—
Agency bonds	45,009				—				(225		)		44,784
Total	$	177,895			$	—			$	(755	)		$	177,140

There were no securities in a loss position for more than 12 months at December 31, 2019 and 2018. There were eight debt securities in an unrealized loss position for less than 12 months at December 31, 2019 and there was one debt security that had been in an unrealized loss position for less than 12 months at December 31, 2018. The aggregate unrealized loss on these securities as of December 31, 2019 and 2018 was approximately $6.0 thousand and $0.8 million, respectively, and the fair value was $42.5 million and $177.1 million, respectively. The aggregate unrealized gain on these securities as of December 31, 2019 and 2018 was approximately $9.0 thousand and $0.0, respectively, and the fair value was $48.5 million and $0.0, respectively. The Company considered the decline in market value for these securities to be primarily attributable to current economic conditions. As it was not more likely than not that the Company would be required to sell these securities before the recovery of their amortized cost basis, which may be maturity, the Company did not consider these investments to be other-than-temporarily impaired as of December 31, 2019 and 2018.

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As of December 31, 2019, all marketable securities, which had an aggregate fair value of $91.0 million, are maturing within one year.

The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Below are the three levels of inputs that may be used to measure fair value:

•	Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•	Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•	Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels during the twelve months ended December 31, 2019 and 2018.

The following table summarizes the financial instruments measured at fair value on a recurring basis in the accompanying consolidated balance sheets as of December 31, 2019 and December 31, 2018 (in thousands):

	As of December 31, 2019
	Level 1				Level 2				Level 3				Total
Assets
Cash and cash equivalents:
Cash	$	34,726			$	—			$	—			$	34,726
Money market funds (1)	35,160				—				—				35,160
Domestic corporate commercial paper (2)	—				—				—				—
Total	$	69,886			$	—			$	—			$	69,886
Marketable Securities
Domestic corporate debt securities (2)	$	—			$	41,229			$	—			$	41,229
Domestic corporate commercial paper (2)	—				24,905				—				24,905
Agency bonds (2)					12,389								12,389
US treasury bonds (2)	—				12,492				—				12,492
Total	$	—			$	91,015			$	—			$	91,015

	As of December 31, 2018
	Level 1				Level 2				Level 3				Total
Assets
Cash and cash equivalents:
Cash	$	20,448			$	—			$	—			$	20,448
Money market funds (1)	38,873				—				—				38,873
Domestic corporate commercial paper (2)	—				—				—				—
Total	$	59,321			$	—			$	—			$	59,321
Marketable securities:
Domestic corporate debt securities (2)	$	—			$	132,356			$	—			$	132,356
Domestic corporate commercial paper (2)	—				—				—				—
Agency bonds (2)	—				44,784				—				44,784
Total	$	—			$	177,140			$	—			$	177,140

(1)	Fair value is based upon quoted market prices.

(2)

Fair value is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs are obtained from various sources, including market participants, dealers and brokers.

Inventory consists of the following at December 31, 2019 and 2018 (in thousands):

	December 31, 2019				December 31, 2018
Raw materials	$	4,093			$	4,961
Work in process	—				490
Finished goods	1,230				759
Total inventories	$	5,323			$	6,210

Finished goods manufactured by the Company have a 36-month shelf life from date of manufacture.

Property and equipment consists of the following (in thousands):

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	Estimated Useful Life (In Years)		December 31,
			2019				2018
Furniture and fixtures, lab and office equipment	5		$	1,262			$	1,262
Computer equipment and software	3		2,726				3,445
Manufacturing equipment	10		1,616				1,616
Leasehold improvements	Shorter of useful life or remaining lease term		1,915				1,915
Construction in progress	-		—				—
			7,519				8,238
Less: accumulated depreciation			(5,226		)		(4,235		)
Property and equipment, net			$	2,293			$	4,003

The Company performed a qualitative impairment analysis to determine if any of the assets displayed indicators of impairment that would trigger the need for further analysis. As a result of the qualitative assessment, the Company concluded that there were no indicators of impairment for any property and equipment assets as of December 31, 2019 and 2018. Depreciation expense related to property and equipment was approximately $1.5 million, $1.9 million and $1.4 million for the years ended December 31, 2019, 2018, and 2017, respectively.

The following table presents intangible assets as of December 31, 2019 and 2018 (in thousands):

	December 31, 2019				December 31, 2018				Estimated useful life (years)
Acquired and in-licensed rights	$	8,712			$	8,712			11
Less: accumulated amortization	(2,129		)		(1,330		)
Total intangible asset, net	$	6,583			$	7,382

The acquired and in-licensed rights relate to the milestone of €8.0 million (approximately $8.7 million) paid to Ipsen, which was triggered by the FDA approval of TYMLOS on April 28, 2017.

The Company recorded approximately $0.8 million, $0.8 million, and $0.5 million in amortization expense related to intangible assets, using the straight-line methodology which is considered the best estimate of economic benefit, during each of the twelve months ended December 31, 2019, 2018, and 2017, respectively. Estimated future amortization expense for intangible assets as of December 31, 2019 is approximately $0.8 million per year over the remaining life of 8.25 years.

Accrued expenses as of December 31, 2019 and 2018 consist of the following (in thousands):

	December 31,
	2019				2018
Commercial costs	$	3,514			$	2,884
Product revenue reserves	17,280				7,620
Royalty payable	2,797				1,735
Research costs	13,049				10,403
Payroll and employee benefits	11,551				12,230
Interest	3,050				3,050
Professional fees	1,439				3,465
Restructuring	255				613
Other current liabilities	95				203
Total accrued expenses and other current liabilities	$	53,030			$	42,203

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On August 14, 2017, in a registered underwritten public offering, the Company issued $300.0 million aggregate principal amount of 3% Convertible Senior Notes due September 1, 2024 (the “Convertible Notes”). In addition, on September 12, 2017, the Company issued an additional $5.0 million principal amount of Convertible Notes pursuant to the exercise of an over-allotment option granted to the underwriters in the offering. In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the Liability and Equity Components of the Convertible Notes by allocating the proceeds between the Liability Component and the Equity Component, due to the Company’s ability to settle the Convertible Notes in cash, common stock or a combination of cash and common stock, at its option. In connection with the issuance of the Convertible Notes, the Company incurred approximately $9.4 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs to the Liability and Equity Components based on the allocation of the proceeds. Of the total $9.4 million of debt issuance costs, $4.3 million was allocated to the Equity Component and recorded as a reduction to additional paid-in capital and $5.1 million was allocated to the liability component and is now recorded as a reduction of the Convertible Notes in the Company’s consolidated balance sheet. The portion allocated to the liability component is amortized to interest expense using the effective interest method over seven years.

The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 3.00% per annum, payable semi-annually in arrears on March 1 and September 1, beginning on March 1, 2018. Upon conversion, the Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. Prior to December 31, 2017, the Convertible Notes were not convertible except in connection with a make whole fundamental change, as defined in the respective indentures. The Convertible Notes will be subject to redemption at our option, on or after September 1, 2021, in whole or in part, if the conditions described below are satisfied. The Convertible Notes will mature on September 1, 2024, unless earlier converted, redeemed or repurchased in accordance with their terms. Subject to satisfaction of certain conditions and during the periods described below, the Convertible Notes may be converted at an initial conversion rate of 20.4891 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $48.81 per share of common stock and 6,249,176 shares). As of December 31, 2019, the Notes were not convertible.

Holders of the Convertible Notes may convert all or any portion of their notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the business day immediately preceding June 1, 2024 only under the following circumstances:

(1)

during any calendar quarter commencing after the calendar quarter ending on December 31, 2017 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether consecutive or not) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

(2)	during the five-business day period after any five-consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

(3)	if the Company calls the Convertible Notes for redemption, until the close of business on the business day immediately preceding the redemption date; or

(4)	upon the occurrence of specified corporate events.

Prior to September 1, 2021, the Company may not redeem the Convertible Notes. On or after September 1, 2021, the Company may redeem for cash all or part of the Convertible Notes if the last reported sale price of the Company’s common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30-consecutive trading day period ending within 5 trading days prior to the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. In addition, calling any Convertible Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note, if it is converted in connection with the redemption, will be increased in certain circumstances.

In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the liability and equity components of the Convertible Notes by allocating the proceeds between the liability component and the embedded conversion option (the “Equity Component”) due to the Company’s ability to settle the Convertible Notes in cash, common stock or a combination of cash and common stock, at its option. The carrying amount of the Liability

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Component of $166.3 million was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected the Company’s non-convertible debt borrowing rate for similar debt. The Equity Component of the Convertible Notes of $138.7 million was recognized as a debt discount and represents the difference between the proceeds from the issuance of the Convertible Notes of $305.0 million and the fair value of the liability of the Convertible Notes of approximately $305.0 million on their respective dates of issuance. The excess of the principal amount of the liability component over its carrying amount (the “Debt Discount”) is amortized to interest expense using the effective interest method over seven years. The Equity Component is not remeasured as long as it continues to meet the conditions for equity classification. In connection with issuance of the Convertible Notes, the Company also incurred certain offering costs directly attributable to the offering. Such costs are deferred and amortized over the term of the debt to interest expense using the effective interest method. A portion of the deferred financing costs incurred in connection with the Convertible Notes was deemed to relate to the Equity Component and was allocated to additional paid-in capital.

The outstanding balances of the Convertible Notes consisted of the following (in thousands):

	December 31, 2019			December 31, 2018
Liability component:
Principal	$	305,000		$	305,000
Less: debt discount and issuance costs, net	(109,409		)	(125,194		)
Net carrying amount	$	195,591		$	179,806
Equity component:	$	134,450		$	134,450

The Company determined the expected life of the Convertible Notes was equal to its seven-year term. The effective interest rate on the Liability Components of the Convertible Notes for the period from the date of issuance through December 31, 2019 was 13.04%. As of December 31, 2019, the “if-converted value” did not exceed the remaining principal amount of the Convertible Notes. The fair values of the 3% Convertible Senior Notes due September 1, 2024 are based on data from readily available pricing sources which utilize market observable inputs and other characteristics for similar types of instruments, and, therefore, these convertible senior notes are classified within Level 2 in the fair value hierarchy. The fair value of the Convertible Notes, which differs from their carrying value, is influenced by interest rates, the Company’s stock price and stock price volatility. The estimated fair value of the Convertible Notes as of December 31, 2019 was approximately $259.0 million.

The following table sets forth total interest expense recognized related to the Convertible Notes during the twelve months ended December 31, 2019, 2018, and 2017 (in thousands):

	Twelve Months Ended December 31,
	2019			2018			2017
Contractual interest expense	$	9,150		$	9,150		$	3,482
Amortization of debt discount	15,213			13,300			4,641
Amortization of debt issuance	572			505			175
Total interest expense	$	24,935		$	22,955		$	8,298

Future minimum payments on our long-term debt as of December 31, 2019 are as follows (in thousands):

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Years ended December 31,	Future Minimum Payments
2020	$	9,150
2021	9,150
2022	9,150
2023	9,150
2024 and thereafter	314,150
Total minimum payments	$	350,750
Less: interest	(45,750		)
Less: unamortized discount	(109,409		)
Less: current portion	—
Long Term Debt	$	195,591

Employee Stock Purchase Plan

In September 2016, the Company initiated the first offering period under the Company’s 2016 Employee Stock Purchase Plan (the “ESPP”), pursuant to which eligible employees may purchase shares of the Company’s common stock on the last day of each predetermined six-month offering period at 85% of the lower of the fair market value per share at the beginning or end of the applicable offering period. The offering periods run from March 1 through August 31 and from September 1 through February 28 (or February 29, in a leap year) of each year.

At December 31, 2019, there were 1,473,247 shares available for future sale to employees under this plan. As of December 31, 2019, the Company recorded a liability of $0.8 million related to employee withholdings under this plan.

Stock Options under Equity Incentive Plans

The Company has granted awards to employees, directors and consultants under the following compensation plans. The Company’s 2018 Stock Option and Incentive Plan (the “2018 Plan”) is the current plan under which the Company grants awards.

2003 Long-Term Incentive Plan—The Company’s 2003 Long-Term Incentive Plan (the “2003 Plan) provided for the granting of incentive stock options and nonqualified options to key employees, directors and consultants of the Company. The exercise price of the incentive stock options, as determined by the Company's board of directors, was required to be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's common stock) of the common stock fair value as of the date of the grant. The provisions of the 2003 Plan limited the exercise of incentive stock options, but in no case could the exercise period extend beyond ten years from the date of grant (five years in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's common stock). Stock options granted under the 2003 Plan generally vest over a four-year period.

2011 Equity Incentive Plan—The Company's 2011 Equity Incentive Plan (the “2011 Plan”) replaced the 2003 Plan when the Company's board of directors approved the 2011 Plan on November 7, 2011 and the shares that remained available for issuance under the 2003 Plan were assumed as shares authorized under the 2011 Plan. The 2011 Plan provided for the granting of incentive stock options and nonqualified options to key employees, directors and consultants of the Company. The exercise price of the incentive stock options, as determined by the Company's board of directors, was required to be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's common stock) of the common stock fair value as of the date of the grant. The provisions of the 2011 Plan limited the exercise of incentive stock options, but in no case could the exercise period extend beyond ten years from the date of grant (five years in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's common stock). Stock options granted under the 2011 Plan generally vest over a four-year period, subject to continued employment with, or services to, the Company.

2018 Stock Option and Incentive Plan—The 2018 Plan replaced the 2011 Plan when the Company’s stockholders approved the new plan on June 6, 2018 and the shares that remained available for issuance under the 2011 Plan were assumed as shares authorized under the 2018 Plan. The 2018 Plan provides for the granting of equity awards, including incentive and non-qualified stock options and restricted stock units, to employees, non-employee directors and consultants of the Company. The exercise price of the incentive stock options, as determined by the Company’s Board of Directors, must be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company’s common

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stock) of the common stock fair value as of the date of the grant. The provisions of the 2018 Plan limit the exercise of incentive stock options, but in no case may the exercise period extend beyond ten years from the date of grant (five years in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company’s common stock). Stock options and restricted stock units granted under the 2018 plan generally vest over a four-year period, subject to continued employment with, or services to, the Company.

As of December 31, 2019, an aggregate of 4,834,255 common shares remained outstanding under all of the Company’s stock based compensation plans. The number of common shares remaining available for granting of future awards under these plans was approximately 5,684,071 at December 31, 2019.

The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its employee stock options. The weighted-average grant-date fair value per share of options granted during 2019, 2018, and 2017 was $12.97, $18.69, and $22.74 respectively. The weighted-average assumptions used in the Black-Scholes option-pricing model were as follows:

	Years Ended December 31,
	2019			2018			2017
Expected term (years)	6.13			6.23			6.02
Volatility	72	%		56	%		57	%
Expected dividend yield	0	%		0	%		0	%
Risk-free interest rates	2.35	%		2.68	%		2.01	%

A summary of stock option activity for the year ended December 31, 2019 is as follows (in thousands, except for share, per share, and weighted-average contractual life amounts):

	Shares			Weighted-Average Exercise Price (in dollars per share)				Weighted-Average Contractual Life (In Years)		Aggregate Intrinsic Value
Options outstanding at December 31, 2018	5,462,787			$	36.88
Granted	1,110,100			19.88
Exercised	(341,337	)		8.40
Canceled	(558,747	)		33.91
Expired	(838,548	)		40.59
Options outstanding at December 31, 2019	4,834,255			$	34.69			6.76		$	4,167
Options exercisable at December 31, 2019	2,951,940			$	39.49			5.56		$	3,166

The aggregate intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by employees to exercise the option) during the years ended December 31, 2019 and 2018 was $4.2 million and $9.1 million, respectively.

As of December 31, 2019, there was approximately $25.1 million of total unrecognized compensation expense related to unvested option-based compensation arrangements, which is expected to be recognized over a weighted-average period of approximately 2.41 years.

Restricted Stock Units

A summary of RSU activity during the year ended December 31, 2019 is as follows:

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	RSUs			Weighted-Average Grant Date Fair Value (in dollars per share)
RSUs Outstanding at December 31, 2018	227,088			$	37.69
Granted	613,650			20.04
Vested	(92,031	)		35.79
Forfeited	(134,434	)		26.17
RSUs Outstanding at December 31, 2019	614,273			$	22.83

As of December 31, 2019, there was approximately $9.8 million of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.55 years.

Performance Units

During the twelve months ended December 31, 2019, the Company awarded 79,000 performance restricted stock units (“PSUs”) to employees. Each PSU entitles the holder to receive one share of the Company’s common stock if and when the PSU vests. The PSUs vest upon achievement of certain performance targets within a pre-specified period from the grant date. The vesting of any earned units is subject to the employee’s continued service relationship with the Company through each vesting date.

A summary of PSU activity during the twelve months ended December 31, 2019 is as follows:

	PSUs			Weighted-Average Grant Date Fair Value (in dollars per share)
PSUs Outstanding at December 31, 2018	—			$	—
Granted	79,000			19.20
Vested	—			—
Forfeited	—
PSUs Outstanding at December 31, 2019	79,000			$	19.20

As the performance condition must be met for the awards to vest, compensation cost will be recognized over the implicit service period and only if the performance condition is assessed as probable of achievement. As of December 31, 2019, the achievement of the performance condition was not probable and, therefore, no expense has been recognized to date.

The following table summarizes stock-based compensation expense by financial statement line (in thousands):

	Years Ended December 31,
	2019				2018				2017
Research and development	$	8,768			$	11,657			$	14,699
General and administrative	14,847				17,044				20,304
Share-based compensation expense included in operating expenses	$	23,615			$	28,701			$	35,003

Warrants

At December 31, 2018, the Company had outstanding warrants to purchase 120,532 shares of the Company’s common stock at prices ranging from $14.00 to $16.97 per share. The warrants became exercisable at various dates between 2011 and 2014. No warrants were outstanding as of December 31, 2019.

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To date, the Company’s only source of product revenue has been from the U.S. sales of TYMLOS, which it began shipping to Customers in May 2017. The following table summarizes activity in each of the product revenue allowance and reserve categories for the twelve months ended December 31, 2019 and 2018 (in thousands):

	Chargebacks, Discounts, and Fees				Government and Other Rebates				Returns				Total
Ending balance at December 31, 2017	$	1,986			$	1,231			$	421			$	3,638
Provision related to sales in the current year	15,281				24,156				355				39,792
Adjustment related to prior periods sales	(140		)		254				(111		)		3
Credits and payments made	(13,929		)		(18,021		)		(254		)		(32,204		)
Ending balance at December 31, 2018	$	3,198			$	7,620			$	411			$	11,229
Provision related to sales in the current year	30,960				62,271				1,673				94,904
Adjustment related to prior periods sales	(81		)		337				(10		)		246
Credits and payments made	(28,338		)		(52,948		)		(491		)		(81,777		)
Ending balance at December 31, 2019	$	5,739			$	17,280			$	1,583			$	24,602

Chargebacks, discounts, fees, and returns are recorded as reductions of trade receivables, net on the consolidated balance sheets. Government and other rebates are recoded as a component of accrued expenses and other current liabilities on the consolidated balance sheets.

Basic and diluted net loss per share is calculated as follows (in thousands, except share and per share amounts):

	Year Ended December 31,
	2019				2018				2017
Numerator:
Net loss	$	(132,993	)		$	(221,337	)		$	(254,237	)
Loss attributable to common stockholders—basic	(132,993		)		(221,337		)		(254,237		)
Loss attributable to common stockholders—diluted	$	(132,993	)		$	(221,337	)		$	(254,237	)
Denominator:
Weighted-average number of common shares used in loss per share— basic and diluted	46,026,217				45,356,263				43,804,660
Loss per share—basic and diluted	$	(2.89	)		$	(4.88	)		$	(5.80	)

The following potentially dilutive securities, prior to the use of the treasury stock method, have been excluded from the computation of diluted weighted-average shares outstanding, as they would be anti-dilutive. For the years ended December 31, 2019, 2018, and 2017 all of the Company’s options to purchase common stock, warrants and stock units outstanding were assumed to be anti-dilutive as earnings attributable to common stockholders was in a loss position.

	Year Ended December 31
	2019			2018			2017
Options to purchase common stock	4,834,255			5,462,787			5,647,895
Warrants	—			120,532			605,415
Restricted stock units	614,273			227,088			146,451
Performance units	79,000			—			—

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3M

In February 2018, the Company entered into a Scale-Up and Commercial Supply Agreement (the “Supply Agreement”) with 3M Company and 3M Innovative Properties Company (collectively with 3M Company, “3M”), pursuant to which 3M has agreed to exclusively manufacture Phase 3 and global commercial supplies of abaloparatide-coated transdermal patch product (“Product”) and associated applicator devices (“Applicator”). Under the Supply Agreement, 3M will manufacture Product and Applicator for the Company according to agreed-upon specifications in sufficient quantities to meet the Company’s projected supply requirements. 3M will manufacture commercial supplies of Product at unit prices that decrease with an increase in the quantity the Company orders. The Company will pay 3M a mid-to-low single-digit royalty on worldwide net sales of Product and reimburse 3M for certain capital expenditures incurred to establish commercial supply of Product. The Company is responsible for providing, at its expense, supplies of abaloparatide drug substance to be used in manufacturing Product. During the term of the Supply Agreement, 3M and the Company have agreed to work exclusively with each other with respect to the delivery of abaloparatide, parathyroid hormone (“PTH”), and/or PTH related proteins via active transdermal, intradermal, or microneedle technology.

The initial term of the Supply Agreement began on its effective date, February 27, 2018, and will continue for five years after the first commercial sale of Product. The Supply Agreement then automatically renews for successive three-year terms, unless earlier terminated pursuant to its terms or upon either party’s notice of termination to the other 24 months prior to the end of the then-current term. The Supply Agreement may be terminated by either party upon an uncured material breach of its terms by the other party, or due to the other party’s bankruptcy, insolvency, or dissolution. The Company may terminate the Supply Agreement upon the occurrence of certain events, including for certain clinical, technical, or commercial reasons impacting Product, if it is unable to obtain U.S. regulatory approval for Product within a certain time period, or if it ceases development or commercialization of Product. 3M may terminate the Supply Agreement upon the occurrence of certain events, including if there are certain safety issues related to Product, if the Company is unable to obtain U.S. regulatory approval for Product within a certain time period, or if the Company fails to order Product for a certain period of time after commercial launch of the Product in the U.S. Upon certain events of termination, 3M is required to transfer the manufacturing processes for Product and Applicator to the Company or a mutually agreeable third party and continue supplying Product and Applicator for a period of time pursuant to the Company’s projected supply requirements.

In partnership with 3M, the Company selected Thermo Fisher to conduct the abaloparatide-patch coating process and packaging operations. In October 2018, the Company committed to fund 3M’s purchase of capital equipment totaling approximately $9.6 million in preparation for manufacturing Phase 3 and potential commercial supplies of Product. Milestone payments for the equipment commenced in the fourth quarter of 2018 and are expected to be paid in full in the second quarter of 2021. In addition, there are cancelable purchase commitments in place to fund the facility build out and future purchases of capital equipment. The Company has paid 3M approximately $14.4 million, in the aggregate, through December 31, 2019 with respect to performance under the Supply Agreement.

In June 2009, the Company entered into a Development and Clinical Supplies Agreement with 3M, as amended (the “Development Agreement”), under which Product and Applicator development activities occur and 3M has manufactured phase 1 and 2 clinical trial supplies on an exclusive basis. The initial term of the Development Agreement remained in effect until June 2019, after which it automatically renews for successive one-year terms, unless earlier terminated, until the earliest of (i) the expiration or termination of the Supply Agreement, (ii) the mutual written agreement of the parties, or (iii) prior written notice by either party to the other party at least ninety days prior to the end of the then-current term of the Development Agreement that such party declines to extend the term. Either party may terminate the agreement in the event of an uncured material breach by the other party. The Company pays 3M for services delivered pursuant to the agreement on a fee-for-service or a fee-for-deliverable basis as specified in the agreement. The Company has paid 3M approximately $28.9 million, in the aggregate, through December 31, 2019 with respect to services and deliverables delivered pursuant to the Development Agreement.

Ipsen

In September 2005, the Company entered into a license agreement (the “License Agreement”), as amended, with an affiliate of Ipsen Pharma SAS (“Ipsen”) under which the Company exclusively licensed certain Ipsen compound technology and related patents covering abaloparatide to research, develop, manufacture, and commercialize certain compounds and related products in all countries, except Japan and France (where the Company’s commercialization rights were subject to certain co-marketing and co-promotion rights exercisable by Ipsen, provided that certain conditions included in the License Agreement were met). The Company believes that Ipsen’s co-marketing and co-promotion rights in France have permanently expired. Ipsen also granted the Company an exclusive right and license under the Ipsen compound technology and related patents to make, and have made, compounds or products in Japan. Ipsen further granted the Company an exclusive right and

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license under certain Ipsen formulation technology and related patents solely for purposes of enabling the Company to develop, manufacture, and commercialize compounds and products covered by the compound technology license in all countries, except Japan and France (as discussed above).

In consideration for these rights, the Company made nonrefundable, non-creditable payments in aggregate of $13.0 million to Ipsen, including payment in recognition of certain milestones having been achieved through December 31, 2019. The License Agreement provides for further payments upon the achievement of certain future regulatory and commercial milestones. Total additional milestone payments that could be payable under the agreement is €24.0 million (approximately $28.7 million). In connection with the FDA’s approval of TYMLOS in April 2017, the Company paid Ipsen a milestone of €8.0 million (approximately $8.7 million) under the License Agreement, which the Company recorded as an intangible asset within the consolidated balance sheet and will amortize over the remaining patent life or the estimated useful life of the underlying product. The agreement provides that the Company would pay to Ipsen a fixed five percent royalty based on net sales of the product by the Company or its sublicensees on a country-by-country basis until the later of the last to expire of the licensed patents or for a period of 10 years after the first commercial sale in such country. The royalty expense was $8.7 million and $5.0 million for the years ended December 31, 2019 and 2018, respectively, which is recorded in cost of sales within the consolidated statement of operations and comprehensive loss. The date of the last to expire of the abaloparatide patents licensed from or co-owned with Ipsen, barring any extension thereof, is expected to be March 26, 2028.

If the Company sublicenses abaloparatide to a third party, then the agreement provides that the Company would pay Ipsen a percentage of certain payments received from such sublicensee (in lieu of milestone payments not achieved at the time of such sublicense). The applicable percentage is in the low double digit range. In addition, if the Company or its sublicensees commercialize a product that includes a compound discovered by it based on or derived from confidential Ipsen know-how, then the agreement provides that the Company would pay to Ipsen a fixed low single digit royalty on net sales of such product on a country-by-country basis until the later of the last to expire of licensed patents that cover such product or for a period of 10 years after the first commercial sale of such product in such country.

The License Agreement expires on a country-by-country basis on the later of (1) the date the last remaining valid claim in the licensed patents expires in that country, or (2) a period of 10 years after the first commercial sale of the licensed products in such country, unless it is sooner terminated in accordance with its terms.

Pursuant to a June 2018 final decision in arbitration proceedings with Ipsen in connection with the License Agreement, the Company paid Ipsen $10.0 million (and pre-award interest of $0.8 million) and is obligated to pay Ipsen (i) $5.0 million if abaloparatide receives marketing approval in Japan, and (ii) a fixed mid single-digit royalty based on net sales of abaloparatide in Japan. The Company recorded the $10.8 million payment to other operating expenses in the consolidated statement of operations and comprehensive loss in the second quarter of 2018. The $5.0 million payment upon abaloparatide receiving marketing approval in Japan will be accrued in the period in which the approval is determined to be probable. Royalties based on net sales of abaloparatide in Japan will be accrued during the period that revenue for such sales, which is subject to a royalty arrangement, is recognized and will be presented as cost of sales within the consolidated statement of operations and comprehensive loss.

The arbitration decision does not impact the Company’s rights under the License Agreement or its license agreement with Teijin for abaloparatide-SC in Japan, under which the Company previously received a $10.0 million upfront payment and is entitled to receive up to an aggregate of $40.0 million upon the achievement of certain regulatory and sales milestones, and a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan.

Eisai Co. Ltd.

In June 2006, the Company entered into a license agreement (the “Eisai Agreement”), with Eisai Co. Ltd., (“Eisai”). Under the Eisai Agreement, Eisai granted to the Company an exclusive right and license to research, develop, manufacture and commercialize elacestrant and related products from Eisai in all countries, except Japan. In consideration for the rights to elacestrant, the Company paid Eisai an initial license fee of $0.5 million, which was expensed during 2006. In March 2015, the Company entered into an amendment to the Eisai Agreement (the “Eisai Amendment”) in which Eisai granted to the Company the exclusive right and license to research, develop, manufacture and commercialize elacestrant in Japan. In consideration for the rights to elacestrant in Japan, the Company paid Eisai a license fee of $0.4 million upon execution of the Eisai Amendment, which was recognized as research and development expense in 2015. The Eisai Agreement, as amended, also provides for additional payments of up to $22.3 million, payable upon the achievement of certain clinical and regulatory milestones. To date, the Company has paid Eisai approximately $1.0 million in connection with the achievement of certain milestones.

Under the Eisai Agreement, as amended, should a product covered by the licensed technology be commercialized, the Company will be obligated to pay to Eisai royalties in a variable mid-single digit range based on net sales of the product on a country-by-country basis. The royalty rate will be reduced, on a country-by-country basis, at such time as the last remaining

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valid claim in the licensed patents expires, lapses or is invalidated and the product is not covered by data protection clauses. In addition, the royalty rate will be reduced, on a country-by-country basis, if, in addition to the conditions specified in the previous sentence, sales of lawful generic versions of such product account for more than a specified minimum percentage of the total sales of all products that contain the licensed compound during a calendar quarter. The latest licensed patent is expected to expire, barring any extension thereof, on August 18, 2026.

The Eisai Agreement, as amended, also grants the Company the right to grant sublicenses with prior written approval from Eisai. If the Company sublicenses the licensed technology to a third party, the Company will be obligated to pay Eisai, in addition to the milestones referenced above, a fixed low double digit percentage of certain fees received from such sublicensee and royalties in the low single digit range based on net sales of the sublicensee. The license agreement expires on a country-by-country basis on the later of (1) the date the last remaining valid claim in the licensed patents expires, lapses or is invalidated in that country, the product is not covered by data protection clauses, and the sales of lawful generic versions of the product account for more than a specified percentage of the total sales of all pharmaceutical products containing the licensed compound in that country; or (2) a period of 10 years after the first commercial sale of the licensed products in such country, unless it is sooner terminated.

Duke

In December 2017, the Company and Duke University (“Duke”) entered into a License Agreement with (the “Duke Agreement”) pursuant to which Radius acquired the exclusive worldwide license to certain Duke patents associated with elacestrant (RAD1901) related to the use of elacestrant in the treatment of breast cancer as a monotherapy and in a combination therapy (collectively “Duke Patents”).

In consideration for these rights, the Company incurred non-refundable, non-creditable obligations to pay Duke, totaling $1.3 million, which were expensed as research and development during 2017. The Duke Agreement provides for further payments upon the achievement of certain future regulatory and commercial milestones totaling up to $3.8 million. To date, the Company has paid Duke approximately $0.5 million in connection with the achievement of certain milestones. The agreement provides that the Company would pay Duke a fixed low single-digit royalty based on net sales, on a country-by-country basis, beginning in August 2029 and ending upon expiration of the last patent rights to expire.

If the Company sublicenses the Duke Patents to a third party, the agreement provides that the Company will pay Duke a percentage of certain payments received by it from such sublicensee(s). The applicable percentage is in the high single-digit range on certain payments received in excess a pre-specified amount. The License Agreement may be terminated by Duke upon a material uncured breach of the License Agreement. The Company may terminate the License Agreement upon 60 days written notice.

Teijin Limited

In July 2017, the Company entered into a License and Development Agreement (the “Teijin Agreement”) with Teijin Limited (“Teijin”) for abaloparatide-SC in Japan.

Pursuant to the Teijin Agreement, the Company granted Teijin: (i) an exclusive payment-bearing license under certain of the Company’s intellectual property to develop and commercialize abaloparatide-SC in Japan, (ii) a non-exclusive payment-bearing license under certain of the Company’s intellectual property to manufacture abaloparatide-SC for commercial supply in Japan, (iii) a right of reference to certain of the Company’s regulatory data related to abaloparatide-SC for purposes of developing, manufacturing and commercializing abaloparatide-SC in Japan, (iv) a manufacture transfer package, upon Teijin’s request, consisting of information and the Company’s know-how that is necessary for the manufacture of active pharmaceutical ingredient and abaloparatide-SC, and (v) right, at Teijin’s request, to have the Company manufacture (or arrange for a third party to manufacture) and supply (or arrange for a third party to supply) the active pharmaceutical ingredient for the clinical supply of abaloparatide-SC in sufficient quantities to enable Teijin to conduct its clinical trials in Japan. In consideration for these rights, the Company received an upfront payment of $10.0 million, and may receive further payments upon the achievement of certain regulatory and sales milestones, as well as a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan during the royalty term, as defined below.

Pursuant to the Teijin Agreement, the parties may further collaborate on new indications for abaloparatide-SC, and the Company also maintains full global rights to its development program for abaloparatide-patch, which is not part of the Teijin Agreement.

Unless earlier terminated, the Teijin Agreement expires on the later of the (i) date on which the use, sale or importation of abaloparatide-SC is no longer covered by a valid claim under the Company’s patent rights licensed to Teijin in Japan, (ii)

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expiration of marketing or data exclusivity for abaloparatide-SC in Japan, or (iii) 10th anniversary of the first commercial sale of abaloparatide-SC in Japan.

The Company assessed this arrangement in accordance with Topic 606 and concluded that the contract counterparty, Teijin, is a customer. The Company identified the following material promises under the contract: the commercialization and manufacturing licenses under certain intellectual property rights relating to abaloparatide-SC in Japan, as well as the right of reference to certain regulatory information. In addition, the Company identified the following customer option that would create an obligation for the Company if exercised by Teijin - the transfer of manufacturing know-how. The customer option for the transfer of manufacturing know-how represents a material right. Finally, the Company also identified the following customer option that would create a manufacturing obligation for the Company if exercised by Teijin - the supply of abaloparatide-SC for Teijin’s clinical trial needs. The customer option for clinical supply of abaloparatide-SC does not represent a material right. Based on these assessments, the Company identified the (i) commercialization and manufacturing licenses, as well as the right of reference to certain regulatory information, and (ii) transfer of manufacturing know-how as the only performance obligations at the inception of the arrangement, which were both deemed to be distinct.

The Company further determined that the up-front payment of $10.0 million constituted the entirety of the consideration to be included in the transaction price, which was allocated to the performance obligations based on the Company’s best estimate of its relative stand-alone selling prices. For the commercialization and manufacturing licenses, including the right of reference to certain regulatory information, the stand-alone selling price was calculated using the expected cost approach by leveraging the direct costs incurred by the Company in its ACTIVExtend Phase 3 clinical trial for abaloparatide-SC, plus an estimated inflation rate. The stand-alone selling price of the transfer of manufacturing know-how was computed using a cost-plus margin approach reflecting the level of effort required, which can be reasonably estimated to be incurred over the performance period, multiplied by a fully-burdened internal labor rate plus an expected margin. Based on the estimates of the stand-alone selling prices for each of the performance obligations, as referenced above, the Company determined that substantially all of the $10.0 million transaction price should be allocated to the performance obligation for the commercialization and manufacturing licenses, including the right of reference to certain regulatory information. The consideration allocated to the performance obligation for the transfer of manufacturing know-how was immaterial. The Company believes that a change in the assumptions used to determine its best estimate of the selling price for the commercialization and manufacturing licenses, including the right of reference to certain regulatory information, would not have a significant effect on the allocation of the underlying consideration to the performance obligations.

For the year ended December 31, 2019, 2018, and 2017 no income tax expense was recorded due to the Company’s net operating losses (NOLs) and full valuation allowance.

The components of loss before provision for (benefit from) income taxes during the three years ended December 31, 2019 consisted of the following:

	Year Ended December 31,
	2019				2018				2017
United States	$	(116,749	)		$	(208,735	)		$	(245,264	)
Foreign	(16,244		)		(12,602		)		(8,973		)
	(132,993		)		(221,337		)		(254,237		)

A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows (in thousands):

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	Year Ended December 31,
	2019				2018				2017
Income tax benefit using U.S. federal statutory rate	$	(27,918	)		$	(46,464	)		$	(86,426	)
State income taxes, net of federal benefit	(5,486		)		(6,694		)		(5,570		)
Stock-based compensation	4,379				(12		)		(5,909		)
Research and development tax credits	(2,491		)		(3,743		)		(2,468		)
Effect of federal tax law change	—				—				86,035
Other adjustments - ASU 2016-09 adoption	—				—				6,135
Change in the valuation allowance	26,918				49,550				(39,045		)
Convertible note	(128		)		(128		)		47,016
Permanent items	457				883				543
Uncertain Tax Positions	—				—				3,056
Foreign rate differential	3,414				2,649				—
Other	855				3,959				(3,367		)
Income tax expense	$	—			$	—			$	—

The principal components of the Company’s deferred tax assets are as follows (in thousands):

	December 31,
	2019				2018
Deferred tax assets:
NOL carryforwards	$	243,063			$	225,285
Capitalized research and development	4,099				3,919
Research and development credits	9,608				8,380
Interest Expense	2,729				1,125
Accrued expenses	5,342				2,644
Stock-based compensation	14,952				14,377
UNICAP	103				86
Allowance for bad debt	1,832				840
Operating lease liability	1,696				—
Other	119				106
Gross non-current deferred tax assets	283,543				256,762
Valuation allowance	(255,242		)		(228,322		)
Net non-current deferred tax assets	$	28,301			$	28,440
Deferred tax liabilities:
Depreciation	$	(216	)		$	(347	)
Right-of-Use asset	(1,677		)		—
Convertible debt	(26,408		)		(28,093		)
Gross non-current deferred tax liabilities	(28,301		)		(28,440		)
Net non-current deferred tax assets (liabilities)	$	—			$	—

FASB ASC 740-Income Taxes requires that a valuation allowance be established to reduce a deferred tax asset to its realizable value when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence needs to be considered, including the utilization of past tax credits and length of carry-back and carry-forward periods, reversal of temporary differences, tax planning strategies, our current and past performance, the market environment in which we operate, and the evaluation of tax planning strategies to generate future taxable income.

The Company has recorded a valuation allowance against its net deferred tax assets in each of the years ended December 31, 2019, 2018, and 2017, because the Company’s management believes that it is more likely than not that these

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assets will not be realized. The increase in the valuation allowance of $26.9 million in 2019 primarily relates to the net loss incurred by the Company.

As of December 31, 2019, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $974.3 million and $681.8 million, respectively, which may be used to offset future taxable income. Of the federal NOL amount, approximately $754.2 million will expire at various dates through 2037 and $220.1 million will carryforward indefinitely. The state NOLs will expire at various dates through 2039.

As of December 31, 2019, the Company also had federal and state tax credits of $8.0 million and $2.1 million, respectively, to offset future tax liabilities. The federal general business credits will expire at various dates through 2039 and the state research and development tax credits will expire at various dates through 2034.  

In 2016, the Company completed an evaluation of our tax attributes through December 31, 2015 as outlined under Section 382 of the Internal Revenue Code, which resulted in a reduction of its NOL and credit carryforwards. The Company has adjusted its NOL and credit carryforwards, and the related valuation allowance, according to the results of this evaluation. As no additional evaluations have been completed since 2016, the NOLs could be subject to further limitations.

The Company applies the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. As of December 31, 2019, the unrecognized tax benefit was $2.6 million which, if recognized, will not affect the annual effective tax rate as these unrecognized tax benefits would increase deferred tax assets which would be subject to a full valuation allowance. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows (in thousands):

	Uncertain Tax Position
Balance at December 31, 2018	$	2,239
Decreases related to prior year tax positions	(285		)
Increases related to prior year tax positions	92
Decreases related to current year tax positions	—
Increases related to current year tax positions	517
Balance at December 31, 2019	$	2,563

The Company and its subsidiaries file income tax returns in the United States, as well as various state and foreign jurisdictions. Generally, the tax years 2016 through 2018 remain open to examination by the major taxing jurisdictions to which the Company is subject. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, or state or foreign tax authorities, to the extent utilized in a future period.

No material interest or penalties have been recorded for the years ended December 31, 2019, 2018, or 2017. The Company does not expect any significant change in its uncertain tax positions in the next 12 months.

Litigation

From time to time, the Company may become subject to legal proceedings and claims which arise in the ordinary course of its business. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.

As of December 31, 2019, the Company was not party to any significant litigation.

Manufacturing Agreements

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In June 2016, the Company entered into a Supply Agreement with Ypsomed AG, pursuant to which Ypsomed agreed to supply commercial and clinical supplies of a disposable pen injection device customized for subcutaneous injection of abaloparatide. The Company has agreed to purchase a minimum number of devices at prices per device that decrease with an increase in quantity supplied. In addition, the Company has agreed to make milestone payments for Ypsomed’s capital developments in connection with the initiation of the commercial supply of the device and to pay a one-time capacity fee. All costs and payments under the agreement are delineated in Swiss Francs. The agreement has an initial term of three years which began on June 1, 2017, after which, it automatically renews for two-year terms unless either party terminates the agreement upon 18 months’ notice prior to the end of the then-current term. The Company will purchase the device subject to minimum annual quantity requirements over the initial three-year term of the agreement. The Company is required to purchase a minimum number of batches for CHF 2.4 million ($2.5 million) through the year ended December 31, 2022.

In June 2016, the Company entered into a Commercial Supply Agreement with Vetter Pharma International GmbH, pursuant to which Vetter has agreed to formulate the finished abaloparatide-SC drug product containing the active pharmaceutical ingredient of abaloparatide, to fill cartridges with the drug product, to assemble the pen delivery device, and to package the pen for commercial distribution. The Company has agreed to purchase the cartridges and pens in specified batch sizes at a price per unit. For labeling and packaging services, the Company has agreed to pay a per unit price dependent upon the number of pens loaded with cartridges that are labeled and packaged. These prices are subject to an annual price adjustment. The agreement has an initial term of five years, which began on January 1, 2016, after which, it automatically renews for two-year terms unless either party notifies the other party two years before the end of the then-current term that it does not intend to renew.

In July 2016, the Company entered into a Manufacturing Services Agreement with Polypeptide Laboratories Holding AB, as successor-in-interest to Lonza Group Ltd., pursuant to which PPL has agreed to manufacture the commercial and clinical supplies of the API for abaloparatide. The Company has agreed to purchase the API in batches at a price per gram in euros, subject to an annual increase by PPL. The Company is also required to purchase a minimum number of batches annually, equal to €2.9 million ($3.4 million) per year and $17.2 million in total through the year ended December 31, 2022. The agreement has an initial term of a six years, after which, it automatically renews for three-year terms unless either party provides notice of non-renewal 24 months before the end of the then-current term.

Related Party Transactions

The Company determines if an arrangement is a lease at inception. For operating leases, amounts recorded in connection therewith are included in right-of-use assets and lease liabilities in the condensed consolidated balance sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the leases and are recognized on the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases have not historically provided an implicit rate, the Company’s incremental borrowing rate based on information available at the commencement date is used in determining the present value of lease payments. However, the implicit rate is used when readily determinable. The operating lease right-of-use assets also include any lease payments made and excludes lease incentives. Options to extend the lease term or terminate the leases are incorporated into the determination of the lease term if it is reasonably certain that the Company will exercise such options based on assessment of economic factors, such as contractual terms, market rates and locations, and costs associated with negotiation of new leases or termination of leases. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

In addition, as a practical expedient, for all leases entered into or modified after the effective date of ASC 842, the Company, as the lessee, has made an accounting policy election, by class of underlying asset, to not separate nonlease components from lease components. The Company will account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

The Company has operating leases for corporate offices in Waltham, MA, Wayne, PA and Parsippany, NJ and for research laboratories in Cambridge, MA. These leases have remaining lease terms of less than one year to six years, some of which

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include options to extend the leases for additional years, and of which includes the option to terminate the lease upon default by the Company. The options to extend and terminate the leases were not incorporated into the determination of the lease term as the exercise of such options was not reasonably certain at the lease commencement date based on assessment of economic factors.

In addition to the operating leases, the Supply Agreement with 3M is a multiple-element arrangement covering Phase 3 clinical materials and related services, potential commercial materials, and potential future royalty payments, as well as the construction of certain equipment, an isolator, to be used in the manufacture of the Phase 3 and potential commercial supplies of Product. The contractually stated cost of the isolator, as well as the costs of the other elements, represent the estimated standalone selling price and, therefore, no initial allocation was required to separate the cost of the isolator from the other elements. Under ASC 840, Leases, which was the standard under which the Company accounted for leases through December 31, 2018, the Company was considered the accounting owner of the isolator equipment during construction and costs were recognized to research and development expense as incurred through December 31, 2018, since the equipment was assessed to not have alternative future use to the Company. Upon transition to ASC 842 on January 1, 2019, the Company continues to control the isolator during construction and costs will be recognized to research and development expense as incurred, which is expected to be completed in 2020, since the equipment was again assessed to not have alternative future use to the Company and/or 3M.

On March 27, 2018, the Company announced organizational changes which included the closure of its Parsippany, NJ office and, on January 4, 2019, the Company ceased use of the office, triggering an impairment assessment. In connection with this assessment, the Company recorded an impairment loss of $0.3 million during the twelve months ended December 31, 2019.

The Company’s operating leases also include such costs as real estate taxes and common area maintenance charges. Such amounts have been recorded as variable lease costs within the consolidated statement of operations. During the twelve months ended December 31, 2019, the components of lease expense were as follows (in thousands):

	Year ended
	December 31, 2019
Operating lease cost	$	2,742
Variable lease cost	124
Total lease cost	$	2,866

As of December 31, 2019, the weighted average remaining lease term for the Company’s operating leases was 4.60 years.

As a discount rate was not directly observable for the operating leases, the discount rate used to calculate the net present value of future payments was the Company’s incremental borrowing rate calculated at transition based on the remaining lease term for each operating lease. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. In determining the incremental borrowing rate, the Company considered the following: (i) the Company’s public credit rating, (ii) observable debt yields of the Company, as well as other bonds in the market issued by other companies with similar credit ratings as the Company, and (iii) adjustments necessary for collateral, lease term and inflation or foreign currency. As of December 31, 2019, the weighted average discount rate for the Company’s operating leases was 6.07%.

The following table summarizes activity of the operating lease liabilities for the twelve months ended December 31, 2019 (in thousands):

	Lease Liability
Beginning balance at December 31, 2018	$	—
Transition adjustment recorded upon adoption	8,289
Operating lease liability recognized	788
Payments during the period	(2,742		)
Effect of discounted cash flows during the period	444
Ending balance at December 31, 2019	$	6,779

Future payments of operating lease liabilities as of December 31, 2019 are as follows (in thousands):

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Year ending December 31,
2020		$	2,551
2021		1,413
2022		1,038
2023		980
2024		1,005
Thereafter		857
Total Lease payments		$	7,844
Less: effect of discounted cash flows during the period		(1,065		)
Total		$	6,779

Rent expense for the years ended December 31, 2019, 2018, and 2017 was $2.9 million, and $3.5 million, and $3.4 million, respectively.

As of December 31, 2019, the Company had no operating or finance leases that have not yet commenced. In addition, upon adoption, and as of December 31, 2019, the Company had no short-term leases.

On January 10, 2020, the Company and Radius Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company (collectively, the “Borrowers”), entered into a (i) Credit and Security Agreement (Term Loan) (the “Term Credit Agreement”) with MidCap Financial Trust, in its capacity as administrative agent (the “Agent”) and as a lender, and the financial institutions or other entities from time to time parties thereto and (ii) Credit and Security Agreement (Revolving Loan) (the “Revolving Credit Agreement”, together with the Term Credit Agreement, the “Credit Agreements”), with the Agent, and the financial institutions or other entities from time to time parties thereto.

The Credit Agreements consist of a secured term loan facility (the “Term Facility”) in an aggregate amount of $55.0 million, which will be made available to the Borrowers under the following four tranches: (i) Tranche 1 – $10.0 million, available at closing; (ii) Tranche 2 – $15.0 million, available no later than March 31, 2020; (iii) Tranche 3 – $15.0 million, available no later than December 31, 2021, subject to the Company’s satisfaction of certain conditions described in the Term Credit Agreement; and (iv) Tranche 4 – $15.0 million, available no later than December 31, 2021, subject to the Company’s satisfaction of certain conditions described in the Term Credit Agreement.

The Credit Agreements also consist of a secured revolving credit facility (the “Revolving Facility”, together with the Term Facility, the “Facilities”) under which the Borrowers may borrow up to $20.0 million, the availability of which is determined based on a borrowing base as follows: (i) up to 85% of the net collectible value of the Borrowers’ domestic accounts receivable due from eligible direct and third-party payors, plus (ii) up to 40% of the Borrowers’ domestic eligible inventory, provided that the availability from eligible inventory may not exceed 20% of the total availability at any time. The Borrowers also have the right, subject to certain customary conditions, to increase the Revolving Facility by $20.0 million.

The Facilities have a maturity date of June 1, 2024. The Borrowers guarantee their obligations under the Credit Agreements. The obligations are secured by first priority liens on substantially all of the assets of the Borrowers, including, with certain exceptions, all of the capital stock of the Borrowers’ subsidiaries.

The proceeds of the Term Facility may be used for (i) transaction fees in connection with the transactions contemplated by the Credit Agreements, (ii) the payment in full on the closing date of certain existing debt, and (iii) working capital needs and general corporate purposes of the Borrowers and their subsidiaries. The proceeds of the Revolving Facility may be used for (i) transaction fees in connection with the transactions contemplated by the Credit Agreements and (ii) working capital needs and general corporate purposes of the Borrowers and their subsidiaries.

Borrowings under the Term Facility will bear interest through maturity at a variable rate based upon the LIBOR rate plus 5.75%, subject to a LIBOR floor of 2.00%. Borrowings under the Revolving Facility will bear interest through maturity at a variable rate based upon the LIBOR rate plus 3.50%, subject to a LIBOR floor of 2.00%.

Subject to the terms and conditions set forth in the Credit Agreements, the Borrowers may be required to make certain mandatory prepayments prior to maturity.

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The Credit Agreements contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, will limit or restrict the ability of the Borrowers, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. The Credit Agreements also contains customary events of default, including subject to thresholds and grace periods, among others, payment default, covenant default, cross default to other material indebtedness, and judgment default. In addition, the Credit Agreements require the Borrowers to maintain a minimum level of net revenue, or in the case where the Borrowers fail to maintain a minimum level of net revenue, certain levels of market capitalization and unrestricted cash.

Selected quarterly financial data for the years ended December 31, 2019 and 2018 is as follows (in thousands, except for share and per share data):

	Three Months Ended
	March 31,				June 30,				September 30,				December 31,
2019:
Net revenue	$	29,844			$	41,042			$	46,766			$	55,665
Gross profit	26,614				37,034				42,595				50,989
Net loss	(42,760		)		(35,474		)		(30,044		)		(24,715		)
Net loss applicable to common stock	(42,760		)		(35,474		)		(30,044		)		(24,715		)
Net loss per share—basic and diluted	(0.94		)		(0.77		)		(0.65		)		(0.54		)
Weighted-average common shares outstanding—basic and diluted	45,671,502				46,109,193				46,141,217				46,176,145
2018:
Net revenue	$	14,547			$	22,629			$	27,639			$	34,424
Gross profit	13,259				20,826				25,246				31,482
Net loss	(61,555		)		(68,882		)		(49,802		)		(41,098		)
Net loss applicable to common stock	(61,555		)		(68,882		)		(49,802		)		(41,098		)
Net loss per share—basic and diluted	(1.37		)		(1.52		)		(1.09		)		(0.90		)
Weighted-average common shares outstanding—basic and diluted	44,937,776				45,430,678				45,498,909				45,549,972

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(a)	Financial Statements

(b)	Financial Statement Schedules

(c)	Exhibits

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^	Confidential treatment has been granted with respect to redacted portions of this exhibit. Redacted portions of this exhibit have been filed separately with the SEC.

^^	Certain confidential information contained in this exhibit, marked by brackets in the exhibit, has been omitted, because it is both not material and would likely cause competitive harm if publicly disclosed.

*	Filed herewith.

**	Furnished herewith.

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