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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 10-Q
_________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 001-36257
 RETROPHIN, INC.
(Exact name of registrant as specified in its charter)
Delaware27-4842691
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3721 Valley Centre Drive, Suite 200
San Diego, CA 92130
(Address of Principal Executive Offices)
(888) 969-7879
(Registrant's Telephone number including area code)
N/A
Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareRTRXThe Nasdaq Global Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No
 The number of shares of outstanding common stock, par value $0.0001 per share, of the Registrant as of July 29, 2020 was 50,905,923.


Table of Contents
RETROPHIN, INC.
Form 10-Q
For the Fiscal Quarter Ended June 30, 2020

TABLE OF CONTENTS
  Page No.
 
 
 
 
 
1

Table of Contents
FORWARD-LOOKING STATEMENTS 
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the "2019 10-K"), and in this Quarterly Report on Form 10-Q. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. 
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned to not unduly rely upon these statements.
We file reports with the Securities and Exchange Commission ("SEC"). The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
2

Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RETROPHIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
 June 30, 2020December 31, 2019
Assets(unaudited) 
Current assets:  
Cash and cash equivalents$237,170  $62,436  
Available-for-sale debt securities, at fair value (amortized cost $218,596, allowance for credit losses of $0 as of June 30, 2020; amortized cost $335,206, allowance for credit losses of $0 as of December 31, 2019)220,206  336,088  
Accounts receivable, net14,077  18,048  
Inventory, net6,286  6,082  
Prepaid expenses and other current assets7,714  5,015  
Tax receivable20,109  1,395  
Total current assets505,562  429,064  
Property and equipment, net2,930  2,891  
Other non-current assets13,895  14,709  
Intangible assets, net155,371  157,200  
Goodwill936  936  
Total assets$678,694  $604,800  
Liabilities and Stockholders' Equity   
Current liabilities:  
Accounts payable$10,198  $26,614  
Accrued expenses44,379  51,745  
Other current liabilities7,356  8,590  
Business combination-related contingent consideration8,000  8,500  
Total current liabilities69,933  95,449  
Convertible debt210,009  204,861  
Other non-current liabilities19,507  20,894  
Business combination-related contingent consideration, less current portion60,600  62,400  
Total liabilities360,049  383,604  
Stockholders' Equity:  
Preferred stock $0.0001 par value; 20,000,000 shares authorized; 0 issued and outstanding as of June 30, 2020 and December 31, 2019
    
Common stock $0.0001 par value; 100,000,000 shares authorized; 50,902,874 and 43,088,921 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
5  4  
Additional paid-in capital758,945  636,910  
Accumulated deficit(441,704) (416,444) 
Accumulated other comprehensive income 1,399  726  
Total stockholders' equity 318,645  221,196  
Total liabilities and stockholders' equity $678,694  $604,800  
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents
RETROPHIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
(unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Net product sales$48,430  $44,707  $96,199  $84,277  
Operating expenses:  
Cost of goods sold1,494  979  2,864  1,996  
Research and development30,790  37,934  61,038  71,377  
Selling, general and administrative34,971  38,970  68,110  71,639  
Change in fair value of contingent consideration4,286  3,353  2,363  6,522  
Write off of L-UDCA IPR&D intangible asset      25,500  
Write off of L-UDCA contingent consideration      (18,000) 
Total operating expenses71,541  81,236  134,375  159,034  
Operating loss(23,111) (36,529) (38,176) (74,757) 
Other income (expenses), net:  
Other income (expense), net426  125  235  (177) 
Interest income1,316  2,589  3,291  5,408  
Interest expense(4,634) (4,817) (9,521) (9,682) 
Total other expense, net(2,892) (2,103) (5,995) (4,451) 
Loss before income taxes(26,003) (38,632) (44,171) (79,208) 
Income tax (expense) benefit(65) (69) 18,911  (470) 
Net loss$(26,068) $(38,701) $(25,260) $(79,678) 
Basic and diluted net loss per common share$(0.58) $(0.92) $(0.57) $(1.91) 
Basic and diluted weighted average common shares outstanding44,763,843  41,957,860  43,943,370  41,685,599  
Comprehensive loss:  
Net loss$(26,068) $(38,701) $(25,260) $(79,678) 
Foreign currency translation(247) (91) (56) 27  
Unrealized gain on debt securities3,146  815  729  2,284  
Comprehensive loss$(23,169) $(37,977) $(24,587) $(77,367) 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Table of Contents
RETROPHIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 For the Six Months Ended June 30,
 20202019
Cash Flows From Operating Activities:
Net loss$(25,260) $(79,678) 
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation and amortization11,507  9,742  
Non-cash interest expense893  798  
Amortization (accretion) of discounts/premiums on investments, net337  (580) 
Amortization of debt discount and issuance costs5,147  4,933  
Provision for Inventory662  (358) 
Share-based compensation11,474  11,947  
ESPP expense390  345  
Change in fair value of contingent consideration2,363  (11,478) 
Payments related to change in fair value of contingent consideration(8,674) (2,767) 
Write off of IPR&D intangible assets  25,500  
Unrealized foreign currency transaction gain (loss)(222) 14  
Other496  60  
Changes in operating assets and liabilities:  
Accounts receivable3,979  (2,396) 
Inventory(875) 918  
Tax receivable (18,714)   
Other current and non-current operating assets(2,508) (10,101) 
Accounts payable and accrued expenses(16,407) 6,305  
Other current and non-current operating liabilities(196) 7,195  
Net cash used in operating activities(35,608) (39,601) 
Cash Flows From Investing Activities:  
Purchase of fixed assets(518) (21) 
Cash paid for intangible assets(8,532) (7,347) 
Proceeds from the sale/maturity of debt securities153,146  115,998  
Purchase of debt securities(36,743) (94,812) 
Net cash provided by investing activities107,353  13,818  
Cash Flows From Financing Activities:  
Payment of acquisition-related contingent consideration(6,101) (1,722) 
Payment of guaranteed minimum royalty(1,050) (1,034) 
Proceeds from exercise of stock options431  317  
Proceeds from issuance of common stock, net of issuance costs108,644    
Proceeds from issuances under employee stock purchase plan1,098  1,005  
Net cash provided by (used in) financing activities103,022  (1,434) 
Effect of exchange rate changes on cash(33) 1  
Net change in cash and cash equivalents174,734  (27,216) 
Cash and cash equivalents, beginning of year62,436  102,873  
Cash and cash equivalents, end of period$237,170  $75,657  
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Table of Contents
RETROPHIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited, in thousands, except share amounts)
Three Months Ended June 30, 2020Three Months Ended June 30, 2019
 Common StockAdditional Paid in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total
Stockholders'
Equity
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total
Stockholders'
Equity
 SharesAmountSharesAmount
Balance - March 3143,153,215  $4  $642,880  $(1,500) $(415,636) $225,748  41,438,020  $4  $596,644  $57  $(310,994) $285,712  
Share based compensation5,760  5,760  5,577  5,577  
Issuance of common stock under the equity incentive plan and proceeds from exercise177,115  371  371  100,151  12  12  
Equity offering7,475,000  1108,643  108,644  
Unrealized gain on debt securities3,146  3,146  815  815  
Foreign currency translation adjustments(247) (247) (91) (91) 
Issuance of common stock from maturity of the 2019 Convertible debt outstanding1,297,343  22,590  22,590  
ESPP stock purchase and expense97,544  1,291  1,291  63,804  1,176  1,176  
Net loss(26,068) (26,068) (38,701) (38,701) 
Balance - June 3050,902,874  $5  $758,945  $1,399  $(441,704) $318,645  42,899,318  $4  $625,999  $781  $(349,695) $277,089  
Six Months Ended June 30, 2020Six Months Ended June 30, 2019
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total
Stockholders'
Equity
Common StockAdditional Paid in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance - December 3143,088,921  $4  $636,910  $726  $(416,444) $221,196  41,389,524  $4  $589,795  $(1,529) $(270,017) $318,253  
Share based compensation11,474  11,474  11,947  11,947  
Issuance of common stock under the equity incentive plan and proceeds from exercise241,409  431  431  148,647  317  317  
Equity offering7,475,000  1108,643  108,644  
Unrealized gain on debt securities729  729  2,284  2,284  
Foreign currency translation adjustments(56) (56) 26  26  
Issuance of common stock from maturity of the 2019 Convertible debt outstanding1,297,343  22,590  22,590  
ESPP stock purchase and expense97,544  1,487  1,487  63,804  1,350  1,350  
Net loss(25,260) (25,260) (79,678) (79,678) 
Balance - June 3050,902,874  $5  $758,945  $1,399  $(441,704) $318,645  42,899,318  $4  $625,999  $781  $(349,695) $277,089  
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Table of Contents
RETROPHIN, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.  DESCRIPTION OF BUSINESS
Organization and Description of Business
Retrophin, Inc. (“we”, “our”, “us”, “Retrophin” and the “Company”) refers to Retrophin, Inc., a Delaware corporation, as well as our direct and indirect subsidiaries. Retrophin is a fully integrated biopharmaceutical company headquartered in San Diego, California, focused on identifying, developing and delivering life-changing therapies to people living with rare diseases. We regularly evaluate and, where appropriate, act on opportunities to expand our product pipeline through licenses and acquisitions of products in areas that will serve patients with serious or rare diseases and that we believe offer attractive growth characteristics.
On January 30, 2020, the World Health Organization (“WHO”) declared that the recent novel coronavirus (COVID-19) outbreak was a global health emergency, which prompted national governments to begin putting actions in place to slow the spread of COVID-19. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic. The outbreak of COVID-19 has resulted in travel restrictions, quarantines, “stay-at-home” and “shelter-in-place” orders and extended shutdown of certain businesses around the world. While the impact of the COVID-19 pandemic did not have a material adverse effect on our financial position or results of operations for the three and six months ended June 30, 2020, these governmental actions and the widespread economic disruption arising from the pandemic have the potential to materially impact our business and influence our business decisions. The extent and duration of the pandemic is unknown, and the future effects on our business are uncertain and difficult to predict. The Company is continuing to monitor the events and circumstances surrounding the COVID-19 pandemic, which may require adjustments to the Company’s estimates and assumptions in the future.
Clinical Programs:
Sparsentan, also known as RE-021, is an investigational product candidate with a dual mechanism of action, selective endothelin receptor antagonist (“ERA”), with in vitro selectivity toward endothelin receptor type A, and a potent angiotensin receptor blocker (“ARB”). Sparsentan is currently being evaluated in two pivotal Phase 3 clinical studies in the following indications:
Focal segmental glomerulosclerosis ("FSGS") is a rare kidney disease characterized by proteinuria where the glomeruli become progressively scarred. FSGS is a leading cause of end-stage renal disease.
Immunoglobulin A nephropathy ("IgAN") is an immune-complex-mediated glomerulonephritis characterized by hematuria, proteinuria, and variable rates of progressive renal failure. IgAN is the most common primary glomerular disease.

Chenodal® has been recognized as the standard of care for cerebrotendinous xanthomatosis (“CTX”) patients for more than three decades but is not currently labeled for this indication. In January 2020, we randomized the first patients in a Phase 3 clinical trial to evaluate the effects of Chenodal in adult and pediatric patients with CTX. The pivotal study, known as the RESTORE study, is intended to support a new drug application (“NDA”) submission for marketing authorization of Chenodal for CTX in the United States.
Cooperative Research and Development Agreements ("CRADAs"):
The Company is a participant in two CRADAs, which form a multi-stakeholder approach to pool resources with leading experts, and incorporates the patient perspective early in the identification and development process. Retrophin has partnered with the National Institutes of Health’s National Center for Advancing Translational Sciences ("NCATS") and leading patient advocacy organizations, NGLY1.org and Alagille Syndrome Alliance ("ALGSA"), aimed at the identification of potential small molecule therapeutics for NGLY1 deficiency and Alagille syndrome, respectively. There are no treatment options currently approved for these diseases.
Approved products:
Chenodal (chenodiol tablets) is approved in the United States for the treatment of patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age. Chenodal has been the standard of care for CTX patients for more than three decades.
Cholbam® (cholic acid capsules) is approved in the United States for the treatment of bile acid synthesis disorders due to single enzyme defects and is further indicated for adjunctive treatment of patients with peroxisomal disorders.
Thiola® and Thiola EC® (tiopronin tablets) are approved in the United States for the prevention of cystine (kidney) stone formation in patients with severe homozygous cystinuria.

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NOTE 2.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2019 10-K filed with the SEC on February 24, 2020. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions for Form 10-Q and the rules and regulations of the SEC. Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods. The December 31, 2019 balance sheet information was derived from the audited financial statements as of that date. 
A summary of the significant accounting policies applied in the preparation of the accompanying condensed consolidated financial statements follows:
Principles of Consolidation
The unaudited condensed consolidated financial statements represent the consolidation of the accounts of the Company and its subsidiaries in conformity with GAAP. All intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of 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 contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer. See Note 3 for further discussion.
Research and Development Expenses
Research and development expenses are comprised of salaries and bonuses, benefits, non-cash share-based compensation, license fees, costs paid to third-party contractors to perform research, conduct clinical trials and pre/non-clinical trials, develop drug materials, and associated overhead expenses and facilities. We also incur indirect costs that are not allocated to specific programs because such costs benefit multiple development programs and allow us to increase our pharmaceutical development capabilities. These consist of internal shared resources related to the development and maintenance of systems and processes applicable to all of our programs.
Clinical Trial Expenses
Our clinical trials are conducted pursuant to contracts with contract research organizations ("CROs") that support conducting and managing clinical trials. The financial terms and activities of these agreements vary from contract to contract and may result in uneven expense levels. Generally, these agreements set forth activities that drive the recording of expenses such as start-up, initiation activities, enrollment, treatment of patients, or the completion of other clinical trial activities.
Expenses related to clinical trials are accrued based on our estimates and/or representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the amounts we are obligated to pay under our clinical trial agreements are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), we adjust our accruals accordingly on a prospective basis. Revisions to our contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become reasonably certain.
We currently have three Phase 3 clinical trials in process that are in varying stages of activity, with ongoing non-clinical support trials. As such, clinical trial expenses will vary depending on all the factors set forth above and may fluctuate significantly from quarter to quarter.
Adoption of New Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Topic 326 amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. This update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company's adoption of this standard has had an immaterial impact on our condensed consolidated financial statements, and there was no recorded impact to our opening accumulated deficit balance for the cumulative-effect adjustment. As of June 30, 2020, the Company held $14.1 million in trade receivables and $220.2 million in available-for-sale debt securities. Expected credit losses on our trade receivables are estimated to be immaterial and the Company has zero recorded allowances for expected credit losses on the available-for-sale debt securities held as of June 30, 2020. See Note 16 and Note 4 for further discussion.

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NOTE 3. REVENUE RECOGNITION
Product Revenue, Net
Product sales consist of Bile Acid products (Chenodal and Cholbam) and Tiopronin products (Thiola and Thiola EC). The Company sells its products through direct-to-patient distributors worldwide, with more than 95% of the revenue generated in North America.
Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs upon delivery to the customer. The Company receives payments from its product sales based on terms that generally are within 30 days of delivery of product to the patient.
Deductions from Revenue
Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and co-pay assistance that are offered to customers, health care providers, payors and other indirect customers relating to the Company’s sales of its products. These provisions are based on the amounts earned or to be claimed on the related sales and are classified as a reduction of accounts receivable (if the amount is payable to a customer) or as a current liability (if the amount is payable to a party other than a customer). Where appropriate, these reserves take into consideration the Company’s historical experience, current contractual and statutory requirements and specific known market events and trends. 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 contract. If actual results in the future vary from the Company’s provisions, the Company will adjust the provision, which would affect net product revenue and earnings in the period such variances become known. Our historical experience is that such adjustments have been immaterial.
Government Rebates: We calculate the rebates that we will be obligated to provide to government programs and deduct these estimated amounts from our gross product sales at the time the revenues are recognized. Allowances for government rebates and discounts are established based on actual payer information, which is reasonably estimated at the time of delivery, and the government-mandated discounts applicable to government-funded programs. Rebate discounts are included in other current liabilities in the accompanying consolidated balance sheets.
Commercial Rebates: We calculate the rebates that we incur due to contracts with certain commercial payors and deduct these amounts from our gross product sales at the time the revenues are recognized. Allowances for commercial rebates are established based on actual payer information, which is reasonably estimated at the time of delivery. Rebate discounts are included in other current liabilities in the accompanying consolidated balance sheets.
Prompt Pay Discounts: We offer discounts to certain customers for prompt payments. We accrue for the calculated prompt pay discount based on the gross amount of each invoice for those customers at the time of sale.
Product Returns: Consistent with industry practice, we offer our customers a limited right to return product purchased directly from the Company, which is principally based upon the product’s expiration date. Generally, shipments are only made upon a patient prescription thus returns are minimal.
Co-pay Assistance: We offer a co-pay assistance program, which is 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 identification of claims and the cost per claim associated with product that has been recognized as revenue.
The following table summarizes net product revenues for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Bile acid products$21,573  $20,929  $43,854  $39,319  
Tiopronin products26,857  23,778  52,345  44,958  
Total net product revenue$48,430  $44,707  $96,199  $84,277  

NOTE 4. DEBT SECURITIES
The Company's debt securities as of June 30, 2020 and December 31, 2019 were comprised of available-for-sale corporate and govenrment debt securities. These securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss), unless an impairment is determined to be the result of credit-related factors or the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in interest income. Realized gains and losses and declines in value that are determined to be the result of credit losses, if any, on available-for-sale securities are included in other income or expense. Unrealized losses that are determined to be credit-related are also recorded as an allowance against the amortized cost basis. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income. All available-for-sale securities are classified as current assets, even if the maturity when acquired by the Company is greater than one year due to the ability to liquidate within the next 12 months.
During the six months ended June 30, 2020, investment activity for the Company included $153.3 million in maturities and $36.7 million in purchases, all relating to debt based marketable securities.
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Debt securities consisted of the following (in thousands):
June 30, 2020December 31, 2019
Commercial paper$  $17,152  
Corporate debt securities210,205  306,436  
Securities of government sponsored entities10,001  12,500  
Total debt securities:$220,206  $336,088  
The following is a summary of short-term debt securities classified as available-for-sale as of June 30, 2020 (in thousands):
Remaining Contractual Maturity
(in years)
Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Commercial paperLess than 1$  $  $  $  
Corporate debt securitiesLess than 1132,352  770    133,122  
Total maturity less than 1 year132,352  770    133,122  
Corporate debt securities1 to 276,244  848  (9) 77,083  
Securities of government-sponsored entities1 to 210,000  1    10,001  
Total maturity 1 to 2 years86,244  849  (9) 87,084  
Total available-for-sale securities$218,596  $1,619  $(9) $220,206  

The following is a summary of short-term debt securities classified as available-for-sale as of December 31, 2019 (in thousands):
Remaining Contractual Maturity
(in years)
Amortized CostUnrealized GainsUnrealized LossesAggregate Estimated Fair Value
Commercial paperLess than 1$17,136  $16  $  $17,152  
Corporate debt securitiesLess than 1191,770  582  (10) 192,342  
Total maturity less than 1 year208,906  598  (10) 209,494  
Corporate debt securities1 to 2113,799  351  (56) 114,094  
Securities of government-sponsored entities1 to 212,501    (1) 12,500  
Total maturity 1 to 2 years126,300  351  (57) 126,594  
Total available-for-sale securities$335,206  $949  $(67) $336,088  
The primary objective of the Company’s investment portfolio is to enhance overall returns while preserving capital and liquidity. The Company’s investment policy limits interest-bearing security investments to certain types of instruments issued by institutions with primarily investment grade credit ratings and places restrictions on maturities and concentration by asset class and issuer.
The Company reviews the available-for-sale debt securities for declines in fair value below the cost basis each quarter. For any security whose fair value is below its amortized cost basis, the Company first evaluates whether it intends to sell the impaired security, or will otherwise be more likely than not required to sell the security before recovery. If either are true, the amortized cost basis of the security is written down to its fair value at the reporting date. If neither circumstance holds true, the Company assesses whether any portion of the unrealized loss is a result of a credit loss. Any amount deemed to be attributable to credit loss is recognized in the income statement, with the amount of the loss limited to the difference between fair value and amortized cost and recorded as an allowance for credit losses. The portion of the unrealized loss related to factors other than credit losses is recognized in other comprehensive income (loss).
The following is a summary of available-for-sale debt securities in an unrealized loss position with no credit losses reported as of June 30, 2020 (in thousands):
Less Than 12 Months12 Months or GreaterTotal
Description of SecuritiesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Commercial paper$  $  $  $  $  $  
Corporate debt securities5,015  9      5,015  9  
Securities of government-sponsored entities            
   Total$5,015  $9  $  $  $5,015  $9  
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The following is a summary of available-for-sale debt securities in an unrealized loss position with no credit losses reported as of December 31, 2019 (in thousands):
Less Than 12 Months12 Months or GreaterTotal
Description of SecuritiesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Commercial paper$  $  $  $  $  $  
Corporate debt securities74,151