ESPERION THERAPEUTICS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes appearing elsewhere in this Annual Report on Form 10-K. In addition to
historical information, this discussion and analysis contains forward-looking
statements that involve risks, uncertainties and assumptions. Our actual results
may differ materially from those anticipated in these forward-looking statements
as a result of certain factors. We discuss factors that we believe could cause
or contribute to these differences below and elsewhere in this report, including
those set forth under Item 1A. "Risk Factors" and under "Forward-Looking
Statements" in this Annual Report on Form 10-K.

Overview

Company Overview

We are a pharmaceutical company singularly focused on developing and
commercializing accessible, oral, once-daily, non-statin medicines for patients
struggling with elevated low-density lipoprotein cholesterol, or LDL-C. Through
commercial execution and advancement of our CLEAR Outcomes trial as well as our
pre-clinical pipeline, we continue to evolve into a differentiated, global
cardiometabolic biotech. Our team of lipid experts are dedicated to lowering bad
cholesterol through the discovery, development and commercialization of
innovative medicines and their combinations with established medicines. Our
first two products were approved by the U.S. Food and Drug Administration, or
FDA, European Medicines Agency, or EMA and Swiss Agency for Therapeutic
Products, or Swissmedic, in 2020. Bempedoic acid and the bempedoic acid /
ezetimibe combination tablet are oral, once-daily, non-statin, LDL-C lowering
medicines for patients with atherosclerotic cardiovascular disease, or ASCVD, or
heterozygous familial hypercholesterolemia, or HeFH.

On April 26, 2021, we entered into a license and collaboration agreement with
Daiichi Sankyo Co. Ltd, or DS. Pursuant to the agreement, we granted DS
exclusive development and commercialization rights to bempedoic acid and the
bempedoic acid / ezetimibe combination tablet in South Korea, Taiwan, Hong Kong,
Thailand, Vietnam, Brazil, Macao, Cambodia and Myanmar, or the DS Territory. The
agreement allows for potential expansion across geographies including Saudi
Arabia, Kuwait, Oman, UAE, Qatar, Bahrain, Yemen, Colombia and other Latin
American countries. Except for certain development activities in South Korea and
Taiwan, DS will be responsible for development and commercialization in these
territories. We received an upfront cash payment of $30.0 million in May 2021
and are eligible to receive up to an additional $175.0 million in sales
milestones. We will also receive tiered royalties ranging from 5 percent to 20
percent on net sales in the DS Territory.

On April 26, 2021, we entered into Amendment No. 2, or the RIPA Amendment, to
the Revenue Interest Purchase Agreement, or RIPA, with Eiger III SA LLC, or
Oberland, an affiliate of Oberland Capital LLC, as agent for the purchaser
parties thereto dated as of June 26, 2019 (as amended by the Amendment No. 1
dated as of November 9, 2020). Pursuant to the RIPA Amendment, Oberland waived
the original trailing six-month world-wide net sales condition to the third
installment payment under the RIPA and released the final $50 million payment
payable to us under the terms of the RIPA. The Company
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and Oberland have also agreed to amend the supplemental terms of the RIPA and related security agreement, which are discussed in more detail in Note 10 to our audited financial statements contained elsewhere in this Annual Report on Form 10-K.

On October 18, 2021, we announced our plan to align operational and expense
structure to better enable future growth for our two first-in-class oral
medicines, NEXLETOL and NEXLIZET, and prioritize our investment in the CLEAR
Outcomes trial. We reduced operational expense across our organization through a
corporate workforce reduction of approximately 40%, or the Reduction, and
through targeted program savings. We focused our commercialization efforts on an
optimized blend of focused outreach including a streamlined sales force,
directed to targeted cardiologists and primary care physicians, and a suite of
digital initiatives designed to increase awareness and utilization of our
medicines in appropriate patients.

On October 22, 2021, we entered into a privately negotiated exchange agreement,
or the Exchange Agreement, with two co-managed holders, or the Holders, of our
Convertible Notes. Under the terms of the Exchange Agreement the Holders agreed
to exchange with us $15.0 million aggregate principal amount of the Convertible
Notes held in the aggregate by them (and accrued interest thereon) for shares of
our common stock. Pursuant to the Exchange Agreement, the number of shares of
common stock to be issued by us to the Holders upon consummation of the Exchange
was determined based upon the volume-weighted-average-price per share of common
stock, subject to a floor of $5.62 per share, during the five trading-day
averaging period, commencing on the trading day immediately following the date
of the Exchange Agreement. The Exchange closed on November 3, 2021, resulting in
an issuance of 1,094,848 shares of our common stock. Refer to Note 11 in our
audited financial statements appearing elsewhere in this Annual Report on Form
10-K for further information.

On December 2, 2021, we entered into an underwriting agreement with H.C.
Wainwright & Co., LLC, or Wainwright. Pursuant to the Underwriting Agreement, we
agreed to sell, in a firm commitment offering, 32,142,858 shares of common
stock, $0.001 par value per share, and accompanying warrants to purchase up to
an aggregate of 32,142,858 shares of common stock, as well as up to 4,821,428
additional shares of common stock and/or accompanying warrants to purchase an
aggregate of up to 4,821,428 shares of our common stock that may be purchased by
Wainwright pursuant to a 30-day option granted to Wainwright by us, or the
Offering. Each share of common stock was sold together with a common warrant to
purchase one share of common stock, at an exercise price of $9.00 per share.
Such common warrants are immediately exercisable and will expire two years from
the date of issuance. The combined public offering price of each share of common
stock and accompanying common warrant sold in the Offering was $7.00, and the
combined price of each share of common stock and accompanying common warrant
purchased by Wainwright from the Company was $6.51. On December 3, 2021,
Wainwright exercised its option to purchase additional warrants to purchase
4,821,428 shares of Common Stock. The Offering, including the additional
warrants sold pursuant to the exercise of Wainwright's option to purchase
additional warrants, closed on December 7, 2021. The aggregate net proceeds
received by us from the offering was $208.7 million, after deducting
underwriting discounts and commissions and other estimated offering expenses
payable by us and excluding the net proceeds, if any, from the exercise of the
common warrants. Refer to Note 12 in our audited financial statements appearing
elsewhere in this Annual Report on Form 10-K for further information.

We are conducting a global cardiovascular outcomes trial, or CVOT, -known as
Cholesterol Lowering via BEmpedoic Acid, an ACL-inhibiting Regimen (CLEAR)
Outcomes. The trial is designed to evaluate whether treatment with bempedoic
acid reduces the risk of cardiovascular events in patients who are statin averse
and who have CVD or are at high risk for CVD. We initiated the CLEAR Outcomes
CVOT in December 2016 and fully enrolled the study with over 14,000 patients in
August 2019. The primary endpoint of the study is the effect of bempedoic acid
on four types of major adverse cardiovascular events, or MACE (cardiovascular
death, non-fatal myocardial infarction, non-fatal stroke, or coronary
revascularization; also referred to as "four-component MACE"). CLEAR Outcomes is
an event-driven trial and will conclude once the predetermined number of MACE
endpoints occur. Based on estimated cardiovascular event rates, we expect to
meet the target number of events in the second half of 2022 and report top-line
results in the first quarter of 2023. In February 2022, we accumulated 90% of
the primary 4-component MACE endpoints. We intend to use positive results from
this CVOT to support submissions for a CV risk reduction indication in the U.S.,
Europe and other territories.

We were incorporated in Delaware in January 2008, and commenced our operations
in April 2008. Since our inception, we have focused substantially all of our
efforts and financial resources on developing and commercializing bempedoic acid
and the bempedoic acid / ezetimibe tablet. In February 2020, the FDA approved
NEXLETOL and NEXLIZET. NEXLETOL was commercially available in the U.S. on March
30, 2020 and NEXLIZET was commercially available in the U.S. on June 4, 2020.
While we began to generate revenue from the sales of our products in 2020, we
have funded our operations to date primarily through proceeds from sales of
preferred stock, convertible promissory notes and warrants, public offerings of
common stock and warrants, the incurrence of indebtedness, through
collaborations with third parties and revenue interest purchase agreements. We
have incurred losses in each year since our inception.

We have never been profitable and our net losses were $269.1 million, $143.6
million and $97.2 million for the years ended December 31, 2021, 2020 and 2019,
respectively. Substantially all of our net losses resulted from costs incurred
in

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related to research and development programs, selling, general and administrative expenses associated with our operations. We expect to incur significant expenses and operating losses in the foreseeable future in connection with our ongoing operations, including, among others:

•market NEXLETOL and NEXLIZET in the we; and

•completion of clinical development activities for the CLEAR Outcomes CVOT.

Accordingly, we may need additional financing to support our continuing
operations and further the development and commercialization of our products. We
may seek to fund our operations and further development activities through
collaborations with third parties, strategic alliances, licensing arrangements,
permitted debt financings, permitted royalty-based financings, permitted public
or private equity offerings or through other sources. Adequate additional
financing may not be available to us on acceptable terms, or at all. Our failure
to raise capital as and when needed would have a material adverse effect on our
financial condition and our ability to pursue our business strategy or continue
operations. We will need to generate significant revenues to achieve
profitability, and we may never do so.

Product presentation

NEXLETOL is a first-in-class ATP Citrate Lyase, or ACL, inhibitor that lowers
LDL-C by reducing cholesterol biosynthesis and up-regulating the LDL receptors.
Completed Phase 3 studies conducted in more than 3,000 patients, with over 2,000
patients treated with NEXLETOL, demonstrated an average 18 percent placebo
corrected LDL-C lowering when used in patients on moderate or high-intensity
statins. NEXLETOL was approved by the FDA in February 2020 as an adjunct to diet
and maximally tolerated statin therapy for the treatment of adults with HeFH or
established ASCVD who require additional lowering of LDL-C.

NEXLIZET contains bempedoic acid and ezetimibe and lowers elevated LDL-C through
complementary mechanisms of action by inhibiting cholesterol synthesis in the
liver and absorption in the intestine. Phase 3 data demonstrated NEXLIZET
lowered LDL-C by a mean of 38 percent compared to placebo when added on to
maximally tolerated statins. NEXLIZET was approved by the FDA in February 2020
as an adjunct to diet and maximally tolerated statin therapy for the treatment
of adults with HeFH or established ASCVD who require additional lowering of
LDL-C.

NILEMDO is a first-in-class ACL inhibitor that lowers LDL-C by reducing
cholesterol biosynthesis and up-regulating the LDL receptors. NILEMDO was
approved by the EC in March 2020 for use in adults with primary
hypercholesterolemia (heterozygous familial and non-familial) or mixed
dyslipidemia, as an adjunct to diet in combination with a statin or statin with
other lipid-lowering therapies in adult patients unable to reach LDL-C goals
with the maximum tolerated dose of a statin, or alone or in combination with
other lipid-lowering therapies as an adjunct to diet in adult patients who are
statin-intolerant, or for whom a statin is contraindicated.

NUSTENDI contains bempedoic acid and ezetimibe and lowers elevated LDL-C through
complementary mechanisms of action by inhibiting cholesterol synthesis in the
liver and absorption in the intestine. NUSTENDI was approved by the EC in March
2020 for use in adults with primary hypercholesterolemia (heterozygous familial
and non-familial) or mixed dyslipidemia, as an adjunct to diet in combination
with a statin in adult patients unable to reach LDL-C goals with the maximum
tolerated dose of a statin in addition to ezetimibe, alone in patients who are
either statin-intolerant or for whom a statin is contraindicated, and are unable
to reach LDL-C goals with ezetimibe alone, or as an adjunct to diet in adult
patients already being treated with the combination of bempedoic acid and
ezetimibe as separate tablets with or without statin.

During the year ended December 31, 2021we hired $65.9 million in direct expenses related to our CVOT CLEAR Outcomes and other ongoing clinical studies.

During the year ended December 31, 2020we hired $70.4 million in direct expenses related to our CVOT CLEAR Outcomes and other ongoing clinical studies.

During the year ended December 31, 2019, we incurred $108.9 million in direct
expenses related to our CLEAR Outcomes CVOT, our open-label extension study, and
our 1002-FDC-058 study.

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The COVID-19 pandemic

The full extent to which the ongoing COVID-19 pandemic, or the future outbreak
of any other highly infectious or contagious diseases, may impact our business,
including our CVOT and commercialization efforts will depend on continuously
changing circumstances, which are highly uncertain and cannot be predicted at
this time, such as the duration of such pandemic including future waves of
infection, the emergence and prevalence of more contagious variants, such as the
recent "Omicron" variant of the virus, or the global availability and
utilization of effective vaccines, the actions taken to contain the pandemic or
mitigate its impact, and the direct and indirect economic effects of the
pandemic and containment measures, among others. The ongoing fluidity of this
situation precludes any prediction as to the full impact of the COVID-19
pandemic but it has had a material adverse effect on our business, financial
condition, and results of operations. The ongoing COVID-19 pandemic may also
have the effect of heightening the risks to which we are subject, including
potential impacts on the progress and time to completion of our ongoing CVOT,
the reliance on third parties in our supply chain for materials and
manufacturing and delivery of our drugs and drug candidates, our ability to
effectively promote and market our approved products, disruptions in health
regulatory agencies' operations globally, the volatility of our common stock,
our ability to access capital markets, and our ability to successfully
commercialize and generate revenue from our approved drugs.

We are continuing to assess the long-term impact of COVID-19 on our business
operations in an effort to mitigate interruption to our commercialization of our
approved drugs and other business activities and to ensure the safety and well
being of our employees, as well as the physicians and patients participating in
our CVOT. Because COVID-19 infections have been reported throughout the U.S. and
worldwide, and as new strains continue to be identified, certain national,
state, and local governmental authorities have issued orders, proclamations,
and/or directives aimed at minimizing the spread of COVID-19. Although some of
these restrictions were eased or lifted, in response to local surges and new
waves of infection, some countries, states, and local governments have
reinstituted these restrictions, and additional, more restrictive orders,
proclamations, and/or directives may be issued in the future. In response to the
COVID-19 pandemic, we have implemented precautionary measures to protect the
health and safety of our employees, partners, and patients, including
encouraging all employees to work-from-home if able to perform their duties
remotely, and requiring adherence to onsite occupancy limits and appropriate
safety measures designed to comply with federal, state, and local guidelines.

Our ability to successfully launch, commercialize, and generate revenue from
NEXLETOL, NEXLIZET, NILEMDO and NUSTENDI has been and may continue to be
adversely affected by the economic impact of the ongoing COVID-19 pandemic.
Physicians' offices and other medical institutions continue to have limited
access for nonpatients, which includes our sales personnel. In addition, social
distancing requirements and precautionary measures due to COVID-19 have impacted
the ability of our sales personnel to interact in-person with customers. As a
result, in many circumstances we have needed to limit our interactions with
physicians and payors and adapt our launch strategies and tactics to a virtual
model, including developing and deploying various technology-enabled platforms
for virtual engagement such as remote detailing, digital and non-personal
marketing channels, and social media. These circumstances have affected and may
continue to adversely affect the ability of our sales professionals to
effectively market our approved drugs to physicians and the rates of uptakes for
our approved drugs, which may have a negative impact on our sales and our market
penetration. In addition, patient visits with physicians have decreased as a
result of COVID-19, due to travel restrictions, social distancing or testing
requirements, prioritization of healthcare resources to address the pandemic,
and/or fear of exposure to the virus, which we believe has adversely affected
and could continue to have an adverse impact on new patient starts and overall
patient treatment volume. Market disruption and unemployment caused by the
COVID-19 pandemic may lead to delays in obtaining insurance coverage and
reimbursement of newly approved products.

We have had to optimize our cost structure in response to the ongoing COVID-19
pandemic and its impact on the conventional healthcare model associated with
normal health management practices, such as regular physician office visits, lab
tests, and prescription fills. As a result of the impact COVID-19 has had on our
business and demand, in October 2021, we announced our plan to align operational
and expense structure to better enable future growth for NEXLETOL and NEXLIZET
and prioritize our investment in the CLEAR Outcomes trial. This included
reducing operational expense across the organization through a corporate
workforce reduction of approximately 40% and through targeted program savings.
We will focus our commercialization efforts on an optimized blend of focused
outreach including a streamlined sales force, directed to targeted cardiologists
and primary care physicians, and a suite of digital initiatives designed to
increase awareness and utilization of our medicines in appropriate patients. We
adjusted our 2021 operating expense guidance and planned 2022 operating expense
budget accordingly, including our budgeted production plans. While it is not
possible at this time to estimate the entirety of the impact that the ongoing
COVID-19 pandemic will have on our business or operations, the continued spread
or future waves of COVID-19, measures taken by governments, actions taken to
protect employees, and the broad impact of the pandemic on all business
activities may materially and adversely affect our preclinical activities,
clinical development progress, data and timelines, commercialization efforts
including any revenue from sales, supply chain continuity, and general business
operations, and our business, prospects, financial condition, and results of
operations could be materially harmed as a result.

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To date, we have not experienced any interruption of our supply of drug products
needed to support our ongoing clinical study and product sales. However, such
interruptions may occur due to supply chain issues related to COVID-19, such as
the demand for vaccines and potential for manufacturing facilities and materials
to be commandeered under the Defense Production Act of 1950, or equivalent
foreign legislation, which may make it more difficult to obtain materials or
manufacturing capacity at our third-party manufacturers to the products needed
for our clinical trials and commercial product, which could lead to delays in
our ongoing trial and/or issues with our commercial supply. We remain focused on
maintaining a strong balance sheet, liquidity and financial flexibility and
continue to monitor developments as we deal with the disruptions and
uncertainties from a business and financial perspective relating to COVID-19. We
will continue to work diligently with our partners and stakeholders to continue
supporting patient access to our approved medicines, advancing our product under
regulatory review as well as in our clinical studies to the extent safe to do so
for patients, caregivers and healthcare practitioners, and ensuring the
continuity of our manufacturing and supply chain. For additional information
related to the potential impact of COVID-19 on our business, please read Part
I-Item 1A, "Risk Factors" of this Annual Report on Form 10-K.

Overview of financial operations

Product sales, net

Product sales, net, relate to our sales of NEXLETOL and NEXLIZET. NEXLETOL was commercially available in the we to March 30, 2020 and NEXLIZET was commercially available in we to June 4, 2020

Collaboration revenue

Collaboration revenue is related to our collaboration agreements with Daiichi
Sankyo and Otsuka. Collaboration revenue in the year ended December 31, 2021,
was primarily related to the initial recognition of the upfront payment from our
license and collaboration agreement with DS, sales of bulk tablets under supply
agreements, and royalty revenue received from collaboration partners.
Collaboration revenue in the year ended December 31, 2020, was primarily related
to the $150.0 million milestone from the Marketing Authorisation Applications,
or MAA, transfer to DSE and $60.0 million from the upfront payment with Otsuka.
Under contracted supply agreements with ex-U.S. collaborators, we may
manufacture and supply quantities of active pharmaceutical ingredient, or API,
or bulk tablets reasonably required by ex-U.S. collaboration partners for the
development or sale of licensed products in their respective territory. We
recognize revenue when the collaboration partner has obtained control of the API
or bulk tablets. We also receive royalties from the commercialization of such
products, and record our share of the variable consideration, representing a
percentage of net product sales, as collaboration revenue in the period in which
such underlying sales occur and costs are incurred by the collaborators.

Cost of Goods Sold

Cost of goods sold is related to our net product sales of NEXLETOL and NEXLIZET
and the cost of goods sold from our supply agreements with collaboration
partners. Prior to the FDA approval of NEXLETOL and NEXLIZET, expenses
associated with the manufacturing of our products were recorded as research and
development expense.

Research and development costs

Our research and development expenses consist primarily of costs incurred in connection with the development of bempedoic acid and the bempedoic acid/ezetimibe combination tablet, which include:

•expenses incurred under agreements with consultants, contract research organizations or CROs and investigational sites that conduct our preclinical and clinical studies;

•the cost of acquiring, developing and manufacturing clinical study materials
and commercial product manufacturing supply prior to product approval, including
the procurement of ezetimibe in our continued development of our bempedoic
acid / ezetimibe combination tablet;

•employee-related expenses, including salaries, benefits, stock-based compensation and travel expenses;

• expenses allocated to rent and maintenance of premises, insurance and other supplies; and

•costs related to compliance with regulatory requirements.

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We expense research and development costs as incurred. To date, substantially
all of our research and development work has been related to bempedoic acid and
the bempedoic acid / ezetimibe combination tablet. Costs for certain development
activities, such as clinical studies, are recognized based on an evaluation of
the progress to completion of specific tasks using data such as patient
enrollment, clinical site activations or information provided to us by our
vendors. Our direct research and development expenses consist principally of
external costs, such as fees paid to investigators, consultants, central
laboratories and CROs in connection with our clinical studies. We do not
allocate acquiring and manufacturing clinical study materials, salaries,
stock-based compensation, employee benefits or other indirect costs related to
our research and development function to specific programs.

We will continue to incur research and development expenses in the foreseeable
future as they relate to our ongoing CLEAR Outcomes CVOT and any other
development programs or additional indications we choose to pursue. We cannot
determine with certainty the duration and completion costs associated with the
ongoing or future clinical studies of bempedoic acid and the bempedoic acid /
ezetimibe combination tablet. The duration, costs and timing associated with the
development of bempedoic acid and the bempedoic acid / ezetimibe combination
tablet will depend on a variety of factors, including uncertainties associated
with the results of our clinical studies and our ability to obtain regulatory
approval outside the U.S. and Europe. For example, if a regulatory authority
were to require us to conduct clinical studies beyond those that we currently
anticipate will be required for the completion of clinical development or
post-commercialization clinical studies of bempedoic acid or the bempedoic acid
/ ezetimibe combination tablet, we could be required to expend significant
additional financial resources and time on the completion of clinical
development or post-commercialization clinical studies of bempedoic acid and the
bempedoic acid / ezetimibe combination tablet.

In accordance with ASC 730-10-25-1, Research and Development, costs incurred in
obtaining in-licenses are charged to research and development expense if the
in-licensed technology has not reached commercial feasibility and has no
alternative future use. Such licenses purchased by us require substantial
completion of research and development, regulatory and marketing approval
efforts in order to reach commercial feasibility and has no alternative future
use.

Selling, general and administrative expenses

Selling, general and administrative expenses primarily consist of salaries and
related costs for personnel, including stock-based compensation, associated with
our sales, executive, accounting and finance, commercial, operational and other
administrative functions. Other general and administrative expenses include
selling expenses, facility-related costs, communication expenses and
professional fees for legal, patent prosecution, protection and review,
consulting and accounting services.

As a result of the Reduction and other targeted program savings, we anticipate
that our selling, general and administrative expenses will decrease in 2022
compared to 2021. We expect our selling, general and administrative expenses
will increase after we report top-line results from the CLEAR Outcomes trial in
the first quarter of 2023 in connection with potential additional global
regulatory submissions for new product indications, expanded commercialization
initiatives for NEXLETOL and NEXLIZET and increases in our associated headcount.

Interest charges

Interest expense for the years ended December 31, 2021 and December 31, 2020 was
related to our Revenue Interest Purchase Agreement, or RIPA, with Eiger III SA
LLC, or Oberland, an affiliate of Oberland Capital and our Convertible Notes
issued in November 2020.

Other Income

Other income, net, primarily relates to the gain on extinguishment on an
exchange of $15 million of our convertible notes for shares of our common stock,
the sale of lease vehicles associated with the reduction in force, interest
income and the accretion or amortization of premiums and discounts earned on our
cash, cash equivalents and investment securities.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations
is based on our financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities and expenses
and the disclosure of contingent assets and liabilities in our financial
statements. We evaluate our estimates and judgments on an ongoing basis,
including those related to our collaboration agreements and revenue interest
liability. We base

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our estimates on historical experience, known trends and events, contractual
milestones and other various factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Our actual results may differ from these estimates
under different assumptions or conditions.

Our significant accounting policies are described in more detail in Note 2 to
our audited financial statements appearing elsewhere in this Annual Report on
Form 10-K. We believe the following accounting policies to be most critical to
understanding our results and financial operations.

Product sales, net

We sell NEXLETOL and NEXLIZET to wholesalers in the U.S and, in accordance with
ASC 606, recognize revenue at the point in time when the customer is deemed to
have obtained control of the product, which generally occurs upon receipt by the
customer. Product sales are recorded at the net selling price, which includes
variable considerations for rebates, chargebacks, co-pay assistance programs,
distribution related fees, product returns, and other sales-related discounts
and fees. Calculating these net product sales involves judgments and estimates.
We estimate a range of possible outcomes which are probability-weighted for
relevant factors such as contracts with customers, healthcare providers, payors
and government agencies, statutorily-defined discounts applicable to
government-funded programs, forecasted payor mix, customer buying and payment
patterns, and other relevant factors. The reserves reflect our best estimates of
the amount of consideration to which we are entitled based on the terms of the
applicable contract. The amount of variable consideration 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 will not
occur in a future period. Given the early stage of our commercial operations we
have provided constraint of our variable consideration due to its potential
consumption trends. Actual amounts of consideration ultimately received may
differ from our estimates. Each period, we review our estimates of rebates,
co-pay assistance programs, distribution fees and other applicable provisions.
If actual results vary from estimates, we adjust these estimates, which would
affect net product revenue and earnings in the period such variances become
known.

Income interest liability

We have entered into a RIPA to support the commercialization and further
development of bempedoic acid and the bempedoic acid / ezetimibe combination
tablet and provide for other working capital needs. The revenue interest
liability related to the RIPA is presented net of deferred issuance costs on the
balance sheets. The Company imputes interest expense associated with this
liability using the effective interest rate method and is presented as interest
expense on the statements of operations. The effective interest rate is
calculated based on the rate that would enable the debt to be repaid in full
over the anticipated life of the arrangement. The interest rate on the liability
may vary during the term of the agreement depending on a number of factors,
including the level of forecasted net sales. This estimate is complex and highly
judgmental as it is based on our future revenue projections and expectations
about future economic and market conditions. The Company evaluates the interest
rate quarterly based on its current net sales forecasts utilizing the
prospective method. A significant increase or decrease in net sales will
materially impact the revenue interest liability, interest expense and the time
period for repayment. Issuance costs in connection with the RIPA are amortized
to interest expense over the estimated term of the RIPA.

Recent Accounting Pronouncements Adopted

For more information about the new accounting standards adopted and the impact on our financial condition or results of operations, see Note 2 to our audited financial statements found elsewhere in this Annual Report on Form 10-K.

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Operating results

Comparison of the years ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended
December 31, 2021 and 2020:

                                                        Year Ended December 31,
                                                  2021            2020           Change
                                                             (in thousands)
       Revenues:
       Product sales, net                     $   40,047      $   12,965      $   27,082
       Collaboration revenue                      38,400         214,582        (176,182)
       Operating Expenses:
       Cost of goods sold                         14,217           2,392          11,825
       Research and development                  105,975         146,936         (40,961)
       Selling, general and administrative       184,985         199,615         (14,630)
       Loss from operations                     (226,730)       (121,396)       (105,334)
       Interest expense                          (46,353)        (22,670)        (23,683)
       Other income, net                           3,975             515           3,460
       Net loss                               $ (269,108)     $ (143,551)     $ (125,557)


Product sales, net

Product sales, net for the year ended December 31, 2021 was $40.0 million
relating to our sales of NEXLETOL and NEXLIZET compared to $13.0 million for the
year ended December 31, 2020, an increase of approximately $27.0 million. The
increase is primarily due to prescription growth of NEXLETOL and NEXLIZET.
NEXLETOL and NEXLIZET became commercially available in the U.S. on March 30,
2020 and June 4, 2020, respectively.

Collaboration revenue

Collaboration revenue recognized from our collaboration agreements for the year
ended December 31, 2021 was $38.4 million compared to $214.6 million for the
year ended December 31, 2020, a decrease of $176.2 million. Revenue for the year
ended December 31, 2021 was primarily related to the initial recognition of the
upfront payment from our license and collaboration agreement with Daiichi Sankyo
in April 2021, product sales to collaboration partners under our supply
agreements and royalty revenue. Collaboration revenue for the year ended
December 31, 2020 was primarily related to the $60.0 million upfront payment
from Otsuka and $150.0 million from Daiichi Sankyo related to the MAA transfer
milestone.

Cost of goods sold

Cost of goods sold for the year ended December 31, 2021, was $14.2 million
compared to $2.4 million for the year ended December 31, 2020, an increase of
$11.8 million. The increase is primarily related to increased product sales to
our collaboration partners under our supply agreements, increased net product
sales of NEXLETOL and NEXLIZET and the impact of pre-launch inventory on the
year ended December 31, 2020. NEXLETOL and NEXLIZET became commercially
available in the U.S. on March 30, 2020 and June 4, 2020, respectively.

Research and development costs

Research and development expenses for the year ended December 31, 2021, were
$106.0 million compared to $146.9 million for the year ended December 31, 2020,
a decrease of approximately $40.9 million. The decrease in research and
development expenses was primarily attributable to a decline in manufacturing
costs which were classified as research and development expense prior to FDA
approval of NEXLETOL and NEXLIZET on February 21, 2020 and February 26, 2020,
respectively, as well as an overall reduction in ongoing clinical research
activities, including compensation costs.

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Selling, general and administrative expenses

Selling, general and administrative expenses for the year ended December 31,
2021, were $185.0 million compared to $199.6 million for the year ended
December 31, 2020, a decrease of $14.6 million. The decrease in selling, general
and administrative expenses was primarily attributable to decreases in
advertising, compensation costs, and costs incurred to support the initial
launch of NEXLETOL and NEXLIZET in the U.S. in 2020 offset partially by a $13.3
million one-time charge associated with a legal settlement in 2021.

Interest expense

Interest expense for the year ended December 31, 2021has been $46.4 millioncompared to $22.7 million for the year ended December 31, 2020an augmentation of
$23.7 million. Interest expense for the year ended December 31, 2021 was primarily due to additional interest charges attributable to additional financings under our Ripa with Oberland and convertible notes entered into in
November 2020.

Other income, net

Other income, net for the year ended December 31, 2021, was $4.0 million
compared to $0.5 million for the year ended December 31, 2020, an increase of
$3.5 million. This increase was primarily related a $2.6 million gain on
extinguishment on the exchange of our convertible notes for shares of our common
stock and a gain on sale of our lease vehicles due to the reduction in force.

Operating results

Comparison of the years ended December 31, 2020 and 2019

Management's discussion and analysis of our results of operations for the year
ended December 31, 2020 as compared to the year ended December 31, 2019 may be
found in the "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Comparison of the Years Ended December 31, 2020 and
2019" section of our Annual Report on Form 10-K for the year ended December 31,
2020, filed with the SEC on February 23, 2021.

Cash and capital resources

While we began to generate revenue from the sales of our products in 2020, we
have funded our operations to date primarily through proceeds from sales of
preferred stock, convertible promissory notes and warrants, public offerings of
common stock and warrants, the incurrence of indebtedness, milestone payments
from collaboration agreements and revenue interest purchase agreement. Pursuant
to the license and collaboration agreements with Daiichi Sankyo and Otsuka, we
are eligible for substantial additional sales and regulatory milestone payments
and royalties. Pursuant to the license and collaboration agreements entered into
April 2021 with Daiichi Sankyo, we received an upfront cash payment of $30.0
million in May 2021 and are eligible for substantial additional sales milestone
payments and royalties. Pursuant to the amended RIPA with Oberland, we received
an additional $50.0 million in May 2021. The amended RIPA increases the revenue
interest we will pay Oberland based on the net sales of our products as outlined
in Note 10 to our audited financial statements appearing elsewhere in this
Annual Report. In December 2021, we entered into an underwriting agreement where
we sold shares of common stock and accompanying warrants to purchase shares of
our common stock and received net proceeds of $208.7 million. We anticipate that
we will incur losses for the foreseeable future as we continue to incur
substantial expenses related to the ongoing commercialization of NEXLETOL and
NEXLIZET and our ongoing CLEAR Outcomes CVOT. We anticipate that our current
cash, cash equivalents, investments, expected future net product sales of
NEXLETOL and NEXLIZET, and expected future revenue under our collaboration
agreements is sufficient to allow us to complete and report results from the
CLEAR Outcomes CVOT and fund continuing operations for the foreseeable future
beyond the CVOT read-out.

As of December 31, 2021, our primary sources of liquidity were our cash and cash
equivalents and available-for-sale investments which totaled $309.3 million,
which includes $50 million that is restricted per the amendment and waiver with
Oberland. We invest our cash equivalents and investments in highly liquid,
interest-bearing investment-grade securities and government securities to
preserve principal.

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The following table summarizes the primary sources and uses of cash for the
periods presented below:

                                                                              Year Ended December 31,
                                                                         2021                          2020
                                                                                  (in thousands)
Net cash used in operating activities                                   (263,809)                      (85,177)
Net cash (used in) provided by investing activities                      (50,484)                       21,356
Net cash provided by financing activities                                268,223                       201,725
Net (decrease) increase in cash, cash equivalents                        (46,070)                      137,904


Operating Activities

We have incurred and expect to continue to incur, significant costs related to
the commercialization of NEXLETOL and NEXLIZET and related to ongoing research
and development, regulatory and other clinical study costs associated with the
development of bempedoic acid and the bempedoic acid / ezetimibe combination
tablet.

Net cash used in operating activities totaled $263.8 million for the year ended
December 31, 2021, consisting of net product sales of NEXLETOL and NEXLIZET and
$30.0 million in upfront fees from our collaboration agreement with DS fully
offset by cash used to fund the commercialization activities of NEXLETOL and
NEXLIZET and the research and development costs related to bempedoic acid and
the bempedoic acid / ezetimibe combination tablet, adjusted for non-cash
expenses such as stock-based compensation expense, interest expense related to
our RIPA with Oberland and convertible notes, depreciation and amortization and
changes in working capital. Net cash used in operating activities totaled $85.2
million for the year ended December 31, 2020, consisting of the $150.0 million
milestone payment from our collaboration agreement with DSE, $60.0 million from
the Otsuka collaboration agreement and net product sales of NEXLETOL and
NEXLIZET offset by cash used to fund the commercialization activities of
NEXLETOL and NEXLIZET and the research and development costs related to
bempedoic acid and the bempedoic acid / ezetimibe combination tablet, adjusted
for non-cash expenses such as stock-based compensation expense, amortization of
debt issuance costs, interest expense related to our RIPA with Oberland and
Convertible Notes, depreciation and amortization and changes in working capital.

Investing activities

Net cash used in investing activities of $50.5 million for the year ended
December 31, 2021 consisted of purchases of highly liquid, interest bearing
investment grade and government securities. Net cash provided by investing
activities of $21.4 million for the year ended December 31, 2020 consisted
primarily of proceeds from the sale and maturities of highly liquid, interest
bearing investment grade and government securities partially offset by $12.5
million for the purchase of in-process research and development to in-license
intellectual property for our PCSK9 inhibitor program.

Funds invested in available-for-sale investments during the year ended December 31, 2021 will be made available to us over the next twelve months.

Fundraising activities

Net cash provided by financing activities of $268.2 million for the year ended
December 31, 2021, related primarily to net $208.7 million received from our
offering of common stock and warrants in December 2021, $50.0 million in cash
from our RIPA with Oberland, proceeds from the issuance of common stock through
the "at-the-market" offering and cash received from stock option exercises,
offset by payments on our revenue interest liability. Net cash provided by
financing activities of $201.7 million for the year ended December 31, 2020,
related primarily to the $271.6 million, net, in cash received from the
Convertible Notes, $25.0 million in cash received from the RIPA with Oberland
upon regulatory approval of NEXLETOL and $6.6 million in cash received from
stock option exercises, offset by the prepayment of a forward stock repurchase
of $55.0 million and $46.0 million from the purchase of capped call options
related to the Convertible Notes as described in Item 8, Note 11, Convertible
Notes.

On August 3, 2021, we filed an automatically effective registration statement on
Form S-3ASR, or Registration Statement, with the SEC which registers the
offering, issuance and sale of an unspecified amount of common stock, preferred
stock, debt securities, warrants and/or units of any combination thereof. We
simultaneously entered into an open market sale agreement with Jefferies LLC, as
sales agent, to provide for the issuance and sale by the Company of up to $250
million of common stock from time to time in "at-the-market" offerings under the
Registration Statement and related prospectus filed with the
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Registration Statement, or the ATM Program. During the year ended December 31,
2021, we issued 897,364 shares of common stock resulting in net proceeds of
approximately $9.7 million after deducting underwriting discounts and
commissions and other expenses, pursuant to the ATM Program. We may continue to
use an ATM Program to address potential short-term or long-term funding
requirements that may arise. Such program will continue to be subject to the
volatility of the price of our common stock and general market conditions.

In December 2021, we entered into an underwriting agreement where we sold
32,142,858 shares of common stock and accompanying warrants to purchase up to an
aggregate of 32,142,858 shares of our common stock. We also granted the
underwriters a 30-day option to purchase up to 4,821,428 additional shares of
common stock and/or accompanying warrants to purchase an aggregate of up to
4,821,428 shares of our common stock. The underwriters exercised the option to
purchase additional warrants to purchase 4,821,428 shares of Common Stock. The
aggregate net proceeds received by us from the offering was $208.7 million,
after deducting underwriting discounts and commissions and other estimated
offering expenses payable by us and excluding the net proceeds, if any, from the
exercise of the common warrants. The warrants are immediately exercisable and
will expire two years from the date of issuance, at an exercise price of $9.00
per share, which may provide us with additional funding, if such warrants are
exercised by their holders.

In 2019, we entered into a RIPA with Oberland. Pursuant to the RIPA, Oberland
paid us $125.0 million at closing, less certain issuance costs, and, subject to
the terms and conditions of the RIPA, we received an additional $25.0 million
upon regulatory approval of NEXLETOL in 2020 and were eligible to receive an
additional $50.0 million at our option upon reaching certain sales thresholds.
In April 2021, we entered into Amendment No. 2 to the RIPA and Oberland waived
the original trailing six-month world-wide net sales condition to the third
installment payment under the RIPA and released the final $50 million payment
payable to us under the terms of the RIPA. The amendment also updated the tiered
payment percentage. As the quarterly net revenue from sales of NEXLETOL and
NEXLIZET and certain other products in the United States did not exceed $15.0
million for the quarter ended September 30, 2021, we deposited $50.0 million in
a deposit account with Oberland, which reduced our unrestricted cash. As
consideration for the payments, Oberland has the right to receive certain
revenue interests from us based on the net sales of certain products which will
be tiered payments ranging from 3.3% to 10% of our net sales in the covered
territory (as detailed in the RIPA). Esperion reacquires 100% revenue rights
upon repayment completion. We recorded the proceeds from the RIPA as a liability
on the balance sheets and are accounting for the RIPA under the
effective-interest method over the estimated life of the RIPA. Future payments
under the RIPA may range from $11.3 million in the next year to a maximum total
payment of $434.8 million beyond one year. Per the terms of the agreement, every
$100 million of net sales generated, less than or equal to $250 million in an
annual aggregate, would result in a repayment obligation of approximately $10.0
million or 10% at the stated repayment rate in the first year. In the future, as
net sales thresholds set forth in the agreement are met and the repayment
percentage rate changes, the amount of the obligation and timing of payment is
likely to change. As the U.S. net sales were less than $350 million for the year
ended December 31, 2021, the Covered Territory is expanded to include worldwide
sales beginning in 2022. A significant increase or decrease in net sales will
materially impact the revenue interest liability, interest expense and the time
period for repayment. Refer to Note 10 to our audited financial statements
appearing elsewhere in this Annual Report on Form 10-K for further information.

On November 16, 2020, we issued $250.0 million aggregate principal amount of
4.00% convertible senior subordinated notes due 2025 to certain financial
institutions as the initial purchasers of the convertible notes. An additional
$30.0 million of additional convertible notes (collectively, the "Convertible
Notes"), which were issued pursuant to the exercise of the initial purchasers'
option to purchase such convertible notes, closed on November 18, 2020. On
October 22, 2021, we entered into the Exchange Agreement with the Holders, of
our Convertible Notes. Under the terms of the Exchange Agreement the Holders
agreed to exchange with us $15.0 million aggregate principal amount of the
Convertible Notes held in the aggregate by them (and accrued interest thereon)
for shares of our common stock, which closed on November 3, 2021. Future
payments under the convertible notes include annual interest of $10.6 million
and a principal payment of $265.0 million in 2025. Refer to Note 11 to our
audited financial statements appearing elsewhere in this Annual Report on Form
10-K.

Plan of operations and financing needs

We expect to continue to incur significant expenses and operating losses for the
foreseeable future in connection with our ongoing CLEAR Outcomes CVOT and our
continued commercialization activities associated with NEXLETOL and NEXLIZET in
the U.S. Pursuant to the license and collaboration agreements with DSE, Otsuka,
and DS, we are eligible for substantial additional sales and regulatory
milestone payments and royalties. We estimate that current cash resources,
proceeds to be received in the future for product sales and proceeds under the
collaboration agreements with Daiichi Sankyo and Otsuka are sufficient to fund
operations for the foreseeable future. We have based these estimates on
assumptions that may prove to be wrong, and we may use our available capital
resources sooner than we currently expect. We may need to secure additional cash
resources or implement certain additional cost reduction initiatives to continue
to fund the commercialization and further development of bempedoic acid and the
bempedoic acid / ezetimibe combination tablet, particularly if there are delays
in the

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completion of the CLEAR Outcomes CVOT or our net product sales do not meet our
expectations. Because of the numerous risks and uncertainties associated with
the development and ongoing commercialization of bempedoic acid and the
bempedoic acid / ezetimibe combination tablet, and the extent to which we
entered and may enter into collaborations with pharmaceutical partners regarding
the development and commercialization of bempedoic acid and the bempedoic acid /
ezetimibe combination tablet, we are unable to estimate the amounts of increased
capital outlays and operating expenses associated with completing the
development and commercialization of bempedoic acid and the bempedoic acid /
ezetimibe combination tablet. Our future funding requirements will depend on
many factors, including, but not limited to:

• our ability to successfully develop and commercialize NEXLETOL and NEXLIZET or other product candidates;

• the costs, schedule and results of our CVOT CLEAR Outcomes and other ongoing clinical studies of bempedoic acid and the bempedoic acid/ezetimibe combination tablet;

•the time and cost required to obtain regulatory approvals for bempedoic acid and the bempedoic acid/ezetimibe combination tablet outside of the we and
Europe;

• our ability to establish any future collaboration or marketing agreement on favorable terms, if applicable;

• our ability to realize the expected benefits of our existing and future collaboration and partnerships;

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property claims; and

•setting up operational and financial information technology.

Until such time, if ever, as we can generate U.S. substantial product revenues,
we expect to finance our cash needs through a combination of collaborations with
third parties, strategic alliances, licensing arrangements, permitted debt
financings, permitted royalty-based financings and equity offerings or other
sources. To the extent that we raise additional capital through the sale of
equity or convertible debt securities, the ownership interest of our
stockholders will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect your rights as a common
stockholder. Debt financing, if available and permitted under the terms of our
RIPA, may involve agreements that include covenants limiting or restricting our
ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends. If we raise additional funds
through collaborations, strategic alliances or licensing arrangements with
pharmaceutical partners or royalty-based financing arrangements, such as the
collaboration arrangement with DSE, Otsuka and DS, and the RIPA with Oberland,
we may have to relinquish valuable rights to our technologies, future revenue
streams or grant licenses on terms that may not be favorable to us. For
instance, as part of the RIPA with Oberland, Oberland has the right to receive
certain revenue interests from us based on the net sales of certain products,
and we have granted Oberland a senior security interest in certain of our
assets. If our cash flows and capital resources are insufficient to allow us to
make required payments, we may have to reduce or delay capital expenditures,
sell assets or seek additional capital. If we raise funds by selling additional
equity, such sale would result in dilution to our stockholders. If we are unable
to raise additional funds through equity or permitted debt financings or through
collaborations, strategic alliances or licensing arrangements or permitted
royalty-based financing arrangements when needed, we may be required to delay,
limit, reduce or terminate our product development or future commercialization
efforts or grant rights to develop and market bempedoic acid and the bempedoic
acid / ezetimibe combination tablet that we would otherwise prefer to develop
and market ourselves.

We do not currently have, and we have not had during the periods presented, any off-balance sheet arrangements as defined by Security and Exchange Commission
rules.

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