Esperion Therapeutics, Inc.

2013 ANNUA L REPORT

Esperion 2014 AnnRep_REV6.indd   1

9/19/14   8:43 AM

To ouR SHAREHolDERS AnD CollEAguES:
2013  was  a  highly  productive  and  important  year  for  Esperion  with  more 
successes,  both  clinically  and  financially,  than  in  any  other  year  since  we 
were  founded  in  April  2008.  All  these  achievements  would  not  have  been 
possible without your support of the Esperion team. Among our 2013 business 
highlights, we completed a $33 million private financing last April and an $80 
million  initial  public  offering  (IPo)  in  June,  leaving  Esperion  well-funded  to 
rapidly advance development of our lead program, ETC-1002. In the second 
half  of  2013,  Esperion  (ESPR)  was  added  to  the  nASDAQ  Biotechnology 
Index, the Russell global, Russell 3000, Russell 2000 and Russell Microcap 
Indices, as well as the MSCI Micro Cap Indices.

our  clinical  and  scientific  colleagues  were  especially  productive  in  2013, 
publishing and presenting results from multiple Phase 2a clinical studies that, 
in aggregate, included data from 242 patients treated with ETC-1002. Results 
demonstrated  consistent  and  significant  reductions  in  lDl-cholesterol  as 
high  as  43  percent,  and  statin-like  reductions  in  levels  of  high  sensitivity 
C-reactive  protein  (hsCRP),  a  key  marker  of  inflammation  associated  with 
cardiovascular  disease.  Esperion  published  a  study  in  the  Journal  of  lipid 
Research  that  demonstrated,  for  the  first  time,  the  effectiveness  of  ETC-
1002 in reducing chronic inflammation in preclinical models of inflammation. 
In  June,  the  Journal  of  the  American  College  of  Cardiology  published  full 
results from our ETC-1002-003 study in patients with hypercholesterolemia 
and  in  September,  we  announced  positive  top-line  results  from  our  ETC-
1002-007 clinical study demonstrating that ETC-1002 provided incremental 
lDl-cholesterol lowering when  added  on  to  statin  therapy  in  patients  with 
hypercholesterolemia.  In  november,  Paul  Thompson,  M.D.,  of  Hartford 
Hospital,  made  an  oral  presentation  of  the  full  results  from  our  ETC-1002-
006  study  in  patients  with  hypercholesterolemia  and  a  history  of  statin 
intolerance at the 2013 American Heart Association Scientific Sessions.

looking into 2014, we plan to deliver on a number of important clinical and 
non-clinical  milestones  including  completing  our  ETC-1002-008  Phase  2b 
study and reporting top-line results in the fourth quarter. The ETC-1002-008 
clinical study is focused on treating patients with hypercholesterolemia and 
a history with or without statin intolerance, which is defined as intolerance 
to  two  or  more  statins  due  to  muscle-related  adverse  events.  The  goals  of 
this study are to compare the lDl-cholesterol lowering efficacy of 1002 with 
ezetimibe,  the  active  control  and  a  common  therapy  for  statin  intolerance, 
and to further characterize the tolerability of ETC-1002.

In addition, Esperion will initiate and complete the ETC-1002-009 Phase 2b 
clinical study in 2014. We expect to report top-line results by the end of 2014. 
This  study  is  designed  to  demonstrate  the  ability  of  ETC-1002  to  achieve 
incremental lDl-cholesterol lowering on top of statin therapy in patients with 
elevated levels of lDl-cholesterol. The ETC-1002-009 study will use parallel 
doses  of  ETC-1002  for  12  weeks  added  on  to  low  and  moderate  doses  of 
statin therapy. 

Finally, in the second quarter of 2014, and then again in the fourth quarter, we 
expect  to  report  results  from  several  non-clinical  studies,  including  results 
from our long-term, 12-month toxicology study and our 2-year carcinogenicity 
studies.  We  believe  2014  will  prove  to  be  pivotal  for  ETC-1002  with  both 
clinical and nonclinical results to be announced throughout the year. We look 
forward to providing you regular updates of our progress.

TIM MAYlEBEn  |  President And Chief Executive officer

Esperion Headquarters

3891 Ranchero Drive 
Suite 150 
Ann Arbor, MI 48108 
Phone: (734) 862-4840 
www.esperion.com

UNITED STATES
SECURITIES  AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark  One)

(cid:1) ANNUAL REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE  SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

or

(cid:2) 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: 001-35986
Esperion Therapeutics, Inc.
(Exact Name of Registrant as Specified in  its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

46701 Commerce Center Drive
Plymouth, Michigan 48170
(Address of Principal Executive Offices)

26-1870780
(I.R.S. Employer
Identification  No.)

48170
(Zip Code)

(743) 862-4840
(Registrant’s Telephone Number, Including Area Code)

Securities  registered pursuant to Section 12(b) of the Act:

Title of each class

Name of  each exchange on  which  registered

Common Stock, $0.001 par value
Securities  registered pursuant to Section 12(g) of the Act: None

NASDAQ Global Market

Indicate  by check mark if the registrant is a well-known  seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes (cid:2) No  (cid:1)

Indicate  by check mark if the registrant is not  required to file reports pursuant to Section 13 or Section 15(d) of  the Exchange

Act.  Yes (cid:2) No  (cid:1)

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 (cid:1) No (cid:2)

Indicate  by check mark whether the registrant has submitted electronically and posted on  its corporate Web site, if any, every
Interactive  Data  File required to be submitted and  posted 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 and post such files).Yes (cid:1) No  (cid:2)
Indicate  by check mark if disclosure of delinquent filers pursuant to Item 405  of Regulation S-K (§229.405 of this chapter)  is
not  contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated  by  reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2)

Indicate  by check mark whether the registrant is a large  accelerated filer, an accelerated filer, a non-accelerated filer, or  a

smaller  reporting company. See the definitions of  ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller reporting  company’’ in
Rule 12b-2 of  the  Exchange Act. (Check one):
Large accelerated  filer (cid:2)

Smaller reporting company (cid:2)

Accelerated filer (cid:2)

Non-accelerated filer (cid:1)
(Do not check if a
smaller reporting company)

Indicate  by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of  the Act). Yes (cid:2) No (cid:1)
An initial public offering, or the IPO,  of the  registrant’s common stock, which is listed on  The NASDAQ Global  Market,
closed  on  July 1,  2013.  Upon  the  closing  of  the  IPO,  the  registrant  issued  5,000,000  shares  of  common  stock  in  the  IPO  and  an
additional  9,210,999 shares of common stock  upon  the conversion of  preferred stock. As of that date, the aggregate market value of
the stock held by non-affiliates of the registrant computed by reference to the price  of the registrant’s common  stock (based on the
last  reported  sale  price  on  The  Nasdaq  Global  Market  as  of  the  last  business  day  of  the  registrant’s  most  recently  completed  second
fiscal  quarter)  was  $204.6 million.  As  of  June 28,  2013,  the  last  business  day  of  the  registrant’s  most  recently  completed  second fiscal
quarter,  which does not include the 5,000,000 shares of common  stock issued in the IPO and the additional 9,210,999  shares of
common  stock  issued  upon  the  conversion  of  preferred  stock,  the  aggregate  market  value  of  common  stock  held  by  non-affiliates  of
the  registrant  was  $5.6 million.

As  of March 1, 2014, there were 15,394,226  shares of the registrant’s common  stock, $0.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part  III of  this Annual Report on Form 10-K incorporates  by reference information from the definitive  Proxy Statement for the

registrant’s 2014  Annual Meeting of Shareholders, which is expected to be filed with the Securities and Exchange Commission not
later  than  120 days  after the Registrant’s fiscal year ended December 31, 2013.

TABLE OF CONTENTS

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

PART I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Item 6.
Item 7.

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion  and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative  Disclosures About Market  Risk . . . . . . . . . . . . . . . . . .
Financial Statements and  Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on  Accounting and Financial
Item 9.

Item 9A.
Item 9B.

Item 10.
Item 11.
Item 12.

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Directors, Executive Officers  and Corporate Governance . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners  and Management  and Related

Item 13.
Item 14.

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and  Related  Transactions, and Director Independence . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15.
Exhibits and Financial Statement  Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

4
27
54
54
54
54

55
59

60
71
72

72
72
72

73
73

73
73
73

73
74

1

Forward-Looking Statements

This Annual Report on Form 10-K contains  forward-looking statements that involve substantial
risks and uncertainties. All statements other  than statements of historical facts contained in this  Annual
Report on Form 10-K, including statements  regarding our  strategy, future operations, future financial
position, future revenue, projected costs, prospects, plans, objectives  of  management and expected
market growth, are forward-looking statements. These statements  involve known and unknown risks,
uncertainties and other important factors  that may cause our actual results, performance or
achievements to be materially different  from any future  results, performance or achievements  expressed
or implied by the forward-looking statements.

The words ‘‘anticipate,’’ ‘‘believe,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘may,’’ ‘‘plan,’’ ‘‘predict,’’
‘‘project,’’ ‘‘target,’’ ‘‘potential,’’ ‘‘will,’’  ‘‘would,’’ ‘‘could,’’  ‘‘should,’’ ‘‘continue,’’ and similar expressions
are intended to identify forward-looking  statements, although not all forward-looking statements
contain these identifying words. These forward-looking  statements include, among other things,
statements about:

(cid:127) our ability to obtain regulatory approval for ETC-1002;

(cid:127) the timing and outcome of our Phase  2 clinical  studies  of  ETC-1002;

(cid:127) the timing and outcome of our Phase  3 clinical  program  of ETC-1002, including two  Phase 3

clinical studies and one long-term safety study;

(cid:127) our ability to replicate positive results from a  completed clinical  study in a future clinical study;

(cid:127) our ability to fund our development programs with existing capital or our ability to raise

additional capital in the future;

(cid:127) the potential benefits, effectiveness  or safety of ETC-1002, including as compared to statins, the
standard of care for LDL-C lowering therapies,  other  currently available therapies or therapies
in development;

(cid:127) our ability to respond and adhere  to  changes in regulatory requirements, including  any

requirement to conduct additional, unplanned clinical studies, such  as a cardiovascular outcomes
study in connection with our pursuit of ETC-1002 as an  LDL-C lowering  therapy in the statin
intolerant or other patient populations;

(cid:127) the progress, timing and amount of  expenses associated with  our development of ETC-1002;

(cid:127) guidelines relating to LDL-C levels and cardiovascular  risk that are generally accepted within
the medical community, including recent changes and any future changes to such guidelines;

(cid:127) reimbursement policies, including any future changes  to such policies or related  government

legislation, and their impact on our ability to sell  ETC-1002, if approved;

(cid:127) the accuracy of our estimates of the size and growth potential of the statin intolerant market

and the rate and degree of ETC-1002’s market acceptance, if it is  approved;

(cid:127) our ability to obtain and maintain intellectual property protection for ETC-1002 without

infringing on the intellectual property  rights of others;

(cid:127) the loss of any of our key scientific  or management personnel;

(cid:127) our intention to seek to establish strategic relationships or  partnerships; and

(cid:127) our ability to compete with other companies  that are, or may be, developing or selling products

that may compete with ETC-1002, if approved.

2

These forward-looking statements are only predictions and we may not  actually achieve  the plans,
intentions or expectations disclosed in our  forward-looking statements,  so  you should not place  undue
reliance on our forward-looking statements. Actual results  or events  could differ materially  from the
plans, intentions and expectations disclosed in the  forward-looking statements we make. We have based
these forward-looking statements largely  on our current expectations and projections about future
events and trends that we believe may affect our business, financial condition and operating  results. We
have included important factors in the cautionary statements  included  in this Annual  Report on
Form 10-K, particularly in Item 1.A. Risk Factors,  that could  cause actual future  results or events to
differ  materially from the forward-looking statements that  we make. Our forward-looking statements do
not reflect the potential impact of any  future acquisitions, mergers, dispositions,  joint  ventures or
investments we may make.

You should read this Annual Report on Form 10-K and  the documents that  we have filed as
exhibits to the Annual Report on Form 10-K with the understanding  that  our  actual future  results may
be materially different from what we expect. We  do  not assume any obligation  to  update any forward-
looking statements whether as a result of new  information, future events  or otherwise, except as
required by applicable law.

3

All brand names or trademarks appearing in this  report are the property of their respective holders.

Unless the context requires otherwise, references in this report  to ‘‘Esperion’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us,’’
and ‘‘our’’ refer to Esperion Therapeutics, Inc.

PART I

Item 1. Business

Overview

We  are a clinical stage biopharmaceutical company focused on developing and commercializing
first-in-class, oral, low-density lipoprotein  cholesterol (LDL-C)  lowering therapies for the treatment  of
patients with hypercholesterolemia and  other cardiometabolic risk markers.  ETC-1002, our lead product
candidate, is a unique, first-in-class, orally  available, once-daily small molecule  designed to lower
LDL-C levels and avoid the side effects associated with  other  LDL-C  lowering therapies  currently
available. ETC-1002 is being developed primarily  for  patients intolerant of statins with elevated levels
of LDL-C. Phase 2b clinical trials for  ETC-1002 are currently  underway and build  upon a  successful
and comprehensive Phase 1 and Phase 2  program. We own the  exclusive  worldwide rights to ETC-1002
and our other product candidates.

Statins are the current standard of care for LDL-C lowering for approximately 34 million patients

in the United States. However, it is estimated that 2  - 7 million U.S. adults are intolerant of statin
therapy due to muscle pain or weakness associated with  statin  therapy. We believe  that  ETC-1002,  if
approved, has the potential to become  the preferred once-daily, oral  therapy for patients who are
unable to tolerate statin therapy. We also believe,  because symptoms of muscle pain or weakness occur
in up to 20% of patients on statin therapy in clinical practice, that the size of the statin intolerant
market is poised to grow as effective  non-statin therapies become available.

In October 2013, we initiated our Phase 2b clinical study  in hypercholesterolemic patients  with or

without statin intolerance (ETC-1002-008),  the first clinical study in our  Phase 2b program. The
ETC-1002-008 study is a 12-week Phase  2b study in approximately 322 patients who are either statin
intolerant or statin tolerant. Patients enrolled in the ETC-1002-008 study will complete a five week
placebo run-in period and will then be  randomized to one of five arms:  1)  120 mg dose  of  ETC-1002,
2) 180 mg dose of ETC-1002, 3) an active comparator, 10 mg dose of ezetimibe, 4) a  combination of
120 mg of ETC-1002 and ezetimibe,  or 5) a  combination of 180 mg of ETC-1002 and ezetimibe.  This
Phase 2b clinical study is a parallel dose  design with  a 12-week duration. The primary objective is to
assess the LDL-C lowering efficacy of  ETC-1002 monotherapy  versus  ezetimibe monotherapy in
patients with elevated LDL-C levels with  or without  statin intolerance.  In  addition, the  study will assess
the LDL-C lowering efficacy of ETC-1002 in combination with  ezetimibe versus ezetimibe
monotherapy. We expect to complete the  study  by the  end of 2014.

We  were founded  in January 2008 by former executives of and investors  in the original Esperion

Therapeutics, Inc., a biopharmaceutical  company,  which was primarily  focused  on the  research  and
development of therapies to regulate high-density lipoprotein cholesterol, or  HDL-C.  After successfully
completing a Phase 2a clinical study with its synthetic  HDL therapy, the  original  Esperion was acquired
by Pfizer Inc. in 2004. ETC-1002 was first  discovered at the original Esperion and  we subsequently
acquired the rights to the product from  Pfizer in 2008.

4

Our Strategy

Our objective is to be a leader in the  discovery,  development and  commercialization of novel
therapies for the treatment of patients with hypercholesterolemia and intolerance to statin therapy. The
core elements of our strategy include:

(cid:127) Rapidly advance the clinical development of  ETC-1002 as  a novel, first in class, orally  available,
once-daily, small molecule therapy for hypercholesterolemic  patients who  are statin  intolerant. In
November 2013 at the Scientific Sessions of  the American Heart Association, we presented
efficacy and safety results from ETC-1002-006, our Phase 2a clinical study in patients with
elevated  LDL-C and a history of intolerance to two or  more statins. We initiated a Phase 2b
clinical study in approximately 322 statin  intolerant and  statin tolerant patients in October 2013
and expect to report top-line results  by  the end of 2014.  This  Phase 2b  clinical study includes a
comparison  with  Zetia(cid:3) (ezetimibe), which we believe is currently the most prescribed non-statin
LDL-C lowering therapy. Zetia’s worldwide sales total more than $2.5  billion, approximately half
of which are estimated to be for the treatment  of statin intolerant patients.  While  we have not
yet completed any comparative clinical studies, Zetia has reported  LDL-C  lowering of up  to  an
average of 18% in two pivotal clinical studies and ETC-1002  has demonstrated LDL-C lowering
up to an average of 43% in clinical studies to date.  Because of its superior  LDL-C lowering and
an attractive safety and tolerability profile, we  believe that ETC-1002, if approved,  has the
potential to become the preferred orally  available, once-daily LDL-C lowering  small molecule
therapy for hypercholesterolemic patients who are unable to tolerate statin therapy.

(cid:127) Demonstrate ETC-1002’s potential as  an add-on therapy  for hypercholesterolemic patients  who cannot
achieve their LDL-C goals despite the use of statin therapy. In September 2013, we announced
top-line safety, tolerability, pharmacokinetics and efficacy  results from  ETC-1002-007, our
Phase 2a clinical study using increasing doses  of  ETC-1002 as an add-on  to  atorvastatin calcium.
In March 2014, we expect to initiate a Phase 2b clinical study (ETC-1002-009) in approximately
132 patients with hypercholesterolemia who will also  be  taking a statin.  Patients in  our Phase 2b
clinical study will receive two dose strengths of ETC-1002 as an add-on to low to moderate
doses of  the four most commonly prescribed  statins, which  include, atorvastatin,  pravastatin,
simvastatin and rosuvastatin.

(cid:127) Develop ETC-1002 for LDL-C lowering in targeted patient populations,  and  develop our other product
candidates to treat other cardiometabolic risk markers  in additional patient populations. We may
initiate additional clinical studies to explore ETC-1002 as a  potential therapy  for patients with
multiple cardiometabolic risk markers, including elevated levels of hsCRP, blood glucose, and
blood pressure. In addition, we may  advance  the clinical  development of two early-stage product
candidates to which we own the exclusive worldwide rights: ESP41091, a small molecule oral
therapy; and 4WF, a synthetic apoA-I  mimetic targeted for patients  with acute coronary
syndrome.

(cid:127) Maintain flexibility in commercializing and maximizing the value of our development programs. We

may enter into strategic relationships with biotechnology or pharmaceutical companies  to
optimize the value of ETC-1002 or our other earlier-stage  development programs.  For
ETC-1002, we may enter into one or more  strategic relationships to access broader  geographic
markets, pursue broader LDL-C lowering indications  and  populations or pursue indications
outside of LDL-C lowering.

ETC-1002

ETC-1002 is a novel, first in class, orally  available,  once-daily LDL-C  lowering small  molecule
therapy with a unique dual mechanism  of action. ETC-1002 is  differentiated from statins  because it acts
at an earlier step in the cholesterol biosynthetic  pathway. ETC-1002 works by inhibiting  the ATP citrate

5

lyase (ACL) enzyme and activating 5’-adenosine  monophosphate-activated protein kinase (AMPK),
whereas statins have a mechanism of action that directly inhibits the  rate-limiting enzyme, HMG-CoA
reductase, in the cholesterol biosynthetic pathway. Reductions in  LDL-C levels resulting from statin
therapy are ultimately due to reduced  cholesterol  synthesis  and  an  increase in  the number  of  LDL
receptors in the liver. By inhibiting the  ACL enzyme, ETC-1002  achieves LDL-C  lowering comparable
to moderate-dose statins and we believe  provide  will provide  incremental lowering of LDL-C  when
used in combination with statins.

Dr. Newton and his scientific team first discovered ETC-1002 at the original Esperion,  and we
subsequently acquired its exclusive worldwide rights  from Pfizer in  2008. Initially, we intend to seek
approval of ETC-1002 as a therapy for patients  with elevated levels  of LDL-C who  are unable to
tolerate  statin therapy due to muscle pain or  weakness.  Subsequently, we may  seek  approval of
ETC-1002 in a broader population of patients who are unable  to  achieve  their LDL-C  goals, despite
being on statin therapy, and therefore remain at an increased risk for cardiovascular disease.

Cardiovascular Disease and Hypercholesterolemia

Cardiovascular disease, which results  in heart attacks, strokes and other cardiovascular events,
represents the number one cause of  death and disability in  western societies.  The American Heart
Association estimates that approximately  800,000 deaths in  the United  States were caused  by
cardiovascular disease in 2009.

Elevated LDL-C is well-accepted as  a  significant risk factor  for cardiovascular disease and the
CDC  estimates that 71 million U.S. adults have elevated levels  of LDL-C.  A consequence of elevated
LDL-C is atherosclerosis, which is a disease  that is characterized  by the deposition of excess cholesterol
and other lipids in the walls of arteries  as plaque. The development of  atherosclerotic plaques often
leads to cardiovascular disease. The risk  relationship between  elevated LDL-C and cardiovascular
disease was first defined by the Framingham Heart Study, which commenced  in 1948 to define the
factors that contributed to the development of cardiovascular  disease. The study enrolled participants
who did not have any form of cardiovascular disease and followed them over a long  period of time.
Elevated LDL-C and elevated blood pressure were identified early on as key risk factors  for the
eventual development of cardiovascular disease.

The hypothesis that lowering elevated levels  of LDL-C would  translate into reduced risk  of

cardiovascular disease was first proven  in  1984 with the publication  of  the Lipid Research Clinics
Coronary Primary Prevention Trial. In  this study, treatment with  cholestyramine, a  bile acid  sequestrant,
showed  a 20% reduction in LDL-C and, importantly, a  19% reduction  in risk of cardiovascular disease
death or nonfatal myocardial infarction,  or  heart attack.  This was the  first major clinical study  to
demonstrate a direct relationship between lowering LDL-C levels and reduced risk of major
cardiovascular events.

The first marketed statin, lovastatin,  was approved  for use in the  United States in  1987 based  on

its  ability to significantly lower elevated  LDL-C levels. That same year,  the  National Cholesterol
Education Program issued its first guidelines for  the diagnosis and treatment of patients  with
hypercholesterolemia. Over the subsequent 20  years,  seven  more statins were approved  for use to lower
elevated  LDL-C levels.

In 1994, the first clinical outcomes study with a  statin was published. This study demonstrated a
significant reduction in risk for total mortality and major  cardiovascular events. A series  of additional
clinical outcomes studies with statins  have each  shown that  lowering elevated LDL-C translated  into
reduced major cardiovascular events.  The  relationship between the  extent of LDL-C lowering  and
reduction in cardiovascular risk appeared  to  be  linear, which has supported a  ‘‘lower is  better’’
hypothesis. This hypothesis was tested  and proven in  the PROVE-IT (Pravastatin or  Atorvastatin
Evaluation and Infection Therapy) study  where an on-treatment LDL-C level of 62  mg/dL  associated

6

with atorvastatin treatment translated  into a  statistically  significant 16% reduction in  risk of  major
cardiovascular events as compared with the  95 mg/dL on-treatment LDL-C level  associated with
pravastatin.

The direct relationship between lower  LDL-C levels  and  reduced risk for major  cardiovascular
events has been consistently demonstrated for more than a decade in 14 clinical  studies involving  more
than 90,000 patients. As a result, physicians are highly focused on lowering LDL-C levels  in their
patients, and we believe there is a trend  towards even more aggressive LDL-C lowering.  For example,
in the United States, increasing attention  has  been placed on  aggressive  LDL-C management by
organizations such as the National Cholesterol Education Program, or NCEP, the American Heart
Association, and the American College  of Cardiology.  Additionally, both  the Canadian Cardiovascular
Society and the Joint British Societies  have  supported even lower LDL-C treatment targets  for
high-risk patients. This has led to the  combination of statins with other  treatments, such  as Zetia.

In July 2004, the NCEP issued an update to its Adult Treatment Panel III (ATP  III) clinical
practice guidelines on cholesterol management, advising physicians to consider new, more intensive
treatment options  for people at very  high risk,  high risk and moderately  high risk  for cardiovascular
disease. The LDL-C goals in these updated clinical practice guidelines, which are  presented  below,
contemplate initiating drug therapy at lower LDL-C  thresholds, expanding the number of potential
patients for LDL-C lowering therapy.

NCEP ATP III Clinical Practice Guidelines

Patient Cardiovascular Disease Risk

LDL-C Goal

Very High Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . < 70 mg/dL
Cardiovascular Disease and Cardiovascular Disease Risk Equivalent . <  100 mg/dL
Multiple (2+) Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . < 130 mg/dL
0 - 1 Risk Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . < 160 mg/dL

In November 2013, the American College of Cardiology and the American Heart Association

issued new guidelines for the treatment  of  elevated cholesterol. For the  first  time in more than
20 years, the new guidelines do not include specific,  numerical  LDL-C treatment  goals for
hypercholesterolemic patients. However,  the guidelines strongly recommend the use of more potent
statins and intensive statin therapy in  patients with hypercholesterolemia.The new  guidelines also
significantly expanded the number of  patients  eligible for statin therapy, including  patients  with a
history of cardiovascular disease including stroke,  patients with both  Type  1 and  Type 2 diabetes, all
patients with LDL-C (cid:1) 190 mg/dL and patients with a 10-year risk  of > 7.5%  of  developing
cardiovascular disease. Also for the first time, the guidelines  acknowledge  the existence of statin
intolerance, and incorporate statin intolerance  into  the consideration  of  treatment choices and into the
evaluation of statin safety.

7

Currently Approved  Therapies

The following table illustrates common therapies  used  to  treat hypercholesterolemia:

Class of Therapy

Labeled Indication

Average LDL-C
Change from
Baseline

Statins

Reduction  in  LDL-C

Up to 63%

Key Side Effects

(cid:127) Skeletal  muscle effects
(e.g.,  myopathy and
rhabdomyolysis)

(cid:127) FDA  recently warned that
people being treated with
statins may have an increased
risk of  raised blood sugar levels
and the development of type 2
diabetes

Fixed combination

Reduction in  LDL-C

Up to 63%

(cid:127) Includes a  statin  as one of  the

therapies

underlying therapies and
therefore contains the same
side effects outlined  above

Bile acid sequestrants

Reduction  in  LDL-C(1) Up to 20%

(cid:127) Gastrointestinal disorders

Cholesterol absorption

Reduction  in  LDL-C

Up to 18%

(cid:127) Limited

inhibitors

Niacin

Fibrates

Reduction  in  LDL-C;
Reduction  in recurrent
myocardial infarction

Reduction  in
triglycerides and
LDL-C

Up to 17%

(cid:127) Flushing (i.e.,  warmth or

redness) hepatic  toxicity  and
skeletal muscle effects

Up to 21%

(cid:127) Gallstones,  skeletal muscle
effects  and liver  disorders

(1) Welchol, a bile  acid sequestrant, is  also  approved for improving glycemic  control  in adults with type  2

diabetes.

Other Approved Therapies for Specific Populations

A small subpopulation of patients with extremely  elevated levels  of LDL-C, estimated to be
approximately 300 patients in the U.S., suffer  from homozygous  familial  hypercholesterolemia,  or
HoFH. HoFH is a serious and rare genetic  disease  and patients with HoFH lack or  have dysfunctional
receptors and as a result, cannot remove  LDL particles  and LDL-C  from the blood.  As a result,
untreated HoFH patients typically have LDL-C levels in the  range of 450  mg/dL  to  1,000 mg/dL. MTP
inhibitors and ApoB antisense drugs are  approved  therapies  to  treat patients with a  clinical or
laboratory diagnosis of HoFH. Given the  serious safety concerns with these therapies, specifically
hepatotoxicity, the FDA has restricted their usage to this narrow subpopulation.

Statin Therapy

Statins are the cornerstone of lipid treatment today and are highly  effective at lowering LDL-C.
This class of drugs includes atorvastatin  calcium,  marketed as Lipitor(cid:3), the most prescribed LDL-C
drug in the world and the best-selling pharmaceutical in  history.  Approximately 25% of Americans over
the age of 45 from 2005 to 2008 were  treated for elevated  LDL-C  levels with a statin  therapy,
according to a National Health and Nutrition Examination Survey.

8

Statins are selective, competitive inhibitors of HMG-CoA  reductase,  a  rate-limiting enzyme in  the

cholesterol biosynthesis pathway, and  work primarily in liver cells.  Statin inhibition of cholesterol
synthesis increases the number of LDL  receptors on the surface of liver cells.  This increase in LDL
receptors enhances uptake of LDL particles into liver cells from the  circulation, thus lowering LDL-C
levels.

The benefits of statin use in lowering  LDL-C levels and improving cardiovascular outcomes are
well documented. Despite the effectiveness of statins and their  broad market acceptance, there  is a
significant subset of patients who are unable to tolerate statins  due to muscle  pain or  weakness,
memory loss or increased glucose levels,  or who are otherwise  unable  to reach  their  LDL-C goal on
statin therapy alone. In rare but extreme  cases, statins can  lead to muscle breakdown,  kidney failure
and death. In addition, the FDA has recently warned that statins can cause hyperglycemia, an increase
in blood sugar levels and create an increased risk of worsening of  glycemic control and  of new onset
diabetes. There are approximately 37 million  U.S. adults with  elevated LDL-C levels who are not on an
LDL-C lowering therapy. For these reasons, we believe  there is  a need  for  novel therapies to treat
patients with hypercholesterolemia.

Statin Intolerance—Initial Market Opportunity for ETC-1002

We  are initially pursuing the clinical development  of  ETC-1002  as a  therapy for patients with
hypercholesterolemia who are statin intolerant. Based upon our communications  with the FDA, statin
intolerance is defined as the inability to tolerate  at least two statins,  one  of  which was taken at  the
lowest approved dose, due to skeletal muscle  pain, aches, weakness  or  cramping, that manifested or
increased during statin therapy and stopped upon the discontinuation of statin  usage.

Muscle  pain or weakness is the most common side effect  experienced by statin users  and the  most

common cause for discontinuing therapy.  According  to  the USAGE survey, an approximately 10,000
patient academic study of current and  former  statin  users published during  2012 in the  Journal  of
Clinical Lipidology, 12% of patients  on statins discontinue therapy and 62% of these patients cited side
effects as the reason for discontinuation.  More than 86%  of  patients who discontinued therapy  because
of side effects cited muscle pain or weakness as the  reason. Based upon these data, approximately 6%
of statin users, or more than 2 million adults in the United  States, ceased therapy because of  muscle
pain or weakness and are therefore statin  intolerant.

Moreover, a significant proportion of  patients remain  on statin therapy despite experiencing
muscle-related side effects. The rate  of  occurrence  in the clinical setting,  as highlighted  by  the USAGE
survey, is  significantly higher than the  up to 5%  rate reported  by subjects in  the controlled environment
of clinical studies. The USAGE survey  reported that 25% of patients currently  on statins  have muscle-
related side effects. Similarly, a study  published in  the Journal of General Internal Medicine  in August
2008 estimated that up to 20% of statin-treated patients in  clinical  practice complained of muscle  pain.
Accordingly, we believe that in the presence of a  safe and effective non-statin, oral, once-daily, small
molecule LDL-C lowering therapy, the statin intolerant  market  could grow  substantially.

Hypercholesterolemic Patients—Subsequent Market Opportunity for ETC-1002

In addition to developing ETC-1002 for the treatment of statin intolerant patients, we  expect to

continue to develop ETC-1002 as an add-on therapy for  hypercholesterolemic patients who are unable
to reach their recommended LDL-C goals despite  the use of statin therapy. The severity of
hypercholesterolemia in these patients,  their level  of cardiovascular disease risk  and their therapeutic
options all vary widely.

9

Additional Therapies in Development—PCSK9 Inhibitors

A number of larger biopharmaceutical companies are currently developing a new class  of biologic

therapies that target proprotein convertase  subtilisin/kexin type 9, or PCSK9, an  enzyme  that  binds
LDL receptors. These PCSK9 inhibitors, which are still in clinical development,  are injectable, fully-
human antibodies  that are being evaluated  as potential therapies to lower  LDL-C, including in patients
who are statin intolerant or who are statin  resistant. In October  2013, Sanofi and Regeneron
Pharmaceuticals Inc. announced topline results for the first Phase 3 study  of alirocumab, their PCSK9
inhibitor. In December 2013, Amgen Inc.  announced  topline  results for the first two Phase  3 studies  of
evolocumab, their PCSK9 inhibitor. Also  in 2013, Pfizer Inc. announced that  it initiated Phase 3 studies
of bococizumab.In monotherapy clinical studies to date,  PCSK9 inhibitors  have demonstrated significant
reductions of LDL-C, up to 51%. The PCSK9  inhibitors,  if approved, could be an effective therapeutic
alternative for statin intolerant patients or as an add on to, statin therapy. Notwithstanding the LDL-C
lowering efficacy, we believe the adoption  of  PCSK9 inhibitor  therapy  by  patients,  physicians,  and
payers will be impacted by the higher  cost of biologic  therapies, the  inconvenient  route of
administration and the inability to positively  impact  other important cardiometabolic risk  markers.

Clinical Experience

To date, ETC-1002 has been studied  in  seven  clinical trials  across five patient populations:  healthy

volunteers; patients with elevated LDL-C  levels; patients  with type 2  diabetes and  elevated  LDL-C
levels; patients with elevated LDL-C  levels and a history  of  statin intolerance; and patients with
elevated  LDL-C levels taking 10 mg  of atorvastatin. The first six (6) clinical  studies compared
ETC-1002 monotherapy to placebo. In  ETC-1002-007,  the most  recent clinical study,  ETC-1002  was
administered as an add-on to a 10 mg dose  of  atorvastatin.  These clinical trials consisted of four
Phase 2a clinical trials and three Phase  1 clinical  trials. The individual design and  results of each of  our
completed clinical trials are discussed  below.

10

Completed Clinical Studies

To date, we have completed the following clinical studies  of  ETC-1002:

Description

Title

Treatment
Duration

Subjects

Total

Treated

ETC-1002-007

ETC-1002-006

Phase 2a Clinical Study of Safety and Pharmacokinetic
Interaction in Patients with Hypercholesterolemia on a
Background of Atorvastatin 10 mg

Placebo-controlled, randomized, double-blind, drug interaction
study to evaluate the safety, tolerability  and effect on
atorvastatin pharmacokinetics of ETC-1002  added to
atorvastatin 10 mg/day in patients with hypercholesterolemia

Phase 2a Proof of Concept Clinical Study in  Patients with
Hypercholesterolemia and a History of Statin Intolerance

Placebo-controlled, randomized, double-blind, multicenter
study to evaluate the efficacy and safety of ETC-1002 in
patients with hypercholesterolemia and a history of  intolerance
to statin therapy

Phase 2a Proof of Concept Clinical Study in  Patients with
Hypercholesterolemia and Type 2 Diabetes

8 Weeks

58

42

8 Weeks

56

37

ETC-1002-005

Placebo-controlled, randomized, double-blind, single site
clinical study to evaluate the LDL-C lowering efficacy and
safety of ETC-1002 in patients with type 2 diabetes

4 Weeks

60

30

Phase 1b Multiple-Dose Tolerance Greater  Than 120 mg
Clinical Study

ETC-1002-004 Multiple ascending dose clinical study to  evaluate safety,

2 Weeks

24

18

ETC-1002-003

tolerability and pharmacokinetics (PK) of ETC-1002 in doses
greater than 120 mg once-daily in healthy subjects

Phase 2a Proof of Concept Clinical Study in
Hypercholesterolemic Patients

Placebo-controlled, randomized, double-blind, parallel group,
multicenter clinical study to evaluate the LDL-C  lowering
efficacy and safety of ETC-1002 in patients with
hypercholesterolemia and either normal or elevated
triglycerides

Phase 1b Multiple-Dose Tolerance Clinical Trial

12 Weeks

177

133

ETC-1002-002 Multiple ascending dose clinical trial to evaluate safety,

tolerability, PK and pharmacodynamics (PD) of ETC-1002 in
doses of up to 120 mg once-daily in healthy subjects

2 Weeks /
4 Weeks

53

39

Phase 1a Single-Dose Tolerance Clinical Trial

ETC-1002-001

First-in-human single-dose clinical trial to evaluate safety,
tolerability and PK of ETC-1002 in healthy subjects

Single
Dose

18

18

Overall, ETC-1002 has been well-tolerated and associated with no dose limiting adverse events.  A

single patient dosed with ETC-1002 has  experienced a serious  adverse event, or SAE,  which was
assessed by the principal investigator  at that clinical site as  unrelated  to  ETC-1002. Two  patients
receiving placebo have also experienced SAEs.

11

Phase 2a Clinical Studies

ETC-1002-007—Phase 2a Clinical Study of Safety  and Atorvastatin Pharmacokinetic  Interaction  in

Patients with Hypercholesterolemia on a Background  of Atorvastatin 10 mg

ETC-1002-007 was an eight-week Phase 2a clinical study in  58 patients, of whom 42  were dosed
with ETC-1002, across six participating clinical recruitment sites  in the United States. Although  the trial
was not designed to assess LDL-C lowering with ETC-1002, this  was measured  as a secondary endpoint
to determine whether incremental LDL-C  lowering would occur with  ETC-1002  added on a
background of statin therapy. The results  of this clinical study are  summarized as follows:

(cid:127) ETC-1002 dosed as an add-on to 10 mg  of atorvastatin was well tolerated and  did not result in

any serious adverse events

(cid:127) In  patients on a background of atorvastatin, ETC-1002 reduced LDL-C  levels, a  secondary

endpoint, by an average of 22% versus 0%  change with placebo (p<0.0001).

(cid:127) Mean LDL-C level in patients on a  background of atorvastatin 10  mg prior to treatment with
ETC-1002 or placebo in 1002-007 was 106 mg/dL; this baseline LDL-C level  is relatively low.

(cid:127) No significant changes in HDL-C or triglyceride levels were  observed.

(cid:127) ETC-1002 demonstrated a weak pharmacokinetic interaction with atorvastatin.

ETC-1002-006—Phase 2a Proof of Concept Clinical Study in Patients with Hypercholesterolemia

and a History of Statin Intolerance

ETC-1002-006 was an eight-week Phase 2a proof-of-concept  clinical study  in 56 patients, of  whom
37 were dosed with ETC-1002, across five participating clinical  recruitment sites in  the United  States.
This clinical study  was designed to evaluate the LDL-C lowering efficacy, tolerability and  safety of
ETC-1002 versus placebo in patients  with hypercholesterolemia and a  history of intolerance  to  two or
more statins due to muscle pain or weakness. After completing  a lipid-lowering therapy  wash-out and
two weeks of dosing with placebo, eligible patients  were randomized to receive  ETC-1002 or  placebo in
a 2:1 ratio for eight weeks. Patients were  given increasing doses  of ETC-1002 of 60  mg, 120 mg,  180 mg
and 240 mg for two weeks each (or placebo only for the  full  8 weeks).  The primary endpoint  of  this
clinical study was LDL-C lowering from baseline  to  end of study.  The  results of this clinical study are
summarized as follows:

(cid:127) LDL-C levels after eight weeks of treatment of ETC-1002, which  was  the primary endpoint,

were reduced by an average of 32% for  patients dosed  with ETC-1002, compared to an average
of 3% for patients dosed with placebo  (p<0.0001).

(cid:127) Drop-out rates and muscle related  adverse events were  comparable to placebo and no  patients

treated with ETC-1002 discontinued the trial because of muscle related adverse events.

(cid:127) hsCRP, a marker of inflammation,  was reduced by  42% after eight weeks  of ETC-1002  therapy

versus 0% on placebo (p=0.0022).

(cid:127) No significant changes in HDL-C or triglyceride levels were  observed.

ETC-1002-005—Phase 2a Proof of Concept Clinical Study in Patients with Type 2 Diabetes

ETC-1002-005 was a four-week Phase 2a proof-of-concept clinical  study  at a  single site. This
clinical study was designed to evaluate  the LDL-C lowering  efficacy and safety of ETC-1002 in patients
with type 2 diabetes. One treatment arm  was placebo and the other  was  80 mg of ETC-1002, once-daily

12

for two weeks, followed by 120 mg of  ETC-1002,  once-daily for  two additional weeks.  The key results
of this clinical study are summarized as follows:

(cid:127) LDL-C levels after four weeks of treatment of ETC-1002, which is  the  primary  endpoint, were
reduced by an average of 43% for patients  on the  120 mg dose of  ETC-1002  compared to an
average of 4% for patients dosed with placebo (p<0.0001).

(cid:127) Approximately 80% of the patients  were not at their NCEP ATP  III  LDL-C goal  of less than
100 mg/dL at the beginning of the study. Of these, 88% of  the  patients dosed with ETC-1002
achieved their goal by study end as compared to 4%  of  patients dosed with placebo (p<0.0001).

(cid:127) hsCRP was reduced by 41% on the  120 mg dose  of  ETC-1002  versus  11% on  placebo

(p=0.001).

(cid:127) HDL-C and triglyceride levels were unchanged in both  treatment arms.

(cid:127) Intensive assessment of glycemic parameters  using blood sampling and  24 hour continuous

glucose monitoring showed no worsening of blood  glucose with ETC-1002 treatment.  Treatment
with ETC-1002 resulted in modest trends toward improved glycemic  control and insulin
resistance.

(cid:127) Non-HDL-C decreased by 32% for  patients dosed with  ETC-1002 as  compared to an  increase of

1% for patients dosed with placebo (p<0.0001).

(cid:127) No SAEs were observed in patients dosed with ETC 1002. ETC  1002 was safe,  well tolerated

and associated with no dose limiting side effects.

ETC-1002-003—Phase 2a Proof of Concept Clinical Study in Hypercholesterolemic  Patients

ETC-1002-003 was a 12-week Phase 2a proof-of-concept study  in 177 patients,  of  whom  133 were

dosed with ETC-1002, across 11 participating clinical recruitment sites in the United  States. This
clinical study was designed to evaluate  the LDL-C lowering  efficacy and safety of ETC-1002 versus
placebo in patients with hypercholesterolemia  (LDL-C of 130  to  220 mg/dL) and either  normal (less
than 150 mg/dL) or elevated triglycerides  (150 to 400  mg/dL). The four arms were placebo and 40 mg,
80 mg and 120 mg doses of ETC-1002  once-daily. The key results  of  this  clinical study  are summarized
as follows:

(cid:127) LDL-C levels were reduced by an average of 18%, 25%  and 27% for  patients dosed with

ETC-1002 40, 80 and 120 mg of ETC-1002, respectively, compared  to  an average of 2%  for
patients dosed with placebo (p<0.0001). ETC-1002’s lowering of LDL-C levels  was  maintained
across a range of baseline triglycerides levels.

(cid:127) ETC-1002 also lowered corresponding  levels of  the atherogenic biomarkers,  apolipoprotein
(apo)  B, non-HDL-C and LDL particle number (p<0.0001) in a dose-dependent manner.

(cid:127) Patients dosed with ETC-1002 demonstrated  a trend in hsCRP reduction of 20% to 26%

compared to 2% in patients dosed with  placebo.  In a  subgroup of patients with elevated hsCRP,
patients dosed with ETC-1002 demonstrated a trend  in hsCRP reduction of  43% to 64%
compared to a decrease of 7% for patients dosed with placebo.

(cid:127) HDL-C and triglyceride levels were unchanged across  all treatment arms.

(cid:127) There  were no SAEs observed in patients  dosed with ETC-1002.  ETC-1002 was safe,

well-tolerated and associated with no dose-limiting side-effects.

13

Phase 1 Clinical Trials

Our completed Phase 1 clinical trials of ETC-1002 exposed subjects in  one  single  dose tolerance

test and two multiple dose tolerance tests.  Our single dose tolerance test dosed subjects with up to
250 mg of ETC-1002. Our multiple dose  tolerance  tests dosed subjects with  up to 120 mg and 220 mg
of ETC-1002, respectively. We did not  identify  any  dose-limiting  side effects in  either the single dose
tolerance test or the multiple dose tolerance tests,  and  ETC-1002 was safe and well-tolerated in each
clinical trial. In addition, LDL-C was  lowered rapidly in the multiple dose tolerance tests, including in
as early as five days, and we observed an  average reduction in LDL-C levels of up  to  36%.

ETC-1002-004—Phase 1b Multiple Dose  Tolerance Greater Than 120  mg Clinical  Trial

ETC-1002-004 was a two-week, Phase 1b,  multiple dose tolerance clinical  trial  in 24 subjects, of

whom 18 were dosed with ETC-1002. This clinical trial was designed to evaluate the safety  and
tolerability of escalating, multiple oral doses of  ETC-1002 above 120  mg/day. Subjects in this clinical
trial received 140, 180, or 220 mg of ETC-1002 or  placebo once-daily  for 14  days. The key
pharmacodynamic results of this clinical trial  are as follows:

(cid:127) LDL-C levels were reduced by an average of 36% for subjects dosed with 220  mg/day of
ETC-1002 as compared to a 4% increase  for subjects dosed  with placebo (p<0.0001).
ETC-1002’s effect on LDL-C lowering was robust notwithstanding non-elevated baseline LDL-C
levels.

(cid:127) The pharmacokinetics of ETC-1002 were well-characterized and supported once-daily dosing.

(cid:127) No SAEs were observed in the subjects dosed with  ETC-1002. ETC-1002 was  safe, well-tolerated

and associated with no dose-limiting side-effects.

ETC-1002-002—Phase 1b Multiple-Dose Tolerance  Clinical  Trial

ETC-1002-002 was a staged two-week and four-week  Phase 1b multiple dose tolerance clinical  trial

in 53 subjects with 39 receiving ETC-1002 and 23 receiving placebo. The subjects  were divided into
four  different cohorts of six subjects with each  receiving  20, 60, 100 or 120  mg of  ETC-1002 or  placebo
once-daily for 14 days. This was followed  by a larger cohort that was treated for 28 days  during which
subjects lived outside of the clinical site for the duration of their treatment. This  clinical trial
demonstrated that the pharmacokinetics of ETC-1002 were  well characterized and supported once-daily
dosing.

(cid:127) The pharmacokinetics of ETC-1002 were well-characterized and supported once-daily dosing.

(cid:127) No SAEs were observed in the subjects dosed with  ETC-1002. ETC-1002 was  safe, well-tolerated

and associated with no dose-limiting side-effects.

Overall Safety Observations

To date, 317 subjects have been treated with ETC-1002 for  periods of up to 12  weeks  at maximum

repeated doses of 240 mg per day. ETC-1002  has been  safe and well-tolerated with no dose-limiting
side effects identified to date in our ongoing  or completed clinical studies.  No clinical safety trends
have emerged to date although very modest  shifts in group mean levels of hemoglobin, uric acid,
alkaline phosphatase and homocysteine  were  identified in some of our completed  clinical studies. The

14

clinical relevance of these shifts is not readily apparent and will  be  monitored in our future clinical
studies.

Trial

Phase

Patient  Population

Trial  Design

Duration

Patients
(Treated)

Doses

LDL
Lowering
Efficacy

ETC-1002-001

Phase  1a

Healthy  subjects

Single  dose, PK

Single  dose

18  (18)

ETC-1002-002

Phase  1b

Healthy  subjects

Multiple ascending
dose, PK/PD

2/4 weeks

53 (39)

20, 60,  100, 120  mg

Up  to  17%

ETC-1002-003

Phase 2a

Elevated LDL

Placebo  controlled

12  weeks

177 (133)

40,  80,  120 mg

Up  to  27%

ETC-1002-004

Phase  1b

Healthy  subjects

Multiple  ascending
dose, PK

2 weeks

24 (18)

40, 180,  220 mg

Up  to  36%

ETC-1002-005

Phase 2a

ETC-1002-006

Phase  2a

Elevated LDL;
T2DM

Elevated LDL;
statin intolerant

Placebo controlled

4 weeks

56  (37)

80, 120  mg

Up  to  43%

Placebo  controlled

8 weeks

60 (30)

60, 120,  180, 240 mg

Up  to  33%

ETC-1002-007 .

.

.

Phase 2a

Elevated LDL;
statin add-on

Placebo  controlled,
10 mg atorvastatin

8 weeks

58 (2)

60, 120,  180, 240 mg

Up  to  22%

Ongoing and Planned Clinical Studies

Statin Intolerant Population (ETC-1002-008)

ETC-1002-008

ETC-1002-008 is a 12-week study of the treatment of elevated LDL-C levels  in approximately

322 patients either with or without statin  intolerance (50% of patients in the trial  will meet  the
definition of statin intolerance) across  70 participating clinical sites in the US. The purpose  of  this
clinical trial is to inform dosing for our Phase 3  program,  directly  compare  the LDL-C lowering
efficacy of ETC-1002 versus ezetimibe,  and assess safety and tolerability, including  muscle-related
adverse events, in patients with or without statin intolerance. ETC-1002-008 utilizes  two doses of
ETC-1002 in a parallel group design of 12 weeks duration,  compared with  ezetimibe, a common
treatment for statin intolerance. The  LDL-C  lowering efficacy of  ETC-1002 in  combination with
ezetimibe will also be assessed. The goal is  to  demonstrate comparable tolerability of ETC-1002
monotherapy with superior efficacy to ezetimibe for the treatment of patients with elevated LDL-C
levels either with or without intolerance to two or  more statins due to muscle-related adverse events.
We  initiated ETC-1002-008 in October 2013.

Add-on to Statin Population (ETC-1002-009)

The objective of this add-on to statin therapy clinical study is to support Phase  3 dosing of

ETC-1002 as  an add-on to low and moderate doses  of statins in  patients with elevated levels of LDL-C.

ETC-1002-009

ETC-1002-009 will be a 12-week study for the treatment of approximately 132 patients  with

ETC-1002 as  an add-on to statin therapy across 28  participating clinical sites  in the U.S. Many
hypercholesterolemic patients on statin  therapy do not achieve adequate lowering of their LDL-C
levels. The goal will be to demonstrate that ETC-1002, when  added  onto statin therapy, will  lead to
greater LDL-C lowering and fewer side effects. We expect  to initiate  ETC-1002-009 in March  2014.

15

Additional Regulatory Studies

Phase 3 Clinical Studies

We  plan to use the results of our Phase 2 clinical studies  to  inform dosing for our Phase 3 clinical
studies.  We will conduct these Phase 3  clinical studies in larger  patient populations  to  further evaluate
clinical doses, and the efficacy and safety of  ETC-1002  in an expanded patient population  at
geographically dispersed clinical study sites. Any such  Phase 3  clinical studies and any  additionally
required long-term safety study, would  be  intended to establish  the overall risk/benefit ratio of
ETC-1002 and to provide an adequate  basis for regulatory  approval of  ETC-1002.

The current Phase 3 clinical program  is planned to include two pivotal  efficacy studies  in patients
with statin intolerance and one long term  safety study.  The doses of ETC-1002  utilized  in Phase  3 will
be informed by the results of our Phase 2  studies. The  overall program will be based upon  agreed upon
study designs/ duration and size based on  an end of Phase 2b  meeting with FDA.

Studies in Response to Partial Clinical Holds

In 2009, the FDA determined that ETC-1002 was a potential peroxisome proliferator activated

receptor, or PPAR, agonist and as a result was subject  to  a partial clinical hold. The FDA has issued
such notices to all  sponsors of PPARs or  agents  deemed  to  have PPAR-like  properties. The partial
clinical hold permits clinical studies of up  of to six months’ duration for ETC-1002 and  also requires us
to conduct two year rat and mouse carcinogenicity  studies before initiating clinical studies of  longer
than six months. The in-life phase of our two year rat  and mouse carcinogenicity studies are scheduled
for completion by April and May 2014 and draft reports will be issued  by the  end of 2014.

The clinical data to date appear to demonstrate  the absence  of  PPAR mediated pharmacology
(triglyceride decreases, adiponectin increases, mild ALT  increases)  or toxicity  (weight gain, edema,
creatinine kinase/creatinine increases) in humans. This is supportive of the conclusion that the  weak
PPAR alpha/gamma activities observed at  high doses of ETC-1002 in vitro and in  animal models
preclinically are not observed with therapeutic doses of ETC-1002 in humans. These  effects will
continue to be monitored in our future  clinical program. Most  importantly, our  clinical studies have
demonstrated rapid and significant LDL-C lowering  consistent with  the dual mechanisms  of  action
inhibiting ATP-citrate lyase and activating  hepatic  AMPK.

In addition, based upon early preclinical  toxicology results, the FDA has limited our ability to dose

ETC-1002 above 240 mg in our clinical  studies. We  do  not plan to dose ETC-1002 above  240 mg. We
recently completed the in-life phase of  our long  term, chronic toxicology studies in  monkeys
(12 months) and rats (6 months) and final reports  from these studies will be issued and filed  with FDA
in the second quarter of 2014.

If we  are unable to address FDA’s concerns related to the partial  clinical holds,  we could be
delayed in, or prevented from, obtaining  marketing  approval of  ETC-1002. Additionally, FDA could
raise these concerns as part of the NDA  review process  for  ETC-1002, which could result  in adverse
limitations in any approved labeling or on distribution and use  of ETC-1002,  if  approved.

Pharmacology and Toxicology Studies

Our pre-clinical studies of ETC-1002  have demonstrated favorable effects on  plasma  LDL-C and

triglycerides, blood pressure, blood glucose and insulin levels, inflammation and weight gain in
diet-induced and genetic pre-clinical models of  dyslipidemia, diabetes, and  obesity. In a progression
model of atherosclerosis using a LDL-receptor deficient mouse  model, ETC-1002 demonstrated
reductions in atherosclerotic plaque content and size  with beneficial  changes in inflammatory  markers.

16

Mechanism of Action

ETC-1002 has dual mechanisms of action targeting both ATP citrate lyase and  AMPK. ETC-1002

works in the liver and, once in the liver  inhibits ACL and activates AMPK.  Pre-clinical  studies have
shown that ETC-1002 is activated to a coenzyme A derivative,  or ETC-1002-CoA,  which directly
inhibits ACL, a key enzyme that supplies substrate for cholesterol and  fatty acid synthesis. Studies in
liver cells show that inhibition of ACL  by  ETC-1002 increases LDL receptor  activity in a  manner
similar to statins, which are known to  reduce LDL-C largely  through this mechanism. Activation of
AMPK by ETC-1002 complements the effects of ACL inhibition  in the liver and is believed to
contribute to the beneficial effects on other cardiometabolic risk  markers including hsCRP, insulin
sensitization, blood pressure and weight. While the  relative contributions  of ACL  inhibition  and AMPK
activation are currently under investigation, these mechanisms  are  supported by preclinical and clinical
observations that have been published  in  peer reviewed  publications and presented at scientific
conferences. We are not aware of any alternative explanations regarding ETC  1002’s dual mechanisms
of action or the preliminarily accepted conclusion  in the scientific community that inhibiting ACL and
activating AMPK have the potential  to  regulate  metabolic imbalances in both the lipid  and
carbohydrate metabolic pathways, which do not function  normally  in specific  patient  populations with
specific  cardiometabolic risk markers.

Early-Stage Product Candidates

ESP41091

We  acquired the exclusive worldwide  rights  to  ESP40191 from  Pfizer in  April 2008. ESP41091, our
second  product candidate, is a pre-IND  compound. In pre-clinical  pharmacology studies, treatment  with
ESP41091 also resulted in beneficial  effects on  lipid metabolism and body  weight  in obese Zucker rats.
Oral intervention with ESP41091 resolved hyperglycemia  and reduced body weight following a four
week treatment in a diet-induced obese mouse  model  of  insulin resistance.

4WF

Our management team has prior success in the identification  and clinical development  of synthetic

apoA-I therapies. ApoA-I is the primary  protein in HDL. At the original Esperion,  we licensed
apoA-I Milano, a synthetic apoA-I therapy,  and successfully completed a Phase  2a clinical  study
showing  regression of atherosclerosis in  high-risk acute coronary  syndrome patients after  four weeks of
therapy. In June 2011, we acquired the exclusive worldwide rights to 4WF from the Cleveland Clinic
Foundation. 4WF is a next generation  synthetic  apoA-I therapy designed to  preserve the function  of
HDL and apoA-I, and to deliver oxidation-resistant synthetic  apoA-I  therapy via an injection as
opposed to intravenous infusion. Moreover,  recent  research  demonstrates  that  HDL becomes
dysfunctional and loses its cholesterol  acceptor and anti-inflammatory activity through myeloperoxidase
mediated enzymatic oxidation. We believe the preferred  means  to  improve HDL function is to increase
the number and activity of HDL particles  in the body through synthetic  apoA-I therapy.  We  believe our
initial in vitro protein screening and characterization suggest the  benefits of 4WF as an  optimized
myeloperoxidase oxidation-resistant synthetic  apoA-I therapy.

Research and Development Expenses

Research and development expenses for the  year  ended December 31, 2013 were $16.0 million.

Sales and Marketing

Given our stage of development, we  have not yet  established a commercial organization  or
distribution capabilities, nor have we entered  into  any  partnership or co-promotion arrangements with
an established pharmaceutical company.  To develop the appropriate  commercial  infrastructure to

17

launch ETC-1002 in the United States,  if approved,  as a treatment for  elevated  levels of  LDL-C in
statin intolerant patients, we would need  to invest significant financial and managerial resources. We
may engage in partnering discussions  with  third parties from time to time. If we elect to seek  approval
and launch commercial sales of ETC-1002  outside of  the United  States or  for broader patient
populations in the  United States, including statin  resistant patients who are unable to reach their
LDL-C goal with a statin therapy, we may either do so on  our own or  by establishing  alliances  with
one or more pharmaceutical company  collaborators,  depending on, among other things, the applicable
indications, the related development  costs  and our available resources.

Manufacturing and Supply

ETC-1002 is a small molecule drug that is synthesized  with readily  available  raw materials using
conventional chemical processes. We  currently have  no manufacturing facilities and limited personnel
with manufacturing experience. We rely on contract manufacturers  to  produce both drug substances
and drug products required for our clinical studies. All lots of drug  substance and  drug product used in
clinical studies are manufactured under current good  manufacturing practices. We plan  to  continue to
rely upon contract manufacturers and, potentially, collaboration  partners to manufacture commercial
quantities of ETC-1002, if approved.

Licenses

In April 2008, we entered into an agreement with  Pfizer pursuant to which we  acquired a

worldwide, exclusive, fully paid-up license from Pfizer to certain patent rights owned or controlled by
Pfizer relating to ETC-1002, and we granted  Pfizer a worldwide, exclusive, fully paid-up license to
certain patent rights owned or controlled  by us relating to development programs other than ETC-1002.
The license to us covers the development,  manufacture  and commercialization  of  ETC-1002.  We may
grant sublicenses under the license. Under the license agreement, Pfizer is restricted from making,
using, developing or testing any of the  compounds claimed under the same  patents  that  claim  or cover
the composition of matter of ETC-1002. Neither  party  is entitled to any  royalties, milestones  or any
similar development or commercialization  payments under the  license agreement,  and the  licenses
granted are irrevocable and may not be  terminated for  any cause,  including intentional breaches or
breaches caused by gross negligence.

Intellectual Property

We  strive to protect and enhance the proprietary technologies that  we believe are important  to  our

business, including seeking and maintaining patents intended to cover our  products and compositions,
their methods of use and any other inventions that are important  to  the development of our business.
We  also rely on trade secrets to protect aspects of our business that are not  amenable to, or that we do
not consider appropriate for, patent protection.

Our success will depend significantly on our ability to obtain and maintain patent and other
proprietary protection for commercially  important  technology, inventions and know-how related to our
business, defend and enforce our patents, preserve  the confidentiality of our  trade secrets and  operate
without infringing the valid and enforceable patents and proprietary  rights of third parties.  We also rely
on know-how, continuing technological  innovation and in-licensing opportunities to develop, strengthen
and maintain the proprietary position of ETC-1002  and our other development programs.

As of December 31, 2013, our patent estate, including patents  we  own or license from third
parties, on a worldwide basis, included  approximately 16 issued United States patents and 7 pending
United States patent applications and  6  issued patents  and 25  pending  patent  applications in other
foreign jurisdictions. Of our worldwide patents and pending applications, only a subset  relates to our
small molecule program which includes  our  lead product candidate, ETC-1002.  ETC-1002 is claimed  in

18

U.S. Patent No. 7,335,799 that is scheduled  to  expire in December 2025, which  includes 711 days  of
patent term adjustment, and may be  eligible for a  patent  term extension period of up  to  5 years. U.S.
Patent No. 8,497,301 claims a method  of  treatment using ETC-1002.  There  are currently three issued
patents and four pending applications in  countries outside the United  States that relate to ETC-1002.

A second subset of this portfolio relates to our  early-stage product candidate ESP41091.  ESP41091

is claimed in U.S. Patent Nos. 7,119,221  and 7,405,226.  Various methods  of  treatment using ESP41091
are claimed in U.S. Patent Nos. 8,153,690  and 8,309,604 and in two pending application in the  United
States. There are currently two issued patents  and four  pending  applications  in countries outside the
United States that relate to ESP41091.

We  hold an exclusive, worldwide, fully paid-up license  from Pfizer  to  some of these patents and

patent applications. This license is described above.

A subset of our worldwide patents and pending patent applications relates to our third drug

candidate Apolipoprotein A1-4WF. Apolipoprotein A1-4WF is claimed in United States Patent
No. 8,143,224. United States Patent No. 8,143,224  is scheduled to remain in  force until  its expiration on
July 12, 2030. In addition, various methods of treatment  using  Apolipoprotein  A1-4WF are  claimed  in
United States Patent Application Publication No.  2012/0264677. We have  rights to 20 issued  patents
and pending patent applications in the  United States  and  other countries outside the United  States that
relate to Apolipoprotein A1-4WF and  its  use  in various methods of treatment.

The term of individual patents depends  upon the legal term  of  the patents in the  countries in
which  they are obtained. In most countries in  which we file, the  patent  term is 20 years from the date
of filing the non-provisional application. In the  United States, a patent’s term may be lengthened by
patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and
Trademark Office in granting a patent,  or may  be  shortened  if a patent is  terminally disclaimed over an
earlier-filed patent. In addition, in certain  instances, a  patent  term can be extended to recapture  a
portion of the term effectively lost as a  result  of the FDA  regulatory review  period. However, the
restoration period cannot be longer than five years and the total patent term  including the  restoration
period must not exceed 14 years following  FDA  approval. The duration of foreign patents  varies  in
accordance with provisions of applicable local law, but  typically  is also twenty  years  from the earliest
effective filing date. Our issued U.S. patents will expire  on dates  ranging from 2021  to  2030. However,
the actual protection afforded by a patent  varies on a claim by claim basis  for each  applicable product,
from country to country and depends upon  many  factors, including the type  of patent, the scope of its
coverage, the availability of regulatory  related extensions, the  availability of legal  remedies in  a
particular country and the validity and  enforceability of the patent.

Furthermore, the patent positions of  biotechnology  and  pharmaceutical  products and processes like

those we intend to develop and commercialize are generally uncertain  and involve complex legal and
factual questions. No consistent policy regarding  the breadth of claims  allowed  in such patents  has
emerged to date in the U.S. The patent situation outside the U.S.  is even more  uncertain. Changes  in
either the patent laws or in interpretations  of patent laws in the  U.S.  and other countries  can diminish
our  ability to protect our inventions,  and enforce our intellectual property rights and  more generally,
could affect the value of intellectual  property. Accordingly, we cannot  predict the breadth  of  claims that
may be allowed or enforced in our patents or  in third-party  patents.

The biotechnology and pharmaceutical industries are characterized by  extensive  litigation regarding

patents and other intellectual property  rights. Our  ability to  maintain and solidify our proprietary
position for our drugs and technology will  depend  on our success  in obtaining effective claims and
enforcing those claims once granted.  We do  not  know  whether any of the patent applications that we
may file or license from third parties  will  result in  the issuance of any patents. The issued patents that
we own or may receive in the future, may  be  challenged,  invalidated or circumvented,  and the  rights
granted under any issued patents may  not provide us with  proprietary protection or competitive

19

advantages against competitors with similar  technology. Furthermore, our  competitors may be able to
independently develop and commercialize  similar drugs or  duplicate our technology, business model or
strategy without infringing our patents.  Because of the  extensive  time  required for clinical  development
and regulatory review of a drug we may  develop, it  is possible that,  before any  of  our  drugs can be
commercialized, any related patent may  expire or remain in force for only a short period  following
commercialization, thereby reducing any advantage of any such patent.

As a result of the America Invents Act of  2011, the United States transitioned to a first-

inventor-to-file system in March 2013,  under  which, assuming the other requirements for patentability
are met, the first inventor to file a patent  application  will be entitled to the patent. This will require us
to minimize the time from invention  to  the filing of a patent application.

We  may rely, in some circumstances, on trade secrets and unpatented know-how  to  protect our

technology. However, trade secrets can  be  difficult to protect. We  seek to  protect our proprietary
technology and processes, in part, by entering into confidentiality agreements with our consultants,
scientific advisors and contractors and  invention assignment agreements with our employees.  We also
seek to preserve the integrity and confidentiality  of  our  data and trade secrets  by  maintaining  physical
security of our premises and physical  and  electronic security of our  information technology systems.
While we have confidence in these individuals,  organizations  and systems, agreements or security
measures may be breached and we may  not  have adequate  remedies for any  breach.  In addition, our
trade secrets may otherwise become known  or be independently  discovered by competitors. To the
extent that our consultants, contractors  or collaborators use intellectual property owned by others  in
their work for us, disputes may arise  as to the  rights in  related  or  resulting know-how and  inventions.
For more information, please see ‘‘Risk  Factors—Risks Related to our  Intellectual  Property.’’

Our commercial success will also depend in  part on not infringing  the proprietary  rights of third

parties. It is uncertain whether the issuance of any third-party  patent  would require us to alter our
development or commercial strategies, or  our drugs or processes, obtain  licenses or  cease certain
activities. Our breach of any license agreements or failure to  obtain a license to proprietary  rights that
we may require to develop or commercialize  our  future drugs may have a material adverse impact on
us. If third parties prepare and file patent  applications in  the U.S. that also claim technology  to  which
we have rights, we may have to participate in interference proceedings in  the U.S.  Patent and
Trademark Office, or USPTO, to determine priority of invention.

In addition, substantial scientific and commercial research has been conducted  for many  years  in

the areas in which we have focused our  development efforts, which has resulted in third parties having
a number of issued patents and pending  patent  applications. Patent  applications  in the U.S. and
elsewhere are published only after eighteen months  from the priority date. The publication of
discoveries in the scientific or patent literature frequently occurs  substantially later  than the date on
which  the underlying discoveries were  made. Therefore, patent applications relating to drugs similar  to
ETC-1002 and any future drugs, discoveries or technologies we might  develop  may have already been
filed by others without our knowledge.

Competition

Our industry is highly competitive and subject to rapid and significant technological change.  Our

potential competitors include large pharmaceutical and biotechnology companies, specialty
pharmaceutical and generic drug companies, academic  institutions, government agencies  and research
institutions. Key competitive factors affecting the  commercial success  of  our product candidates  are
likely to be efficacy, safety and tolerability profile, reliability, convenience  of dosing, price and
reimbursement.

20

The market for cholesterol regulating  therapies is especially large and  competitive. The product

candidates we are currently developing,  if  approved, will  face intense competition,  either as
monotherapies or as combination therapies.

Many of our existing or potential competitors  have substantially greater  financial, technical and

human resources than we do and significantly  greater  experience  in the discovery and  development of
product  candidates, obtaining FDA and  other  regulatory  approvals of products and the
commercialization of those products. Mergers  and acquisitions in  the pharmaceutical  and biotechnology
industries may result in even more resources being concentrated among  a small  number of our
competitors. Accordingly, our competitors may be more successful than  we may be in obtaining FDA
approval for drugs and achieving widespread market acceptance. Our competitors’ drugs may  be  more
effective, or more effectively marketed  and sold, than  any drug we may commercialize and  may render
our  product candidates obsolete or non-competitive  before we can recover the expenses of developing
and commercializing any of our product candidates. Our competitors may also obtain FDA or other
regulatory approval for their products  more  rapidly  than we may obtain approval for  ours.  We
anticipate that we will face intense and  increasing competition as new drugs  enter the market and
advanced technologies become available. Finally, the development of new treatment methods for the
diseases  we are targeting could render  our drugs non-competitive  or  obsolete. See ‘‘Risk Factors—Risks
Related to our Business and the Clinical  Development and Commercialization of  ETC-1002—Our
market is subject to intense competition. If we are unable to  compete effectively,  our  opportunity to
generate revenue from the sale of ETC-1002,  if approved, will be materially  adversely affected,’’  and
elsewhere in this prospectus for more information regarding  competitors and  competitive products.

Regulatory Matters

Government Regulation and Product Approval

Government authorities in the United States at  the federal, state and local level,  and other
countries, extensively regulate, among  other things, the research,  development, testing,  manufacture,
quality control, approval, labeling, packaging, storage, record-keeping,  promotion,  advertising,
distribution, marketing, export and import  of products such as  those we are developing. Our product
candidates, including ETC-1002, must be approved by the FDA through the new drug application, or
NDA,  process before they may legally be marketed  in the United States.

United States Drug Development Process

In the United States, the FDA regulates  drugs  under the  Federal Food, Drug,  and Cosmetic Act,

or FDCA, and implementing regulations. The process  of  obtaining regulatory  approvals and compliance
with appropriate federal, state, local  and  foreign statutes and  regulations  require the expenditure  of
substantial time and financial resources.  Failure to comply with  the applicable  U.S. requirements at any
time during the product development process, approval process, or after  approval, may subject an
applicant to administrative or judicial  sanctions.  These sanctions could  include the FDA’s  refusal to
approve pending applications, withdrawal of an approval, a clinical hold, warning letters,  product
recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines,
refusals of government contracts, restitution,  disgorgement or civil or criminal penalties. The process
required by the FDA before a drug may be marketed in the  United States generally involves the
following:

(cid:127) completion of non-clinical laboratory tests, animal studies and formulation studies according to

Good Laboratory Practices regulations;

(cid:127) submission to the FDA of an IND,  which must  become effective  before  human clinical  studies

may begin;

21

(cid:127) performance of adequate and well-controlled  human clinical studies according  to  Good Clinical
Practices, or GCP, to establish the safety and efficacy of the  proposed drug for its  intended use;

(cid:127) submission to the FDA of an NDA  for a  new  drug;

(cid:127) satisfactory completion of an FDA  inspection of the manufacturing facility or facilities at which

the drug is produced to assess compliance with cGMP; and

(cid:127) FDA review and approval of the NDA.

The testing and approval process requires substantial  time, effort and financial resources  and we

cannot be certain that any approvals  for our product candidates will  be  granted  on a  timely  basis, if at
all.

Once a pharmaceutical product candidate is identified  for development,  it enters the non-clinical,

also referred to as pre-clinical, testing  stage. Non-clinical tests include  laboratory evaluations  of  product
chemistry, toxicity, formulation and stability, as  well as animal studies.  An IND sponsor must submit
the results of the non-clinical tests, together  with manufacturing information, analytical data and any
available clinical data or literature, to  the FDA as part of the  IND.  The sponsor must also include a
protocol detailing, among other things, the objectives  of  the initial clinical trial, the  parameters  to  be
used in monitoring safety and the effectiveness criteria  to  be evaluated  if the initial  clinical trial lends
itself to an efficacy evaluation. Some  non-clinical testing may continue  even after  the IND is  submitted.
The IND automatically becomes effective  30 days after receipt by the FDA, unless the FDA places the
clinical trial on a clinical hold within that  30-day time period. In such  a case, the  IND sponsor and the
FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may
be imposed by the FDA at any time before or during clinical studies  due  to  safety concerns or
non-compliance, and may be imposed on all  drug products within a certain class of drugs. The  FDA
also can impose partial clinical holds, for  example prohibiting  the initiation of clinical studies of a
certain duration or for a certain dose.

All clinical studies must be conducted under the  supervision of one  or more qualified investigators

in accordance with GCP regulations. These regulations include  the requirement that all research
subjects provide informed consent. Further,  an institutional  review board,  or IRB,  must  review and
approve the plan for any clinical trial before it commences at any institution.  An IRB considers, among
other things, whether the risks to individuals  participating  in the clinical trial are  minimized  and are
reasonable in relation to anticipated  benefits. The  IRB also approves the information regarding  the
clinical trial and the consent form that must be provided  to  each clinical trial subject or  his or her legal
representative and must monitor the  clinical trial until completed.

Each  new clinical protocol and any amendments to the  protocol  must be submitted to the IND for

FDA review, and to the IRBs for approval. Protocols  detail, among other things, the objectives of the
clinical trial, dosing procedures, subject selection and exclusion criteria,  and the parameters to be used
to monitor subject safety.

Human clinical studies are typically conducted in three  sequential phases  that may  overlap or be

combined:

(cid:127) Phase 1. The product is initially introduced into healthy human subjects  and tested for  safety,

dosage tolerance, absorption, metabolism, distribution and excretion. In the case  of  some
products for severe or life-threatening diseases, especially when the product may be too
inherently toxic to ethically administer  to  healthy volunteers, the initial  human testing may be
conducted in patients.

(cid:127) Phase 2. Involves clinical studies in  a limited patient population  to  identify possible adverse

effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted
diseases  and to determine dosage tolerance and optimal dosage  and schedule.

22

(cid:127) Phase 3. Clinical studies are undertaken to further evaluate  dosage, clinical efficacy  and safety  in

an expanded patient population at geographically  dispersed clinical trial sites.  These clinical
studies  are intended to establish the overall risk/benefit  ratio  of  the product and provide an
adequate basis for product labeling.

Progress reports detailing the results  of the  clinical studies must  be  submitted at  least annually to

the FDA and safety reports must be  submitted  to  the FDA and the  investigators  for serious and
unexpected adverse events. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully
within any specified period, if at all. The FDA or the  sponsor  may  suspend or  terminate a clinical trial
at any time on various grounds, including  a  finding that the research subjects or patients are  being
exposed  to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a
clinical trial at its institution if the clinical  trial is  not  being  conducted in  accordance with the  IRB’s
requirements or if the drug has been associated with unexpected serious harm to patients.

Concurrent with clinical studies, companies usually complete additional animal  studies and must
also develop additional information about the  chemistry and physical characteristics of  the product and
finalize a process for manufacturing the  product in  commercial quantities in  accordance  with cGMP
requirements. The manufacturing process must be capable  of consistently  producing quality batches of
the product candidate and, among other things,  the manufacturer must develop methods  for testing the
identity, strength, quality and purity of the final product. Additionally,  appropriate  packaging must be
selected  and tested and stability studies must  be  conducted  to  demonstrate  that  the product candidate
does not undergo unacceptable deterioration over its shelf life.

U.S. Review and Approval Processes

The results of product development, non-clinical studies  and clinical  studies, along with

descriptions of the manufacturing process,  analytical tests conducted on the drug, proposed labeling
and other relevant information, are submitted to the FDA as  part  of  an NDA  for a  new drug,
requesting approval to market the product. The submission of an  NDA is  subject to the payment of a
substantial user fee; a waiver of such fee  may be obtained under  certain limited circumstances. For
example, the agency will waive the application fee for the first human  drug application that a small
business or its affiliate submits for review.

In addition, under the Pediatric Research Equity Act of 2003, or PREA, an  NDA  or supplement to
an NDA must contain data to assess  the safety and effectiveness of the drug for the claimed indications
in all relevant pediatric subpopulations  and to support dosing and administration for each pediatric
subpopulation for which the product  is  safe and effective. The FDA may grant deferrals for submission
of data or full or partial waivers.

The FDA reviews all NDAs submitted to ensure that they are sufficiently complete  for substantive

review before it accepts them for filing.  The FDA  may  request additional information rather than
accept an NDA for filing. In this event, the  NDA must be re-submitted with the additional  information.
The re-submitted application also is subject to review before  the FDA accepts it for  filing. Once  the
submission is accepted for filing, the  FDA begins an  in-depth substantive review. The FDA  reviews an
NDA  to determine, among other things, whether a  product is  safe and  effective for its  intended use
and whether its manufacturing is cGMP-compliant to assure and preserve the  product’s identity,
strength, quality and purity. Before approving  an NDA, the  FDA will inspect the  facility or  facilities
where  the product is manufactured. The FDA will not approve an  application  unless it determines that
the manufacturing processes and facilities  are  in compliance  with cGMP requirements  and adequate to
assure consistent production of the product within required specifications. The FDA also can  require,
or an NDA applicant may voluntarily  propose,  a Risk Evaluation and Mitigation Strategy,  or REMS, to
ensure the benefits of a drug outweigh its risks.  Elements  of a REMS may  include ‘‘dear  doctor
letters,’’ a medication guide, and in some  cases  restrictions on distribution. These elements are

23

negotiated as part of the NDA approval, and in  some cases may delay  the  approval date.  Once
adopted, REMS are subject to periodic assessment and modification.  The FDA may  refer the NDA to
an advisory committee for review, evaluation and recommendation  as to whether the application should
be approved and under what conditions. An advisory  committee is a panel of experts who provide
advice and recommendations when requested by the FDA on  matters of importance that come before
the agency. The FDA is not bound by  the  recommendation  of  an advisory committee.

The approval process is lengthy and difficult and the FDA may refuse to approve  an NDA if the

applicable regulatory criteria are not  satisfied  or may require  additional clinical data or other data and
information. Even if such data and information are  submitted, the FDA may ultimately decide  that  the
NDA  does not satisfy the criteria for approval. Data obtained from  clinical studies are not always
conclusive and the FDA may interpret data differently  than we interpret the same  data.  The FDA will
issue a complete response letter if the agency decides not to approve the NDA in its  present  form. The
complete response letter usually describes all of  the specific deficiencies that the  FDA identified in the
NDA.  The deficiencies identified may  be  minor, for example, requiring labeling changes, or major, for
example, requiring additional clinical studies. Additionally, the complete response letter may include
recommended actions that the applicant  might take to place the application in a  condition for  approval.
If a  complete response letter is issued,  the applicant may either resubmit  the NDA,  addressing all of
the deficiencies identified in the letter,  or  withdraw the application or request an opportunity for a
hearing.

If a  product receives regulatory approval, the approval may be significantly  limited to specific
diseases  and dosages or the indications for  use may otherwise  be  limited, which could restrict  the
commercial value of the product. Further, the FDA may require that certain contraindications,
warnings or precautions be included  in the  product labeling. In addition,  the FDA  may require Phase 4
testing which involves clinical studies designed  to  further assess  a drug’s safety and effectiveness after
NDA  approval and may require testing  and surveillance programs  to  monitor the safety  of  approved
products that have been commercialized.

Patent Term Restoration and Marketing  Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of  our product
candidates, some of our U.S. patents  may be eligible for limited patent term extension  under the  Drug
Price Competition and Patent Term Restoration Act of 1984, commonly referred to as  the Hatch-
Waxman Act. The Hatch-Waxman Act  permits a patent restoration term of up to five  years  as
compensation for patent term lost during  product  development and  the FDA regulatory review  process.
However, patent term restoration cannot extend the  remaining  term of a patent beyond  a total of
14 years from the product’s approval  date. The  patent  term restoration period is  generally one-half the
time between the effective date of an IND and the  submission  date of an NDA plus the  time between
the submission date of an NDA and the  approval  of  that application. Only one patent applicable to an
approved drug is eligible for the extension and the  application  for the  extension must be submitted
prior to the expiration of the patent.  The U.S.  Patent  and Trademark Office, in consultation with the
FDA, reviews and approves the application for  any  patent  term extension or restoration. In  the future,
we intend to apply for restorations of patent term for  some of our currently owned or licensed patents
to add  patent life beyond their current expiration  dates, depending on the expected length of the
clinical studies and other factors involved in  the filing  of the relevant NDA, however  there can  be  no
assurance that any such extension will  be  granted to us.

Market exclusivity provisions under the FDCA  can also delay the submission or the approval  of

certain applications. The FDCA provides  a five-year period of non-patent marketing exclusivity  within
the United States to the first applicant to gain approval  of an NDA for a new chemical entity. A drug
is a new chemical entity if the FDA has  not previously approved any  other  new drug containing  the
same active moiety, which is the molecule  or ion  responsible for the action of the  drug  substance.

24

During  the exclusivity period, the FDA  may not accept for  review an abbreviated new drug  application,
or ANDA, or a 505(b)(2) NDA submitted by another company for another version  of  such drug where
the applicant does not own or have a legal  right of reference to all  the data required for  approval.
However, an application may be submitted after four years  if it contains a certification of  patent
invalidity or non-infringement. The FDCA also  provides three years of  marketing  exclusivity for  an
NDA,  505(b)(2) NDA or supplement  to  an existing NDA if new clinical  investigations, other than
bioavailability studies, that were conducted or sponsored by the applicant are deemed  by  the FDA  to
be essential to the  approval of the application,  for  example new indications, dosages or strengths of an
existing drug. This three-year exclusivity  covers only  the conditions of use associated with the new
clinical investigations and does not prohibit the FDA from  approving ANDAs for  drugs containing the
original active agent. Five-year and three-year exclusivity will  not  delay the submission  or approval of a
full NDA. However, an applicant submitting a full NDA  would be required to conduct  or obtain a right
of reference to all of the non-clinical studies and adequate and well-controlled clinical studies  necessary
to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of exclusivity in the United States.  Pediatric  exclusivity, if
granted, provides an additional six months to an  existing exclusivity or statutory delay in approval
resulting from a patent certification.  This  six-month  exclusivity, which  runs from  the end of other
exclusivity protection or patent delay,  may  be  granted based on the voluntary completion of  a pediatric
clinical trial in accordance with an FDA-issued ‘‘Written Request’’ for such a clinical trial.

Post-Approval Requirements

Any drugs for which we receive FDA approval are subject  to continuing regulation by the  FDA,

including, among other things, record-keeping  requirements,  reporting  of  adverse experiences with the
product,  providing the FDA with updated safety and efficacy information, product  sampling and
distribution requirements, complying  with  certain electronic records  and  signature requirements  and
complying with FDA promotion and advertising requirements.  The FDA strictly regulates labeling,
advertising, promotion and other types  of  information on  products that  are placed on the  market.
Drugs may be promoted only for the approved  indications  and in  accordance with the  provisions of the
approved label. Further, manufacturers  of  drugs must continue to comply with  cGMP requirements,
which  are extensive and require considerable time,  resources and ongoing  investment to ensure
compliance. In addition, changes to the  manufacturing  process generally require prior FDA  approval
before being implemented and other  types  of changes to the  approved product, such as  adding new
indications and additional labeling claims, are also subject to further  FDA review and approval.

Drug manufacturers and other entities involved in the manufacturing and distribution of approved

drugs are required to register their establishments with the  FDA and certain state  agencies, and are
subject to periodic unannounced inspections by the FDA and certain state  agencies for compliance  with
cGMP and other laws. The cGMP requirements apply to all stages of  the manufacturing  process,
including the production, processing, sterilization,  packaging, labeling, storage and shipment of the
drug. Manufacturers must establish validated systems to ensure that products meet specifications  and
regulatory standards, and test each product batch or  lot prior to its release. We  rely, and expect to
continue to rely, on third parties for  the production of clinical quantities of  our  product candidates.
Future FDA and state inspections may  identify compliance  issues at the facilities of our contract
manufacturers that may disrupt production or distribution  or  may require substantial resources to
correct.

The FDA may withdraw a product approval if  compliance with regulatory  requirements is not

maintained or if problems occur after the  product reaches the market. Later discovery of previously
unknown problems with a product may result in restrictions on the  product or even complete
withdrawal of the product from the market.  Further, the failure to maintain compliance  with regulatory
requirements may result in administrative  or  judicial actions, such as fines, warning  letters, holds on

25

clinical studies, product recalls or seizures, product  detention or refusal to permit the import or export
of products, refusal to approve pending  applications or supplements, restrictions on  marketing or
manufacturing, injunctions or civil or  criminal penalties.

From time to time, legislation is drafted,  introduced  and  passed in  Congress that could significantly

change the statutory provisions governing the approval,  manufacturing  and  marketing of  products
regulated by the FDA. In addition to new legislation,  the FDA regulations and policies are often
revised or reinterpreted by the agency  in ways that may significantly  affect our business and  our
product  candidates. It is impossible to predict whether further legislative or FDA regulation or  policy
changes will be enacted or implemented  and what  the impact of such  changes, if any,  may be.

Foreign Regulation

In addition to regulations in the United  States,  we will be subject  to  a  variety  of foreign

regulations governing clinical studies and commercial sales and distribution of our product  candidates
to the extent we choose to sell any products outside of the United States.  Whether or  not  we obtain
FDA approval for a product, we must obtain approval of a product by the  comparable  regulatory
authorities of foreign countries before we  can commence clinical studies  or marketing of the product in
those countries. The approval process  varies from country  to  country  and  the time  may be longer or
shorter than that required for FDA approval. The requirements governing the conduct of clinical
studies,  product licensing, pricing and reimbursement vary greatly from country  to  country.  As in  the
United States, post-approval regulatory  requirements, such as those  regarding product  manufacture,
marketing, or distribution would apply  to  any product  that is approved  outside the  United States.

Employees

As of December 31, 2013, we had 16  full-time employees and one part-time employee. Two  of our

employees have Ph.D. degrees. Nine of our employees are engaged  in research and development
activities. None of  our employees is represented  by  labor unions or  covered by collective bargaining
agreements. We consider our relationship  with our  employees to be good.

Facilities

We  lease our facility, which is located at 46701 Commerce Center  Drive, Plymouth, Michigan  and

consists of approximately 2,083 square feet of office and  4,867 square feet  of  laboratory space. In
August 2013, we entered into the second  amendment to the  operating lease agreement  which extended
the expiration date of the initial term  from October  2, 2013 to April 30,  2014. In  February 2014, we
entered into a lease for our offices to  be  located in the Valley Ranch Business  Park at 3891 Ranchero
Drive, Suite 150, Ann Arbor, Michigan consisting of approximately 7,941 rentable square  feet of office
space. The term of the lease ends 63 months after the  commencement date which we expect to begin
in April 2014. We believe our current and  future  facilities  are sufficient  to  meet our  needs  until each
respective lease expiration.

Legal Proceedings

We  are not currently a party to any material legal  proceedings.

26

Item 1A. Risk Factors

Except for the historical information contained  herein or  incorporated  by  reference, this report and  the

information incorporated by reference contains  forward-looking statements that  involve risks and
uncertainties. These statements include projections about our accounting and finances, plans and objectives
for the future, future operating and economic  performance and other statements regarding future
performance. These statements are not  guarantees of future performance  or events. Our actual  results  could
differ materially from those discussed in  this  report. Factors that could cause or  contribute  to these
differences include, but are not limited  to, those discussed in the following  section, as well  as those
discussed in Part II, Item 7 entitled ‘‘Management’s Discussion  and  Analysis  of  Financial  Condition and
Results of Operations’’ and elsewhere throughout this report and  in any documents incorporated in this
report by reference.

You should consider carefully the following  risk  factors, together with all of  the  other information
included or incorporated in this report. If  any of  the following risks,  either alone or taken  together,  or other
risks not presently known to us or that  we  currently  believe to not be significant, develop into actual events,
then our business, financial condition,  results of  operations  or prospects  could be materially adversely
affected. If that happens, the market price of  our  common stock could decline,  and stockholders  may lose
all or part of their investment.

Risks Related to our Business and the  Clinical Development  and Commercialization of  ETC-1002

We depend almost entirely on the success of  one product candidate, ETC-1002,  which is  still in Phase  2
clinical development. We cannot be certain that we will  be  able to obtain  regulatory approval for,  or
successfully commercialize, ETC-1002.

We  currently have only one product candidate,  ETC-1002, in clinical development, and  our
business depends almost entirely on its  successful  clinical development,  regulatory approvals and
commercialization. We currently have  no  drug products for sale  and  may  never be able to develop
marketable drug products. ETC-1002,  which is currently in Phase  2 clinical studies, will require
substantial additional clinical development, testing, and regulatory  approvals before we are permitted to
commence its commercialization. Our  other product candidates are still  in pre-clinical development
stages. None of our product candidates have advanced into a pivotal  study, and  it may  be  years  before
such studies are initiated, if ever. The clinical studies of our product candidates are,  and the
manufacturing and marketing of our product candidates will  be,  subject to extensive and  rigorous
review and regulation by numerous government  authorities in the  United States and in other  countries
where  we intend to test and, if approved,  market any  product candidate. Before obtaining regulatory
approvals for the commercial sale of  any  product candidate, we must demonstrate  through pre-clinical
testing and clinical studies that the product candidate  is safe and  effective  for use in each  target
indication. This process can take many years and may include post-marketing studies and surveillance,
including a Risk Evaluation and Mitigation Strategy, or  REMS  program,  which will  require the
expenditure of substantial resources beyond the  proceeds we raised in our initial public  offering. Of the
large number of drugs in development in  the United States, only a small  percentage successfully
complete the FDA or any other foreign  regulatory approval process  and  are commercialized.
Accordingly, even if we are able to obtain the requisite financing to continue to fund our development
and clinical programs, we cannot assure you that ETC-1002 or  any other  of our product candidates will
be successfully developed or commercialized.

We  are not permitted to market ETC-1002 in the United States until we  receive approval  of  a

New Drug Application, or NDA, from the FDA, or in any foreign countries until  we receive  the
requisite approval from such countries.  As a condition to submitting  an NDA to the FDA for
ETC-1002 to treat patients with hypercholesterolemia,  we currently expect to complete two Phase  2b
clinical studies, two pivotal Phase 3 clinical  studies and  one long-term safety study. We  commenced our

27

first Phase 2b clinical study in October 2013  and we expect to initiate our second Phase 2b clinical
study in March 2014. We have not commenced  any of the  Phase 3  clinical studies. Obtaining approval
of an NDA is a complex, lengthy, expensive  and  uncertain process, and the FDA may delay,  limit or
deny approval of ETC-1002 for many  reasons, including,  among  others:

(cid:127) we may not be able to demonstrate that ETC-1002 is  safe and effective in  treating

hypercholesterolemia to the satisfaction of  the FDA;

(cid:127) the results of our clinical studies may not meet the  level of statistical or clinical significance

required by the FDA for marketing approval;

(cid:127) the FDA may disagree with the number, design,  size, conduct or implementation of our clinical

studies;

(cid:127) the FDA may require that we conduct additional  clinical studies, such  as a cardiovascular

outcomes trial;

(cid:127) the FDA may not release its partial clinical hold on  ETC-1002 to permit us to conduct a  clinical

study for more than six months;

(cid:127) the FDA or an applicable foreign regulatory  agency may not approve the formulation,

specifications or labeling of ETC-1002;

(cid:127) the clinical research organizations, or CROs,  that we  retain to conduct our clinical studies  may

take actions outside of our control that materially  adversely impact  our clinical  studies;

(cid:127) the FDA may find the data from pre-clinical  studies and clinical studies insufficient to

demonstrate that ETC-1002’s clinical and other  benefits outweigh its  safety risks;

(cid:127) the FDA may disagree with our interpretation  of data from our pre-clinical studies and  clinical

studies;

(cid:127) the FDA may not accept data generated at  our  clinical study  sites;

(cid:127) if  our NDA, if and when submitted, is reviewed  by an advisory  committee, the  FDA may have

difficulties scheduling an advisory committee  meeting  in a  timely  manner  or  the advisory
committee may recommend against approval of our application or may recommend  that  the
FDA require, as a  condition of approval, additional pre-clinical  studies or  clinical studies,
limitations in approved labeling or distribution and use restrictions;

(cid:127) the FDA may require the development of a  REMS as a condition of approval or post-approval;

(cid:127) the FDA or the applicable foreign regulatory agency may not approve the manufacturing

processes or facilities of third-party manufacturers with which  we contract; or

(cid:127) the FDA may change its approval  policies or  adopt  new regulations.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain

regulatory approval for and successfully  market ETC-1002. Moreover, because  our business is almost
entirely dependent upon this one product candidate,  any  setback in our pursuit of  its regulatory
approval would have a material adverse effect on our business and prospects.

Failures or delays in the commencement or completion of our  Phase  2b  or pivotal  Phase 3 clinical  studies of
ETC-1002 could result in increased costs  to  us and  could delay, prevent or limit our ability to  generate
revenue and continue our business.

We  initiated our first Phase 2b clinical study in October  2013 and we expect to initiate  our  second

Phase 2b clinical study in March 2014. We  have not commenced our  pivotal Phase 3 clinical studies.
Successful completion of such clinical  studies  is a prerequisite to submitting an  NDA  to  the FDA  and,

28

consequently, the ultimate approval and  commercial marketing of ETC-1002. We do  not  know  whether
our  Phase 2b clinical studies will be completed on schedule,  if at all,  or  whether our pivotal  Phase 3
clinical studies will begin or be completed  on schedule, if at  all, as the  commencement and completion
of clinical studies can be delayed or prevented for a number of reasons, including, among others:

(cid:127) the FDA may deny permission to proceed  with Phase 3 clinical trials, including not releasing its
partial clinical hold on ETC-1002 to permit us to conduct a  clinical  study  for more  than six
months, or may place a clinical study  on hold;

(cid:127) delays in reaching or failing to reach  agreement on  acceptable  terms with prospective CROs and
study sites, the terms of which can be  subject to extensive negotiation and may vary significantly
among different CROs and study sites;

(cid:127) inadequate quantity or quality of a  product candidate  or other materials necessary to conduct

clinical studies;

(cid:127) difficulties or delays obtaining institutional  review board, or IRB, approval  to  conduct a  clinical

study at a prospective site or sites;

(cid:127) challenges in recruiting and enrolling patients  to  participate in clinical studies or in a

cardiovascular outcomes study, if one  were to be required, including the size and  nature of the
patient population, the proximity of patients to clinical sites,  eligibility criteria for  the clinical
study, the nature of the clinical study protocol, the  availability of approved effective treatments
for the relevant disease and competition  from other clinical study programs for similar
indications;

(cid:127) severe or unexpected drug-related side  effects experienced by patients in a clinical study,

including instances of muscle pain or  weakness  or other side effects previously identified in  our
completed clinical studies;

(cid:127) reports from pre-clinical or clinical  testing of  other  cardiometabolic  therapies  that  raise safety or

efficacy concerns; and

(cid:127) difficulties retaining patients who have enrolled in a  clinical  study  but may be prone  to  withdraw

due to rigors of the study, lack of efficacy, side  effects, personal issues  or loss  of interest.

Clinical studies may also be delayed or  terminated as  a result  of  ambiguous or negative interim

results. In addition, a clinical study may be suspended or terminated by us, the FDA, the  IRBs  at the
sites where the IRBs are overseeing a  clinical study,  a data safety monitoring  board, or  DSMB,
overseeing the clinical study at issue or  other regulatory authorities due to a  number of factors,
including, among others:

(cid:127) failure to conduct the clinical study in accordance with  regulatory requirements or our clinical

protocols;

(cid:127) inspection of the clinical study operations  or study sites  by  the FDA or other regulatory

authorities that reveals deficiencies or  violations that require  us to undertake corrective action,
including the imposition of a clinical hold;

(cid:127) unforeseen safety issues, including  any that could be identified  in our  ongoing pre-clinical

carcinogenicity studies, adverse side effects  or lack of effectiveness;

(cid:127) changes in government regulations  or administrative  actions;

(cid:127) problems with clinical supply materials; and

(cid:127) lack of adequate funding to continue the  clinical study.

29

Positive results from Phase 1 and Phase 2a  clinical  studies of ETC-1002 are not  necessarily  predictive of the
results of our Phase 2b and planned Phase 3 clinical studies of ETC-1002. If we  cannot replicate the  positive
results from our Phase 1 and Phase 2a  clinical  studies of ETC-1002 in our Phase  2b and Phase  3 clinical
studies, we may be unable to successfully develop, obtain regulatory  approval for and  commercialize
ETC-1002.

Even if we are able to complete our  Phase  2b and planned pivotal Phase 3 clinical studies of
ETC-1002 according to our current development timeline, the positive results from  our  Phase 1  and
Phase 2a clinical studies of ETC-1002 may not be replicated  in our Phase  2b or pivotal Phase 3 clinical
study results. Many companies in the  pharmaceutical and biotechnology industries have  suffered
significant setbacks in late-stage clinical  studies after achieving positive results  in early stage
development, and we cannot be certain that we  will not  face similar setbacks. These setbacks  have been
caused by, among other things, pre-clinical findings  made while clinical  studies were underway or safety
or efficacy observations made in clinical studies,  including  previously  unreported adverse events.  Our
Phase 2b clinical studies are evaluating  the safety and efficacy of ETC-1002 in statin-intolerant patients
and as an add-on to existing statin treatments.  We expect that our Phase  3 clinical studies will evaluate
the safety and efficacy of ETC-1002 in  these same  patient  populations.  Nevertheless, the  results from
our  Phase 2a clinical studies for ETC-1002,  including ETC-1002-006 and ETC-1002-007, may  not  be
predictive of the results we may obtain in our Phase 2b or  Phase 3 clinical  studies of ETC-1002.
Moreover, pre-clinical and clinical data are often  susceptible to varying interpretations  and analyses,
and many companies that believed their product  candidates performed satisfactorily in pre-clinical
studies and clinical studies nonetheless  failed to obtain FDA approval.  If  we  fail to-obtain  positive
results in  our Phase 2b and Phase 3 clinical studies  of ETC-1002, the development timeline  and
regulatory approval and commercialization prospects  for our leading product candidate, and,
correspondingly, our business and financial prospects, would be materially adversely  affected.

We may  need substantial additional capital  in the future. If  additional capital is not available, we  will have to
delay, reduce or cease operations.

Although we believe that the net proceeds  from our initial  public offering will be sufficient to fund
our  operations through at least the end  of 2015, we  will likely need to raise  additional capital  thereafter
to continue to fund the further development  of ETC-1002 and our  operations. We expect to announce
top-line  results from our latest currently  anticipated Phase 2b clinical studies in the fourth quarter of
2014 and to have our end of Phase 2 meeting with  the FDA  in the first  half of 2015.  Our future capital
requirements may be substantial and  will depend on many factors including:

(cid:127) the scope, size, rate of progress, results and costs  of  initiating and completing our Phase 2b

clinical studies of ETC-1002 and our  operating costs incurred as  we  conduct these studies and
through our planned end of Phase 2  meeting with the FDA, for which we currently estimate  that
we will use substantially all of the net  proceeds from  our initial public offering;

(cid:127) the scope, size, rate of progress, results and costs  of  initiating and completing our Phase 3

clinical program of ETC-1002, which currently  includes two  pivotal  Phase 3  clinical studies and
one long-term safety study;

(cid:127) the cost, timing and outcome of our efforts to obtain marketing approval  for ETC-1002 in  the

United States, including to fund the preparation and filing  of  an NDA  with the  FDA for
ETC-1002 and to satisfy related FDA  requirements;

(cid:127) the number and characteristics of any  additional product  candidates we develop or acquire;

(cid:127) the costs associated with commercializing ETC-1002 or  any  future product  candidates if we
receive marketing approval, including the cost and timing of developing sales and  marketing

30

capabilities or entering into strategic collaborations  to  market and sell ETC-1002 or any future
product candidates;

(cid:127) the cost of manufacturing ETC-1002 or  any  future product candidates and any products  we

successfully commercialize; and

(cid:127) the costs associated with general corporate activities,  such as  the cost of filing, prosecuting and

enforcing patent claims.

Changing circumstances may cause us to consume capital  significantly faster than we currently
anticipate. Because the outcome of any  clinical study is highly uncertain, we  cannot reasonably estimate
the actual amounts necessary to successfully complete  the development, regulatory  approval and
commercialization of ETC-1002 and any  future  product candidates.  Additional  financing  may not be
available when we need it or may not  be  available on terms  that are favorable  to  us. In  addition,  we
may seek additional capital due to favorable  market  conditions  or strategic considerations, even if we
believe we have sufficient funds for our  current or  future operating plans.  If adequate  funds  are
unavailable to us on a timely basis, or at  all, we  may not be able to continue the  development of
ETC-1002 or any future product candidate, or  to  commercialize ETC-1002 or any future product
candidate, if approved, unless we find  a  partner.

We are a development stage biopharmaceutical company  with a  limited  operating  history and have  not
generated any revenue from product sales.  We have incurred significant  operating losses since our inception,
and anticipate that we will incur continued  losses for the  foreseeable future.

We  are a development stage company with a  limited  operating history on which to base your
investment decision. Biopharmaceutical  product  development is a  highly speculative undertaking and
involves a substantial degree of risk.  We  were incorporated in January  2008. Our operations to date
have been limited primarily to organizing and staffing our company and conducting research and
development activities for ETC-1002.  We have never  generated any revenue  from product sales. We
have not obtained regulatory approvals  for any of our product  candidates. As  such, we are subject  to all
the risks incident to the development, regulatory approval and commercialization of new
pharmaceutical products and we may  encounter unforeseen  expenses, difficulties, complications, delays
and other unknown factors.

Since our inception, we have focused  substantially all of our efforts and  financial resources on

developing ETC-1002, which is currently  in Phase  2 clinical development. We  have funded our
operations to date primarily through  proceeds from sales of preferred stock, our initial public offering
of common stock, which we closed in July  2013, convertible  promissory notes and  warrants and we  have
incurred losses in each year since our inception. Our  net losses were  $26.1 million, $11.7  million and
$10.8 million for the years ended December 31, 2013, 2012 and 2011,  respectively. As  of December  31,
2013, we had an accumulated deficit of $68.1million. Substantially  all of our operating losses  resulted
from costs incurred in connection with our development program and from general and  administrative
costs associated with our operations. We  expect to incur increasing levels of operating  losses over the
next several years and for the foreseeable future. Our prior losses, combined with  expected future
losses, have had and will continue to  have  an adverse effect  on our stockholders’ equity and working
capital. We expect our research and development expenses to significantly increase in  connection with
our  additional clinical studies of ETC-1002 and development  of  any other product candidates we  may
choose to pursue. In addition, if we obtain marketing approval for ETC-1002, we will also incur
significant sales, marketing and outsourced  manufacturing  expenses. As a newly public company, we
have started to incur and will continue to incur additional costs  associated  with operating  as a public
company. As a result, we expect to continue to incur significant and increasing  operating losses  for the
foreseeable future. Because of the numerous risks and uncertainties associated with developing
pharmaceutical products, we are unable to predict the extent of any future losses or  when we will

31

become  profitable, if at all. Even if we  do  become profitable, we may not  be  able to sustain or increase
our  profitability on a quarterly or annual  basis.

Changes in regulatory requirements, FDA  guidance or  unanticipated events during our Phase  2b or Phase 3
clinical studies of ETC-1002 may occur,  which may result  in  changes to clinical  study protocols or  additional
clinical study requirements, such as the  initiation  or completion of a cardiovascular outcomes trial, which
could result in increased costs to us and could  delay our development timeline.

Changes in regulatory requirements,  FDA guidance  or unanticipated events during our clinical
studies may force us to amend clinical study protocols or the  FDA  may impose additional  clinical study
requirements. Amendments to our clinical  study protocols  would require resubmission to the FDA and
IRBs for review and approval, which  may  adversely impact the cost, timing and/or successful
completion of a clinical study. If we experience delays completing—or if  we terminate—any  of our
Phase 2b or Phase 3 clinical studies,  or if  we are  required to conduct  additional clinical  studies, such as
a cardiovascular outcomes trial, the commercial prospects  for ETC-1002  may  be  harmed and  our  ability
to generate product revenue will be delayed. If  the FDA requires us  to  conduct a  cardiovascular
outcomes trial, we may not be able to identify  and enroll the requisite  number of patients in that study.
Even if we are successful in enrolling  patients  in a  cardiovascular outcomes study, we may not
ultimately be able to demonstrate that  lowering LDL-C levels using ETC-1002 provides patients with
an incremental lowering of cardiovascular  disease risks  and our failure to do so  may delay  or hinder
our  ability to obtain FDA approval for ETC-1002. Our current  development timeline for ETC-1002
does not contemplate the completion  of  a  cardiovascular  outcomes trial prior  to  FDA  approval.. Any
such study, if required, would be costly  and time-consuming and, regardless of the  outcome, would
adversely affect our development timeline and  financial condition.

Even if we receive marketing approval for  ETC-1002,  we may still face future  development and regulatory
difficulties.

Even if we receive marketing approval for  ETC-1002, regulatory authorities  may still impose
significant restrictions on ETC-1002’s indicated uses or marketing or impose ongoing  requirements for
potentially costly post-approval studies,  such as  a cardiovascular outcomes trial. ETC-1002 will also  be
subject to ongoing FDA requirements governing the  packaging, storage, labeling, advertising and
promotion of the product, recordkeeping and submission of  safety updates and other post-marketing
information. The FDA has significant  post-marketing authority, including, for  example, the authority to
require labeling changes based on new safety information and to require post-marketing studies or
clinical studies to evaluate serious safety risks related to the use  of a  drug product. The FDA also has
the authority to require, as part of an  NDA  or post-approval,  the  submission  of a REMS. Any REMS
required by the FDA may lead to increased costs to assure  compliance with post-approval regulatory
requirements and potential requirements or restrictions on  the sale  of  approved products, all of which
could lead to lower sales volume and revenue.

Manufacturers of drug products and their facilities are  subject to continual  review and  periodic

inspections by the FDA and other regulatory  authorities  for  compliance with  current Good
Manufacturing Practices and other regulations.  If we or a  regulatory agency discover problems with
ETC-1002, such as adverse events of  unanticipated  severity or frequency,  or  problems with the facility
where  ETC-1002 is manufactured, a regulatory  agency may  impose restrictions on ETC-1002, the
manufacturer or us, including requiring  withdrawal of ETC-1002 from the  market or  suspension of
manufacturing. If we, ETC-1002 or the  manufacturing facilities for ETC-1002 fail  to  comply with
applicable regulatory requirements, a regulatory agency  may,  among  other things:

(cid:127) issue warning letters or untitled letters;

(cid:127) seek an injunction or impose civil or criminal penalties or monetary fines;

32

(cid:127) suspend or withdraw marketing approval;

(cid:127) suspend any ongoing clinical studies;

(cid:127) refuse  to approve pending applications or supplements to applications submitted  by  us;

(cid:127) suspend or impose restrictions on  operations, including costly  new  manufacturing requirements;

or

(cid:127) seize  or detain products, refuse to  permit  the import or  export of products, or  request  that  we

initiate a product recall.

Even if we receive marketing approval for  ETC-1002  in the United  States,  we may  never  receive regulatory
approval to market ETC-1002 outside of  the United  States.

We  have not yet selected any markets outside of the United States  where  we intend to seek
regulatory approval to market ETC-1002.  In order to market  any product  outside of  the United States,
however, we must establish and comply  with the numerous and  varying efficacy, safety  and other
regulatory requirements of other countries. Approval  procedures vary among countries  and can involve
additional product candidate testing and  additional administrative review periods. The  time required to
obtain approvals in other countries might differ  from that required to obtain FDA approval. The
marketing approval processes in other countries may include  all of the risks detailed above regarding
FDA approval in the United States as well  as other risks. In particular, in many countries outside of
the United States, products must receive  pricing  and reimbursement  approval before the product can
be commercialized. Obtaining this approval  can result in substantial delays in bringing products to
market in such countries. Marketing  approval in one country does not ensure marketing  approval in
another, but a failure or delay in obtaining marketing approval in one country  may have a negative
effect on the regulatory process in others.  Failure to obtain marketing approval in other countries or
any delay or other setback in obtaining  such approval  would impair our ability to commercialize
ETC-1002 in such foreign markets. Any such impairment  would reduce the  size of our potential
market, which could have a material adverse impact on our  business, results of operations and
prospects.

Even if we receive marketing approval for  ETC-1002,  it may not achieve broad market acceptance,  which
would limit the revenue that we generate  from its  sales.

The commercial success of ETC-1002,  if approved by the FDA or other regulatory authorities, will

depend  upon the awareness and acceptance of ETC-1002 among the  medical community, including
physicians, patients and healthcare payors. Market acceptance of ETC-1002, if approved, will depend
on a number  of factors, including, among others:

(cid:127) ETC-1002’s demonstrated ability to treat statin intolerant patients  with hypercholesterolemia

and, if required by any applicable regulatory authority in  connection with the approval for this
or any other indication, to provide patients with incremental  cardiovascular disease benefits, as
compared with other available therapies;

(cid:127) the relative convenience and ease of  administration of ETC-1002,  including as  compared with

other treatments for patients with hypercholesterolemia;

(cid:127) the prevalence and severity of any  adverse side effects  such as muscle  pain or  weakness;

(cid:127) limitations or warnings contained in the  labeling approved for ETC-1002 by the FDA;

(cid:127) availability of alternative treatments, including  a number  of  competitive LDL-C  lowering
therapies already approved or expected to be commercially launched  in the  near future;

(cid:127) pricing and cost effectiveness;

33

(cid:127) the effectiveness of our sales and marketing  strategies;

(cid:127) our ability to increase awareness of  ETC-1002 through  marketing  efforts;

(cid:127) our ability to obtain sufficient third-party coverage or reimbursement; and

(cid:127) the willingness of patients to pay out-of-pocket in the absence of  third-party coverage.

If ETC-1002 is approved but does not achieve  an adequate level of acceptance by patients,
physicians and payors, we may not generate sufficient revenue  from  ETC-1002 to become or  remain
profitable. Before granting reimbursement approval,  healthcare payors  may  require us to demonstrate
that, in addition to lowering elevated  LDL-C levels,  ETC-1002 also provides incremental cardiovascular
disease benefits to patients. Our efforts to educate the  medical community and third-party payors  about
the benefits of ETC-1002 may require  significant  resources and may never be successful.

If we are unable to establish sales and  marketing  capabilities or  enter into agreements  with third parties to
market and sell ETC-1002, we may not  be able to  generate any  revenue.

We  do not currently have an infrastructure  for  the sales, marketing  and distribution of
pharmaceutical products. In order to market ETC-1002, if approved by  the  FDA or  any other
regulatory body, we must build our sales, marketing, managerial, and other non-technical capabilities or
make arrangements with third parties to perform these services. If we  are unable  to  establish adequate
sales, marketing and distribution capabilities,  whether  independently or with  third parties, or if we  are
unable to do so on commercially reasonable terms, our  business,  results of operations, financial
condition and prospects will be materially  adversely affected.

Even if we obtain marketing approval for ETC-1002, physicians and patients using other LDL-C lowering
therapies may choose not to switch to our  product.

Physicians are often reluctant to switch their patients  from existing therapies even when new and
potentially more effective, safe or convenient  treatments enter the market. In addition, patients often
acclimate to the brand or type of therapy  that they are  currently taking and  do not want to switch
unless their physicians recommend switching products  or they are required to switch therapies due to
lack of reimbursement for existing therapies.  If physicians or patients are  reluctant  to  switch  from
existing therapies to ETC-1002, if approved,  our operating results and  financial condition would be
materially adversely affected.

Guidelines and recommendations published by  various organizations may adversely  affect the  use  or
commercial viability of ETC-1002, if approved.

Government agencies issue regulations  and guidelines directly  applicable  to  us  and to ETC-1002,

including guidelines generally relating  to  therapeutically significant  LDL-C  levels. In addition,
professional societies, practice management groups, private health or science foundations  and other
organizations involved in the research,  treatment and prevention of various  diseases  from time  to  time
publish guidelines or recommendations to the medical and patient  communities. These various sorts of
recommendations may relate to such matters as product usage and use of related  or competing
therapies. For example, organizations such as  the American Heart Association have  made
recommendations about therapies in  the  cardiovascular  therapeutics market. Changes to these existing
recommendations or other guidelines advocating  alternative therapies  could  result in  decreased use of
ETC-1002, if approved, which would  adversely affect our results of  operations.

Even if approved, reimbursement policies could limit our  ability  to sell  ETC-1002.

Market acceptance and sales of ETC-1002 will depend  on reimbursement policies and  may be
affected by healthcare reform measures. Government authorities and third-party payors, such  as private

34

health insurers and health maintenance  organizations, decide which medications  they will pay for and
establish reimbursement levels for those  medications. Cost containment  is a primary concern in the
U.S. healthcare industry and elsewhere. Government authorities  and  these third-party payors have
attempted to control costs by limiting coverage  and the  amount  of reimbursement for particular
medications. We cannot be sure that  reimbursement  will  be available for ETC-1002 and, if
reimbursement is available, the level of  such reimbursement. Reimbursement may impact the  demand
for, or the price of, ETC-1002. If reimbursement is  not available or is  available  only  at limited levels,
we may not be able to successfully commercialize ETC-1002.

In some foreign countries, particularly in Canada and  European  countries, the pricing of
prescription pharmaceuticals is subject  to  strict governmental  control. In  these countries,  pricing
negotiations with governmental authorities can take  six to 12 months or longer after the  receipt of
regulatory approval and product launch.  To obtain favorable reimbursement for the indications sought
or pricing approval in some countries,  we may be required  to  conduct a  clinical study that compares
the cost-effectiveness of ETC-1002 with other available  therapies.  If reimbursement  for ETC-1002 is
unavailable in any country in which we seek reimbursement, if it is limited in scope or  amount,  if  it is
conditioned upon our completion of additional clinical studies,  or  if pricing  is set  at unsatisfactory
levels, our operating results could be materially  adversely affected.

Our product development programs for candidates other  than ETC-1002 may require substantial financial
resources and  may  ultimately be unsuccessful.

In addition to the development of ETC-1002, we may pursue the  development of our other two

early-stage development programs. Neither  of our other potential product candidates has  commenced
any clinical studies, and there are a number  of  FDA requirements that we must satisfy before  we can
commence such clinical studies. Satisfaction of these  requirements will entail substantial time,  effort
and financial resources. We may never  satisfy these requirements. Any time, effort and financial
resources we expend on our other two  early-stage development programs may adversely  affect our
ability to continue development and commercialization of ETC-1002, and we may  never commence
clinical studies of such development programs  despite expending significant  resources in pursuit of  their
development. If we do commence clinical  studies  of our other potential product  candidates, such
product  candidates may never be approved by the FDA.

Recent federal legislation will increase pressure to reduce  prices  of pharmaceutical products paid  for by
Medicare, which could materially adversely  affect our  revenue, if any, and  our  results of operations.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of
2003, also called the MMA, changed the  way Medicare covers and pays  for  pharmaceutical products.
The legislation expanded Medicare coverage for  drug purchases  by the elderly and  introduced  a new
reimbursement methodology based on average sales prices for physician-administered drugs. In
addition, this legislation provided authority for limiting the  number of drugs that will  be  covered in  any
therapeutic class. As a result of this legislation and the expansion of  federal coverage of drug products,
we expect that there will be additional  pressure to reduce costs. These cost reduction initiatives and
other provisions of this legislation could  decrease the  scope  of  coverage and the price that we receive
for any approved products and could  seriously harm our  business. While the  MMA applies only to drug
benefits for Medicare beneficiaries, private payors  often  follow  Medicare coverage policies and payment
limitations in setting their own reimbursement rates, and any  reduction  in reimbursement that results
from the MMA may cause a similar reduction in  payments from  private payors.  This legislation  may
pose an even greater risk to ETC-1002 than some  other pharmaceutical products because a significant
portion of the target patient population for ETC-1002 would likely  be  over  65 years of age and,
therefore, many such patients will be  covered by Medicare.

35

In March 2010, the Patient Protection and Affordable Care Act, as amended by the  Health Care
and Education Affordability Reconciliation  Act, or collectively, the PPACA, became law in the  United
States. The goal of the PPACA is to reduce the  cost of healthcare and substantially  change the way
healthcare is financed by both governmental  and private insurers. While we cannot predict what  impact
on federal reimbursement policies this legislation will have in general or  on our business specifically,
the PPACA may result in downward pressure on pharmaceutical  reimbursement, which could negatively
affect market acceptance of ETC-1002, if approved, or any of our future products. In  2012, members of
the U.S.  Congress and some state legislatures sought to overturn certain provisions of the PPACA
including those concerning the mandatory purchase of insurance. However,  on June 28,  2012, the
United States Supreme Court upheld the  constitutionality of these provisions. Members of the U.S.
Congress have since proposed a number of legislative  initiatives,  including  possible  repeal of the
PPACA. We cannot predict the outcome or impact of current  proposals or whether new proposals  will
be made or adopted, when they may  be  adopted or what impact  they may have  on us if they are
adopted. These challenges add to the  uncertainty  of the legislative changes  as part of ACA.

Finally, the availability of generic LDL-C lowering  treatments may also substantially reduce the
likelihood of reimbursement for branded counterparts  or other competitive LDL-C lowering  therapies,
such as ETC-1002 if it is approved for  commercial distribution.  If we fail  to  successfully  secure  and
maintain reimbursement coverage for our  products  or are significantly delayed in doing  so, we will have
difficulty achieving market acceptance of our products and our  business will be harmed.

Recent federal legislation and actions by  state and  local governments may permit reimportation of drugs from
foreign countries into the United States, including  foreign countries where the drugs are sold at lower prices
than in the United States, which could materially  adversely affect our operating results.

We  may face competition for ETC-1002, if approved,  from cheaper  LDL-C lowering therapies
sourced from foreign countries that have  placed price controls on  pharmaceutical  products. The MMA
contains provisions that may change U.S. importation laws  and expand pharmacists’  and wholesalers’
ability to import cheaper versions of an approved drug and competing products  from Canada, where
there are government price controls. These changes to U.S.  importation laws will  not  take effect  unless
and until the Secretary of Health and  Human Services certifies that  the  changes will pose  no additional
risk to the public’s health and safety  and  will result in a significant reduction in the  cost of products to
consumers. The Secretary of Health  and  Human Services has so far  declined to approve a
reimportation plan. Proponents of drug reimportation may  attempt to pass legislation that would
directly allow reimportation under certain circumstances. Legislation or regulations allowing the
reimportation of drugs, if enacted, could decrease the price we receive for any  products that we may
develop, including ETC-1002, and adversely affect our future revenues and prospects for profitability.

The FDA and other regulatory agencies actively enforce  the laws and regulations prohibiting the promotion of
off-label uses. If we are found to have improperly  promoted off-label  uses, we may become subject to
significant liability.

The FDA and other regulatory agencies strictly regulate  the promotional  claims that may be made

about prescription  products, such as  ETC-1002 if approved.  In particular, a product  may not be
promoted for uses that are not approved by the FDA or other regulatory agencies as reflected  in the
product’s approved labeling. If we receive  marketing approval  for ETC-1002 as  a therapy  for lowering
LDL-C levels in statin intolerant patients  with hypercholesterolemia, the first indication we intend  to
pursue, physicians may nevertheless prescribe ETC-1002  to their patients  in a manner that is
inconsistent with the approved label,  potentially  including as a therapy in addition to statins. If we are
found to have promoted such off-label uses, we  may become subject to significant liability. The  federal
government has levied large civil and  criminal fines  against companies for alleged improper promotion
and has enjoined several companies from engaging in off-label promotion. The FDA  has also requested

36

that companies enter into consent decrees, corporate integrity agreements or  permanent injunctions
under which specified promotional conduct is changed or curtailed. If we  cannot successfully manage
the promotion of ETC-1002, if approved,  we could become subject to significant liability, which would
materially adversely affect our business  and  financial condition.

Our market is subject to intense competition.  If we are  unable to compete effectively,  our opportunity  to
generate revenue from the sale of ETC-1002,  if approved, will be materially adversely  affected.

The LDL-C lowering therapies market is highly competitive and dynamic and dominated  by  the
sale of statin treatments, including the cheaper generic  versions of statins.  We estimate that the total
statin monotherapy and fixed combination  market,  including generic drugs, accounted for 69% of U.S.
sales in the LDL-C lowering market in  2012.  Our success  will  depend,  in part,  on our ability to obtain
a share of the market, initially, for patients who are statin intolerant. Potential competitors in North
America, Europe and elsewhere include  major pharmaceutical companies,  specialty pharmaceutical
companies, biotechnology firms, universities and  other research institutions and  government agencies.
Other pharmaceutical companies may  develop LDL-C lowering therapies  for statin  intolerant patients
that compete with ETC-1002, if approved, that do not infringe the  claims  of our  patents, pending
patent applications or other proprietary  rights, which could materially  adversely affect our business and
results of operations.

Low-density lipoprotein cholesterol (LDL-C) lowering therapies  currently  on the  market that

would compete with ETC-1002 include the following:

(cid:127) Statins, such as Crestor(cid:3) (rosuvastatin) and Lipitor(cid:3) (atorvastatin), including their cheaper

generic versions;

(cid:127) Cholesterol absorption inhibitors, such as  Zetia(cid:3) (ezetimibe), a monotherapy marketed by

Merck & Co.,

(cid:127) Bile  acid sequestrants such as Welchol(cid:3) (colesevelam), marketed by Daiichi Sankyo Inc.;
(cid:127) MTP inhibitors, such as JUXTAPID(cid:3) (lomitapide), marketed by Aegerion  Pharmaceuticals, Inc.;
(cid:127) Apo B Anti-Sense therapy, such as KYNAMRO(cid:3) (mipomersen), marketed by Genzyme  Corp. a

Sanofi company;

(cid:127) Combination therapies, such as Vytorin(cid:3) (ezetimibe and simvastatin) and Liptruzet(cid:3) (ezetimibe

and atorvastatin), marketed by Merck &  Co., Inc.;  and

(cid:127) Other  lipid-lowering monotherapies (including cheaper  generic versions), such as Tricor(cid:3)
(fenofibrate) and Niaspan(cid:3) (niacin extended release), and combination therapies, such as
Advicor(cid:3) (niacin extended release and lovastatin) and Simcor(cid:3) (niacin  and simvastatin), both of
which  are marketed by AbbVie, Inc.

Several other pharmaceutical companies have other LDL-C lowering  therapies in development that
may be approved for marketing in the  United States or  outside of the United  States. Based on  publicly
available information, we believe the current therapies in development that would compete with
ETC-1002 include:

(cid:127) PCSK9 inhibitors, such as alirocumab, a therapy in Phase 3 clinical testing being developed by

Sanofi and Regeneron Pharmaceuticals, Inc., evolocumab, a separate therapy in Phase 3 clinical
testing being developed by Amgen Inc.and bococizumab, a separate therapy in Phase 3 clinical
testing being developed by Pfizer Inc.,  and four  additional  PCSK9 inhibitors in earlier phases of
development from Lilly, Novartis, Roche and The Medicines Company/Alnylam ; and

37

(cid:127) CETP inhibitors, such as anacetrapib, a therapy in Phase 3 clinical testing being developed by
Merck, and evacetrapib, a therapy in Phase 3 clinical testing  being  developed  by  Eli Lilly &
Company.

Many of our potential competitors have substantially greater financial, technical and human
resources than we do and significantly greater experience discovering and developing drug candidates,
obtaining FDA and other marketing  approvals of  products and commercializing those products.
Accordingly, our competitors may be  more successful than  we  may  be  in obtaining FDA approval for
drugs and achieving widespread market acceptance.  Our competitors’  drugs may be more effective, or
more effectively marketed and sold, than ETC-1002, if approved, and may render  ETC-1002 obsolete
or non-competitive before we can recover  the expenses of developing  and commercializing it. If
approved, ETC-1002 may also compete with  unapproved and off-label  LDL-C lowering  treatments, and
following the expiration of additional patents  covering the  LDL-C lowering market, we  may also face
additional competition from the entry of  new  generic drugs. We  anticipate that we  will  encounter
intense and increasing competition as  new  drugs enter the  market  and advanced technologies  become
available.

We face potential product liability exposure,  and, if claims are brought against  us, we  may incur  substantial
liability.

The use of ETC-1002 in clinical studies and the sale of ETC-1002, if approved,  exposes us to the

risk of product liability claims. Product liability claims might  be  brought against us by patients,
healthcare providers or others selling or  otherwise coming into contact  with ETC-1002. For example,
we may be sued if any product we develop allegedly causes injury or  is found to be otherwise
unsuitable during product testing, manufacturing,  marketing  or  sale. Any  such product  liability  claims
may include allegations of defects in manufacturing, defects in  design, a  failure to warn of  dangers
inherent in the product, including as  a result of  interactions with alcohol or other drugs,  negligence,
strict liability, and a breach of warranties. Claims could  also be asserted under  state consumer
protection acts. If we become subject  to  product liability claims and cannot successfully defend
ourselves  against them, we could incur  substantial liabilities. In addition, regardless of merit  or eventual
outcome, product liability claims may  result in,  among  other things:

(cid:127) withdrawal of patients from our clinical studies;

(cid:127) substantial monetary awards to patients or other claimants;

(cid:127) decreased demand for ETC-1002 or any future product  candidates following marketing approval,

if obtained;

(cid:127) damage to our reputation and exposure to adverse publicity;

(cid:127) increased FDA warnings on product labels;

(cid:127) litigation costs;

(cid:127) distraction of management’s attention  from our primary business;

(cid:127) loss of revenue; and

(cid:127) the inability to successfully commercialize ETC-1002 or any  future product  candidates, if

approved.

We  maintain product liability insurance coverage for our clinical studies  with a $5  million  annual
aggregate coverage limit. Nevertheless, our insurance  coverage  may be insufficient to reimburse us  for
any expenses or losses we may suffer. Moreover, in the future, we  may not be able to maintain
insurance coverage at a reasonable cost or in  sufficient amounts to protect  us against losses, including
if insurance coverage becomes increasingly expensive. If  and when we  obtain marketing approval for

38

ETC-1002, we intend to expand our  insurance coverage  to include the sale of commercial products;
however, we may not be able to obtain  this product liability insurance on  commercially reasonable
terms. Large judgments have been awarded in class action lawsuits  based on  drugs that had
unanticipated side effects. The cost of  any  product liability litigation or other proceedings,  even if
resolved  in our favor, could be substantial, particularly in light of the size of our business and  financial
resources. A product liability claim or  series of claims  brought against us  could  cause  our stock  price to
decline  and, if we  are unsuccessful in  defending such  a claim  or claims and the resulting judgments
exceed our insurance coverage, our financial condition, business and prospects could be materially
adversely affected.

We are subject to healthcare laws and regulations, which could expose us to criminal sanctions, civil  penalties,
contractual damages, reputational harm  and diminished profits  and  future  earnings.

Healthcare providers, physicians and  others will play a primary role in  the recommendation  and

prescription of ETC-1002, if approved.  Our future arrangements with third-party  payors will expose us
to broadly applicable fraud and abuse and other  healthcare laws and regulations  that  may constrain the
business or financial arrangements and relationships through which we market, sell and distribute
ETC-1002, if we obtain marketing approval.  Restrictions  under applicable federal and state healthcare
laws and regulations include the following:

(cid:127) The federal healthcare anti-kickback statute prohibits, among other things, persons from

knowingly and willfully soliciting, offering, receiving or  providing  remuneration, directly or
indirectly, in cash or in kind, to induce or reward either the referral of an  individual for,  or the
purchase, order or recommendation  of,  any  good or service, for which  payment may  be  made
under federal healthcare programs such as Medicare and Medicaid.

(cid:127) The federal False Claims Act imposes  criminal  and civil penalties,  including those from civil
whistleblower or qui tam actions, against individuals  or entities for knowingly  presenting,  or
causing  to be presented, to the federal government, claims for  payment that are false or
fraudulent or making a false statement to avoid,  decrease, or conceal  an obligation to pay  money
to the  federal government.

(cid:127) The federal Health Insurance Portability  and  Accountability Act of 1996,  as amended  by  the

Health Information Technology for Economic and Clinical Health Act, imposes criminal and  civil
liability for executing a scheme to defraud any healthcare benefit program and also  imposes
obligations, including mandatory contractual  terms, with respect to safeguarding the privacy,
security and transmission of individually identifiable health information.

(cid:127) The federal false statements statute  prohibits knowingly  and willfully falsifying, concealing or
covering up a material fact or making  any materially false statement in connection with the
delivery of or payment for healthcare  benefits, items or services.

(cid:127) The federal transparency requirements under  the PPACA require manufacturers of drugs,

devices, biologics, and medical supplies to report to the Department of Health and  Human
Services information related to physician payments and  other transfers of value and physician
ownership and investment interests.

(cid:127) Analogous state laws and regulations, such  as state  anti-kickback and false claims laws and

transparency laws, may apply to sales or marketing arrangements  and claims involving healthcare
items or services reimbursed by non-governmental third-party  payors, including  private insurers,
and some state laws require pharmaceutical companies to comply with the pharmaceutical
industry’s voluntary compliance guidelines and the relevant compliance guidance  promulgated  by
the federal government in addition to  requiring  drug  manufacturers  to  report information

39

related to payments to physicians and  other  healthcare providers or marketing  expenditures and
drug pricing.

Ensuring that our future business arrangements  with third parties  comply with applicable

healthcare laws and regulations could  be  costly. It  is possible that governmental authorities will
conclude that our business practices do not  comply with current or  future statutes, regulations or  case
law involving applicable fraud and abuse or other healthcare laws and  regulations.  If our operations,
including anticipated activities to be conducted by our sales team, were found to be in violation of any
of these  laws or any other governmental regulations that  may  apply to us, we may be subject  to
significant civil, criminal and administrative  penalties, damages, fines and exclusion from government
funded healthcare  programs, such as Medicare  and  Medicaid, any  of  which could substantially disrupt
our  operations. If any of the physicians or other providers or entities with  whom  we expect to do
business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from government funded healthcare programs.

Our internal computer systems, or those  of our third-party clinical research organizations or other contractors
or consultants, may fail or suffer security breaches, which  could result in a material  disruption of our
ETC-1002 development programs.

Despite the implementation of security  measures, our internal computer systems and those of our

third-party clinical research organizations  and other  contractors and consultants are vulnerable  to
damage  from computer viruses, unauthorized access,  natural disasters, terrorism, war, and
telecommunication and electrical failures.  While  we have  not  experienced any such system failure,
accident, or security breach to date, if such an event  were to occur and  cause interruptions in  our
operations, it could result in a material disruption of our programs. For  example, the loss of clinical
study data for ETC-1002 could result  in  delays in  our  regulatory approval  efforts and  significantly
increase our costs to recover or reproduce  the data. To the extent  that any  disruption or security  breach
results in  a loss of or damage to our  data or applications or  other data or applications relating to our
technology or product candidates, or inappropriate disclosure of confidential or proprietary
information, we could incur liabilities  and  the further development of ETC-1002  could  be  delayed.

Risks Related to our Intellectual Property

If we are unable to adequately protect our proprietary technology or maintain issued patents which are
sufficient to protect ETC-1002, others could  compete against  us  more directly,  which  would  have  a material
adverse impact on our business, results of operations, financial  condition and  prospects.

Our commercial success will depend in part on  our  success obtaining and maintaining issued
patents and other intellectual property  rights in the  United States and elsewhere and  protecting our
proprietary technology. If we do not  adequately protect  our intellectual property and proprietary
technology, competitors may be able to use our technologies  and erode  or negate any  competitive
advantage we may have, which could harm our business  and ability to achieve profitability.

As of December 31, 2013, Esperion’s patent estate,  including patents  we own or  license from  third

parties, on a worldwide basis, included  approximately 16 issued United States patents and 7 pending
United States patent applications, 1 international patent application and 6  issued patents and
25 pending patent applications in other foreign jurisdictions. Of our worldwide patents  and pending
applications, only a subset relates to  our small molecule  program  which includes  our lead  product
candidate, ETC-1002. ETC-1002 is claimed in  U.S. Patent No.  7,335,799 that is  scheduled to expire  in
December 2025, which includes 711 days of  patent  term adjustment, and  may be eligible for a patent
term extension period of up to 5 years. U.S. Patent No. 8,497,301  claims a method of  treatment using
ETC-1002. We also have a pending U.S.  patent application claiming methods of treatment  using

40

ETC-1002. There are currently three issued  patents  and  four pending applications in countries  outside
the United States that relate to ETC-1002.

A second subset of this portfolio relates to our  early-stage product candidate ESP41091.  ESP41091

is claimed in U.S. Patent Nos. 7,119,221  and 7,405,226.  Various methods  of  treatment using ESP41091
are claimed in U.S. Patent Nos. 8,153,690  and 8,309,604 and in two pending applications in  the United
States. There are currently two issued patents  and four  pending  applications  in countries outside the
United States that relate to ESP41091.

Our 4WF patent portfolio currently consists  of 20 issued patents and pending patent applications

in the United States and other foreign jurisdictions regarding apolipoprotein mixtures, dimeric
oxidation-resistant apolipoprotein variants  and  oxidant resistant  apolipoprotein A1 variants  and mimetic
peptides thereof.

We  cannot assure you that any of our patents  have, or that  any of our pending patent applications
will mature into issued patents that will  include, claims with  a  scope  sufficient to protect  ETC-1002  or
our  other product candidates. Others have developed technologies that may be related  or competitive
to our approach, and may have filed or  may  file patent applications and  may have received or may
receive patents that may overlap or conflict  with our patent applications,  either  by  claiming  the same
methods or formulations or by claiming  subject  matter that  could dominate  our patent position. The
patent positions of biotechnology and  pharmaceutical companies, including  our patent position, involve
complex legal and factual questions,  and,  therefore,  the issuance, scope, validity and enforceability  of
any patent claims that we may obtain  cannot be predicted with  certainty. Patents, if issued, may  be
challenged, deemed unenforceable, invalidated, or  circumvented. U.S.  patents and  patent  applications
may also be subject to interference proceedings,  ex parte reexamination, inter partes review and
post-grant review proceedings, supplemental examination and may be challenged in  district court.
Patents granted in certain other countries  may be subjected  to  opposition or comparable proceedings
lodged in various national and regional patent offices. These proceedings could result in  either loss of
the patent or denial of the patent application or  loss or  reduction in the scope  of  one or more of the
claims of the patent or patent application.  In addition, such interference, re-examination,  opposition,
post-grant review,  inter partes review, supplemental examination or revocation proceedings may be
costly. Thus, any patents that we may own  or exclusively license  may  not  provide any  protection against
competitors. Furthermore, an adverse  decision in  an interference  proceeding can result in  a third-party
receiving the patent right sought by us,  which in  turn could affect our  ability to develop, market or
otherwise commercialize ETC-1002.

Furthermore, the issuance of a patent, while presumed  valid and enforceable,  is not conclusive as

to its validity or its enforceability and  it  may not provide us with adequate proprietary  protection or
competitive advantages against competitors with similar products. Competitors  may also be able to
design around our patents. Other parties  may develop and obtain  patent  protection for more effective
technologies, designs or methods. We  may not be able to prevent the unauthorized  disclosure or use of
our  technical knowledge or trade secrets by consultants, vendors, former employees  and current
employees. The laws of some foreign  countries do not protect our proprietary rights to the  same extent
as the laws of the United States, and  we may encounter significant  problems in protecting our
proprietary rights in these countries.  If  these developments were to occur, they  could  have a material
adverse effect on our sales.

Our ability to enforce our patent rights  depends  on our ability to detect  infringement. It is difficult

to detect  infringers who do not advertise  the components that are used in their products.  Moreover, it
may be difficult or impossible to obtain  evidence of  infringement  in a competitor’s or  potential
competitor’s product. Any litigation to  enforce or  defend our patent rights,  if  any, even if we  were to
prevail, could be costly and time-consuming and would divert the attention of our management and  key

41

personnel from our business operations.  We  may  not  prevail in any lawsuits that we initiate  and the
damages or other remedies awarded if we  were to prevail may not be commercially meaningful.

In addition, proceedings to enforce or  defend our  patents could  put  our patents at risk of being
invalidated, held unenforceable, or interpreted  narrowly.  Such  proceedings could also provoke third
parties to assert claims against us, including that some  or all  of the claims in one or more of  our
patents are invalid or otherwise unenforceable.  If, in  any proceeding, a court invalidated or  found
unenforceable our patents covering ETC-1002, our  financial position  and  results of operations would be
materially and adversely impacted. In addition,  if a court found  that valid, enforceable  patents held by
third parties covered ETC-1002, our financial  position and results  of  operations  would also  be
materially and adversely impacted.

The degree of future protection for our proprietary rights is uncertain, and we cannot  ensure that:

(cid:127) any of our patents, or any of our pending patent applications, if issued, will include claims

having a scope sufficient to protect ETC-1002;

(cid:127) any of our pending patent applications will result in issued patents;

(cid:127) we will be able to successfully commercialize ETC-1002, if approved,  before  our relevant patents

expire;

(cid:127) we were the first to make the inventions covered  by  each  of  our patents and  pending  patent

applications;

(cid:127) we were the first to file patent applications for  these inventions;

(cid:127) others will not develop similar or alternative  technologies that  do not infringe our patents;

(cid:127) any of our patents will be valid and  enforceable;

(cid:127) any patents issued to us will provide a basis for  an exclusive market for our commercially viable
products, will provide us with any competitive advantages or will not be challenged by third
parties;

(cid:127) we will develop additional proprietary technologies or product  candidates that are separately

patentable; or

(cid:127) that our commercial activities or products will not infringe  upon the  patents  of others.

We  rely  upon unpatented trade secrets, unpatented know-how and continuing technological
innovation to develop and maintain our  competitive position, which we seek  to  protect, in part, by
confidentiality agreements with our employees and our collaborators and consultants. We  also have
agreements with our employees and selected  consultants that obligate  them to assign their inventions to
us. It is possible that technology relevant  to  our  business will be independently developed by a  person
that is not a party to such an agreement.  Furthermore, if the employees  and consultants  who are
parties to these agreements breach or  violate the  terms of these agreements,  we may not have  adequate
remedies for any such breach or violation, and we could  lose our trade secrets through such  breaches
or violations. Further, our trade secrets  could otherwise become  known or be independently discovered
by our competitors.

If we are not able to adequately prevent  disclosure of trade secrets and other proprietary information, the
value of our technology and products could  be significantly diminished.

We  rely  on trade secrets to protect our proprietary technologies, especially where we do  not
believe patent protection is appropriate  or  obtainable. However, trade secrets are difficult to protect.
We  rely  in part on confidentiality agreements  with our employees, consultants, outside scientific
collaborators, sponsored researchers,  contract manufacturers, vendors and other advisors to protect  our

42

trade secrets and other proprietary information.  These agreements may not effectively prevent
disclosure of confidential information and may not provide an adequate remedy  in the event of
unauthorized disclosure of confidential information. In addition, we cannot guarantee that we have
executed these agreements with each party  that  may have or have had access  to  our  trade secrets.

Moreover, because we acquired certain  rights to our lead product  candidate from Pfizer, we must

rely on Pfizer’s practices, and those of  its predecessors, with regard to parties that may have had access
to our trade secrets related thereto before our  incorporation. Any party  with whom we or  they have
executed such an agreement may breach that agreement and disclose our proprietary  information,
including our trade secrets, and we may  not be able to obtain adequate  remedies for such  breaches.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret  is difficult, expensive
and time-consuming, and the outcome is unpredictable.  In  addition, some courts inside and outside the
United States are less willing or unwilling  to  protect trade secrets. If any  of our trade  secrets  were to
be lawfully obtained or independently developed by a competitor, we would have  no right  to  prevent
them, or those to whom they disclose such  trade secrets, from using that technology or information to
compete with us. If any of our trade secrets were to be disclosed to or independently developed by a
competitor or other third-party, our  competitive position  would be harmed.

We may  infringe the intellectual property rights of others, which may prevent or delay our product development
efforts and stop us from commercializing or increase the costs  of commercializing  ETC-1002, if approved.

Our success will depend in part on our ability to operate without infringing the intellectual
property and proprietary rights of third parties.  We cannot assure  you  that our business, products and
methods do not or will not infringe the  patents or other intellectual  property  rights of third parties.

The pharmaceutical industry is characterized by extensive litigation regarding patents and  other

intellectual property rights. Other parties may  allege  that ETC-1002  or  the use of our technologies
infringes  patent claims or other intellectual property rights held by them or that we are employing  their
proprietary technology without authorization. Patent and other types  of  intellectual  property litigation
can involve complex factual and legal  questions, and their outcome is uncertain. Any claim relating to
intellectual property infringement that  is successfully asserted against  us may require us  to  pay
substantial damages, including treble  damages  and  attorney’s  fees  if we are  found to be willfully
infringing another party’s patents, for past use  of  the asserted intellectual  property and  royalties and
other consideration going forward if  we  are  forced to take a license.  In addition,  if  any such claim were
successfully asserted against us and we could  not  obtain  such a license, we may be forced to stop or
delay developing, manufacturing, selling  or otherwise commercializing  ETC-1002.

Even if we are successful in these proceedings, we may  incur substantial  costs and divert

management time and attention in pursuing these proceedings, which could have a  material  adverse
effect on us. If we are unable to avoid  infringing the patent rights of others, we  may be required  to
seek a license, defend an infringement action or challenge  the validity of  the patents in court, or
redesign our products. Patent litigation is  costly  and time consuming. We  may not have sufficient
resources to bring these actions to a successful conclusion. In addition, intellectual property litigation or
claims could force us to do one or more of the following:

(cid:127) cease developing, selling or otherwise commercializing ETC-1002;

(cid:127) pay substantial damages for past use of the asserted intellectual property;

(cid:127) obtain a license from the holder of  the asserted intellectual property, which license may not be

available on reasonable terms, if at all; and

(cid:127) redesign, or rename in the case of  trademark claims, ETC-1002 to avoid infringing the

intellectual property rights of third parties,  which may not be possible and, even if  possible,
could be costly and time-consuming.

43

Any of these risks coming to fruition could have a  material  adverse effect on our  business,  results

of operations, financial condition and prospects.

Changes in U.S. patent law could diminish  the value of patents in general, thereby impairing our ability  to
protect our products.

The United States has recently enacted  and is currently  implementing  the America Invents  Act  of

2011, wide-ranging patent reform legislation. The United States Supreme Court  has ruled  on several
patent cases in recent years, either narrowing  the scope of patent protection  available  in certain
circumstances or weakening the rights of  patent owners in certain situations.  In addition to increasing
uncertainty with regard to our ability to obtain  patents  in the future, this combination of events  has
created uncertainty with respect to the  value  of  patents, once obtained. Depending on decisions by the
U.S. Congress, the federal courts, and the  United States Patent  and  Trademark Office,  or the
U.S. PTO, the laws and regulations governing patents could change in  unpredictable ways that would
weaken our ability to obtain new patents  or  to  enforce our existing patents and patents that we might
obtain in the future.

Obtaining and maintaining our patent  protection depends on compliance with  various procedural, document
submission, fee payment and other requirements imposed by governmental patent agencies, and our  patent
protection could be reduced or eliminated  for non-compliance  with these requirements.

The U.S. PTO and various foreign governmental patent agencies require compliance with  a

number of procedural, documentary,  fee  payment  and other provisions  during the  patent  process.  There
are situations in which noncompliance  can result in abandonment or lapse of a patent or patent
application, resulting in partial or complete  loss of patent rights in the  relevant jurisdiction. In such an
event, competitors might be able to enter  the market earlier than would otherwise have  been the case.

We could become dependent on licensed intellectual property.  If we were to lose our  rights  to licensed
intellectual property, we may not be able  to  continue developing or  commercializing ETC-1002  or our other
product candidates, if approved.

In the future, we may enter into license(s) to third-party  intellectual property that are necessary or

useful to our business. Such license agreement(s) will likely impose various  obligations upon  us, and
our  licensor(s) have or may have the  right to terminate the  license  thereunder in the  event of a
material breach or, in some cases, at  will. Future licensor(s) may allege that  we have breached our
license agreement with them or decide  to  terminate our license  at  will, and accordingly seek to
terminate our license. If successful, this could result in our loss of the right  to  use the licensed
intellectual property, which could materially adversely affect our ability  to  develop  and commercialize  a
product  candidate or product, if approved, as well as harm our  competitive  business  position  and our
business prospects.

We do not seek to protect our intellectual  property  rights  in all jurisdictions throughout the world and we  may
not  be able to adequately enforce our intellectual property rights even  in the  jurisdictions  where  we seek
protection.

Filing,  prosecuting and defending patents on product candidates in all countries  and jurisdictions

throughout the world would be prohibitively expensive, and  our intellectual property  rights in  some
countries outside the United States could  be  less extensive than those in the United States. In addition,
the laws of some foreign countries do not  protect intellectual property rights to the  same extent as
federal and state laws in the United  States. Consequently,  we may not  be  able to prevent third  parties
from practicing our inventions in all countries outside the United  States, or from selling or importing
products made using our inventions in and into  the United States  or  other jurisdictions. Competitors
may use our technologies in jurisdictions  where we have  not  obtained patent protection to develop

44

their own products and further, may  export otherwise infringing  products to territories  where we have
patent protection, but enforcement is not as strong as that in the United States. These  products may
compete with our products and our patents or other  intellectual property rights may not be effective or
sufficient to prevent them from competing.

Many companies have encountered significant  problems in protecting and defending intellectual

property rights in foreign jurisdictions.  The  legal systems  of certain countries, particularly certain
developing countries, do not favor the  enforcement of patents and other intellectual property
protection, particularly those relating to biopharmaceuticals, which could make it  difficult for  us  to  stop
the infringement of our patents or marketing of competing products in violation of our proprietary
rights generally. Proceedings to enforce our patent rights in foreign jurisdictions  could  result in
substantial costs and divert our efforts  and attention from  other aspects of our business, could put  our
patents at risk of being invalidated or  interpreted narrowly, could put  our patent applications at  risk of
not issuing and could provoke third parties  to  assert  claims against us.  We may not prevail in any
lawsuits that we initiate and the damages  or other remedies awarded,  if any,  may not be commercially
meaningful. Accordingly, our efforts  to  enforce our intellectual property rights around the world  may
be inadequate to obtain a significant commercial advantage from the intellectual property that we
develop or license.

We may  be subject to damages resulting from claims  that we or our employees have wrongfully used or
disclosed alleged trade secrets of their former employers.

Our employees have been previously employed  at other biotechnology or pharmaceutical
companies, including our competitors or  potential competitors. Although we are not aware of any
claims currently pending against us, we may be subject to claims that these  employees or we have
inadvertently or otherwise used or disclosed trade  secrets  or other proprietary information  of the
former employers of our employees. Litigation  may be necessary  to  defend against these claims. Even if
we are successful in defending against  these claims, litigation could result in substantial costs  and be a
distraction to management. If we fail  in defending such claims,  in addition to paying money  claims,  we
may lose valuable intellectual property rights or personnel. A loss of key personnel or their work
product  could hamper or prevent our  ability to commercialize ETC-1002,  which would  materially
adversely affect our commercial development efforts.

Risks Related to our Dependence on  Third Parties

We will be unable to directly control all aspects of our clinical studies due to our  reliance  on CROs and other
third  parties that assist us in conducting  clinical studies.

We  will rely on CROs to conduct our Phase 2b  and Phase 3 clinical studies for  ETC-1002. As a
result, we will have less direct control over the  conduct, timing  and  completion of these clinical studies
and the management of data developed through  the clinical studies than would be the  case if  we were
relying entirely upon our own staff. Communicating with outside parties can also  be  challenging,
potentially leading to mistakes as well  as difficulties in coordinating activities. Outside parties may:

(cid:127) have staffing difficulties;

(cid:127) fail to comply with contractual obligations;

(cid:127) experience regulatory compliance issues;

(cid:127) undergo changes in priorities or become  financially distressed;  or

(cid:127) form relationships with other entities, some of which may be our competitors.

These factors may materially adversely affect  the willingness or ability  of third parties to conduct

our  clinical studies and may subject us  to  unexpected  cost increases  that are beyond our control.

45

Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical
Practices, for conducting, recording, and  reporting  the results  of  clinical  studies to assure that data and
reported results are credible and accurate and that  the rights,  integrity and confidentiality  of  clinical
study participants are protected. Our reliance  on third parties  that we do not control  does not relieve
us of these responsibilities and requirements.

Problems with the timeliness or quality of the work of any CRO may lead  us to seek to terminate

our  relationship with any such CRO  and  use an  alternative service  provider. Making  this  change  may
be costly and may delay our clinical studies, and contractual restrictions may make such  a change
difficult or impossible to effect. If we  must replace any CRO that is  conducting  our clinical studies, our
clinical studies may have to be suspended  until we find another CRO  that  offers comparable services.
The time that it takes us to find alternative organizations may cause  a delay  in the commercialization
of ETC-1002 or may cause us to incur significant expenses  to  replicate data  that  may be lost. Although
we do not believe that any CRO on which we may rely  will offer  services  that  are not available
elsewhere, it may be difficult to find  a  replacement organization that  can  conduct our clinical studies  in
an acceptable manner and at an acceptable cost.  Any  delay in or inability to complete our clinical
studies could significantly compromise our ability to secure regulatory  approval of ETC-1002 and
preclude our ability to commercialize ETC-1002,  thereby limiting or preventing  our  ability  to  generate
revenue from its sales.

We rely completely on third-party suppliers  to manufacture  our  clinical drug supplies for ETC-1002, and  we
intend to rely on third parties to produce  commercial  supplies of ETC-1002  and pre-clinical, clinical and
commercial supplies of any future product  candidate.

We  do not currently have, nor do we plan to acquire,  the infrastructure or capability to internally

manufacture our clinical drug supply  of  ETC-1002, or  any future product  candidates, for use in the
conduct of our pre-clinical studies and  clinical studies, and we lack the internal resources and the
capability to manufacture any product  candidates  on a clinical or commercial scale. The facilities used
by our contract manufacturers to manufacture the active pharmaceutical ingredient and final  drug for
ETC-1002, or any future product candidates, must be approved by the FDA and other comparable
foreign regulatory  agencies pursuant  to  inspections that would be conducted after  we submit our NDA
or relevant foreign regulatory submission to the applicable regulatory  agency.

We  do not control the manufacturing process of,  and are completely dependent on,  our contract
manufacturers to comply with current Good  Manufacturing Practices for manufacture  of  both active
drug substances and finished drug products.  If our contract manufacturers cannot successfully
manufacture material that conforms  to  our specifications  and the  strict regulatory requirements of the
FDA or applicable foreign regulatory  agencies, they  will  not  be  able to secure  and/or maintain
regulatory approval for their manufacturing  facilities. In  addition, we have  no direct control over our
contract manufacturers’ ability to maintain adequate quality control, quality assurance and qualified
personnel. Furthermore, all of our contract manufacturers are engaged with other companies  to  supply
and/or manufacture materials or products for  such companies,  which exposes our manufacturers to
regulatory risks for the production of  such materials and products. As a result, failure to satisfy the
regulatory requirements for the production of those materials and  products  may affect the  regulatory
clearance of our contract manufacturers’ facilities generally.  If the FDA or a comparable foreign
regulatory agency does not approve these  facilities for  the manufacture  of  our product candidates  or if
it withdraws its approval in the future, we may  need to find alternative manufacturing  facilities,  which
would adversely impact our ability to develop, obtain regulatory approval  for or  market our product
candidates.

46

If we do not establish successful collaborations, we may have to alter our development and commercialization
plans for ETC-1002.

Our drug development programs and commercialization plans for  ETC-1002 will require

substantial additional cash to fund expenses. We may develop and  initially commercialize ETC-1002 in
the United States without a partner.  However,  in order to pursue the  broader  statin resistant market in
the United States, we may also enter into a  partnership or  co-promotion arrangement with an
established pharmaceutical company that  has a  larger sales force  and we may enter into collaborative
arrangements to develop and commercialize ETC-1002 outside  of the United States. We  will  face
significant competition in seeking appropriate collaborators  and these  collaboration agreements are
complex and time-consuming to negotiate.  We  may  not be able to negotiate collaborations on
acceptable terms, or at all. If that were  to  occur, we  may  have to curtail the  development or delay
commercialization of ETC-1002 in certain geographies,  reduce the  scope  of  our  sales or  marketing
activities, reduce the scope of our commercialization  plans,  or  increase our expenditures  and undertake
development or commercialization activities at our own expense.  If we elect to increase our
expenditures to fund development or commercialization activities outside  of  the United  States  on our
own, we may need to obtain additional  capital, which may not  be  available to us on  acceptable terms,
or at all.

If a collaborative partner terminates or fails to perform its  obligations  under  an agreement with  us, the
commercialization of ETC-1002 could be delayed  or terminated.

We  are not currently party to any collaborative  arrangements for the commercialization of

ETC-1002 or similar arrangements, although we may pursue  such arrangements before any
commercialization of ETC-1002 outside of the United States or to further commercialize ETC-1002 in
the broader statin  resistant market in the  United  States, if  approved.  If we are successful in entering
into collaborative arrangements for the commercialization of ETC-1002 or similar  arrangements and
any of our collaborative partners does  not devote sufficient time and resources to a  collaboration
arrangement with us, we may not realize  the potential commercial  benefits  of  the arrangement, and our
results of operations may be materially  adversely affected. In addition, if any  such future  collaboration
partner were to breach or terminate  its arrangements with us, the commercialization  of  ETC-1002
could be delayed, curtailed or terminated  because  we may  not  have sufficient financial resources or
capabilities to continue commercialization  of ETC-1002 on our  own in such  locations.

Much of the potential revenue from future  collaborations may consist  of contingent payments, such

as payments for achieving regulatory  milestones or  royalties payable on sales of drugs.  The milestone
and royalty revenue that we may receive under  these collaborations will  depend  upon our collaborators’
ability to successfully develop, introduce,  market and sell  new  products. In addition, collaborators  may
decide to enter into arrangements with third parties to commercialize  products developed under
collaborations using our technologies,  which could reduce  the milestone and royalty  revenue that we
may receive, if any. Future collaboration partners may fail to develop or effectively  commercialize
products using our products or technologies because  they:

(cid:127) decide not to devote the necessary  resources due  to  internal constraints, such as limited
personnel with the requisite expertise, limited cash  resources or specialized equipment
limitations, or the belief that other drug development  programs  may have a higher likelihood of
obtaining marketing approval or may  potentially generate a  greater return  on investment;

(cid:127) decide to pursue other technologies or  develop  other product candidates, either on their own or
in collaboration with others, including our competitors, to treat the  same  diseases targeted by
our  own collaborative programs;

(cid:127) do not have sufficient resources necessary  to  carry the  product candidate through  clinical

development, marketing approval and commercialization; or

47

(cid:127) cannot obtain the necessary marketing approvals.

Competition may negatively impact a  partner’s focus  on and commitment  to  ETC-1002 and, as  a

result, could delay  or otherwise negatively  affect  the commercialization  of  ETC-1002  outside of the
United States or in the broader statin  resistant market in the  United States. If  future collaboration
partners fail to develop or effectively commercialize  ETC-1002 for any of these reasons, our sales of
ETC-1002, if approved, may be limited, which would have  a material adverse effect on our operating
results and financial condition.

Risks Related to General Business, Employee Matters and  Managing Growth

We will need to develop and expand our  company,  and we may encounter difficulties  in managing  this
development and expansion, which could  disrupt  our operations.

In connection with being a relatively new public  company, we  expect  that  we will continue  to

increase our number of employees and the scope of our  operations. To  manage our  anticipated
development and expansion, we must  continue  to  implement  and  improve  our managerial, operational
and financial systems, expand our facilities  and  continue to recruit  and train additional qualified
personnel. Also, our management may  need  to  divert a  disproportionate amount of its attention away
from its day-to-day activities and devote  a  substantial amount of time to managing these  development
activities. Due to our limited resources, we may not be able  to  effectively  manage  the expansion  of our
operations or recruit and train additional qualified personnel. This may result  in weaknesses  in our
infrastructure; or give rise to operational  mistakes, loss of business opportunities, loss of employees and
reduced productivity among remaining  employees. The physical expansion of  our operations may  lead
to significant costs and may divert financial resources from  other projects, such as  the development of
ETC-1002. If our management is unable to effectively manage our expected development and
expansion, our expenses may increase more than  anticipated, our ability  to  generate or  increase our
revenue could be reduced and we may not be able to implement  our business strategy. Our future
financial performance and our ability  to  commercialize  ETC-1002, if approved, and compete effectively
will depend, in part, on our ability to  effectively manage the future development  and expansion of our
company.

Our future success depends on our ability to retain both our founder,  Executive  Chairman  and Chief
Scientific Officer and our President and Chief Executive Officer, and to  attract, retain and motivate qualified
personnel.

We  are highly dependent on Dr. Roger S. Newton,  our founder, Executive  Chairman and Chief

Scientific Officer, and Tim M. Mayleben, our President  and Chief Executive Officer. We have entered
into employment agreements with Dr.  Newton and Mr. Mayleben, but any employee may terminate his
or her employment with us. Although  we  do not have  any reason to believe  that  we will lose the
services of either Dr. Newton or Mr. Mayleben in the foreseeable future,  the loss  of the services of
either individual might impede the achievement of our research, development  and commercialization
objectives. We rely on consultants and  advisors, including  scientific  and clinical advisors, to assist us in
formulating our development and commercialization strategy. Our  consultants and  advisors may be
employed by employers other than us  and  may have commitments under consulting or advisory
contracts with other entities that may limit their availability to us.  Recruiting and retaining qualified
scientific personnel and sales and marketing personnel will also be critical  to  our success. We may not
be able to attract and retain these personnel on  acceptable terms given the  competition among
numerous pharmaceutical and biotechnology companies for  similar personnel. We also experience
competition for the hiring of scientific personnel from  universities and research institutions. Failure to
succeed in clinical studies may make  it  more  challenging to recruit and retain qualified scientific
personnel.

48

Our company lacks experience commercializing products,  which may have a  material adverse  effect on  our
business.

We  will need to transition from a company with a  development focus to a  company capable of

supporting commercial activities. We  may  be  unsuccessful in making such a  transition.  Our company
has never filed an NDA and has not  yet demonstrated an  ability to obtain marketing approval for or
commercialize a product candidate. Therefore,  our clinical development  and regulatory approval
process may involve more inherent risk, take longer, and  cost more than it would if we were  a company
with a more significant operating history and had experience obtaining marketing approval for and
commercializing a product candidate.

Our employees may engage in misconduct  or other improper activities, including violating applicable
regulatory standards and requirements or engaging  in insider trading, which could significantly  harm our
business.

We  are exposed to the risk of employee fraud  or other misconduct. Misconduct  by  employees
could include intentional failures to comply with the regulations  of the FDA and applicable non-U.S.
regulators, provide accurate information  to the FDA and applicable non-U.S. regulators, comply  with
healthcare fraud and abuse laws and regulations  in the United States and  abroad, report  financial
information or data accurately or disclose unauthorized activities to us. In  particular, sales,  marketing
and business arrangements in the healthcare industry are  subject to extensive laws and  regulations
intended to prevent fraud, misconduct, kickbacks, self-dealing and  other abusive practices. These laws
and regulations restrict or prohibit a wide  range of pricing, discounting,  marketing  and promotion, sales
commission, customer incentive programs and other business arrangements. Employee misconduct
could also involve  the improper use of, including trading on, information obtained in  the course of
clinical studies, which could result in regulatory sanctions  and serious harm to our reputation.  We have
adopted a code of conduct, but it is not  always possible  to  identify and deter employee  misconduct, and
the precautions we take to detect and prevent this activity  may be ineffective in controlling unknown or
unmanaged risks or losses or in protecting  us  from governmental investigations or other  actions or
lawsuits stemming from a failure to comply with these laws or regulations. If any such  actions are
instituted against us, and we are not  successful in defending ourselves or  asserting our rights, those
actions could have a significant impact on  our business, including  the imposition of significant fines or
other sanctions.

In order to satisfy our obligations as a public company, we may need to hire qualified accounting and
financial personnel with appropriate public  company  experience.

As a relatively new public company, we need to establish and maintain effective disclosure  and
financial controls and our corporate governance practices that we  adopted in connection with our  initial
public offering. We may need to hire  additional accounting  and financial  personnel with appropriate
public company experience and technical accounting  knowledge, and it may be difficult to recruit  and
maintain such personnel. Even if we are able to hire appropriate personnel, our  existing operating
expenses and operations will be impacted  by  the direct  costs of  their  employment and the indirect
consequences related to the diversion  of management resources from  product development efforts.

Risks Related to our Financial Position  and  Capital Requirements

We have  not generated any revenue from ETC-1002 and  may never be  profitable.

Our ability to become profitable depends upon  our ability  to generate  revenue. To date, we  have

not generated any revenue from our lead  product  candidate, ETC-1002, and  we do not know when, or
if, we will generate any revenue. We do not expect to generate significant revenue unless and until we

49

obtain marketing approval of, and begin  to sell,  ETC-1002.  Our ability  to  generate revenue depends on
a number of factors, including, but not  limited  to,  our ability to:

(cid:127) initiate and successfully complete our Phase  2b clinical studies that  meet  their clinical endpoints;

(cid:127) initiate and successfully complete our Phase  3 clinical  program;

(cid:127) initiate and successfully complete all safety studies  required to obtain  U.S. and foreign marketing

approval for ETC-1002 as a treatment for patients with  hypercholesterolemia;

(cid:127) commercialize ETC-1002, if approved, by developing a sales force or entering into collaborations

with third parties; and

(cid:127) achieve market acceptance of ETC-1002 in  the medical  community and with third-party payors.

Absent our entering into a collaboration or  partnership agreement, we expect to incur significant

sales and marketing costs as we prepare to commercialize  ETC-1002.  Even if we  initiate and
successfully complete our Phase 3 clinical program of ETC-1002, which includes two pivotal Phase 3
clinical studies and one long-term safety study,  which each  meet their clinical  endpoints and ETC-1002
is approved for commercial sale, and despite expending these costs, ETC-1002  may not be a
commercially successful drug. We may not achieve profitability soon after generating  product sales, if
ever. If we are unable to generate product revenue, we will not become profitable  and may  be  unable
to continue operations without continued funding.

Raising additional capital may cause dilution  to our existing stockholders, restrict our operations or require
us to relinquish rights.

We  may seek additional capital through  a combination of private and  public  equity offerings, debt

financings, collaborations and strategic  and  licensing arrangements.  To the extent  that  we raise
additional capital through the sale of common stock or  securities convertible or exchangeable into
common stock, your ownership interest  in our company will be diluted.  In  addition, the  terms of any
such securities may include liquidation or  other  preferences that  materially adversely  affect your  rights
as a stockholder. Debt financing, if available, would increase our fixed payment  obligations and  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 collaboration, strategic  partnerships  and licensing  arrangements with third  parties, we
may have to relinquish valuable rights  to  ETC-1002,  our intellectual property, future revenue  streams
or grant licenses on terms that are not favorable  to  us.

Our ability to use our net operating loss  carry forwards may  be subject  to limitation.

Under Section 382 of the Internal Revenue Code of  1986, as amended, or the Code,  changes in

our  ownership may limit the amount of our  net operating loss carryforwards that could be utilized
annually to offset our future taxable  income, if any. This limitation would  generally apply in the event
of a cumulative change in ownership  of  our  company of more than 50% within a three-year period.
Any such limitation may significantly  reduce  our  ability to utilize our net operating  loss carryforwards
before they expire. The closing of our initial public offering, together  with private placements and other
transactions that have occurred since  our  inception,  may  trigger  such an ownership change pursuant  to
Section 382. Any such limitation, whether as the  result of our initial public  offering, prior  private
placements, sales of our common stock by  our existing stockholders or  additional sales of our common
stock by us after our initial public offering,  could  have a material  adverse effect  on our results  of
operations in future years. We have not completed  a study to assess whether an  ownership change for
purposes  of Section 382 has occurred, or whether there have been multiple ownership changes  since
our  inception, due to the significant  costs  and complexities  associated with  such study.

50

Complying with public company reporting  and other obligations  may  strain our financial and managerial
resources. Additionally, we are obligated  to  develop  and maintain proper and effective internal  control over
financial reporting,  but we may not complete  our analysis of our internal  control over financial  reporting in  a
timely manner or these internal controls may  not  be  determined  to  be effective,  either of which may harm
investor confidence in us and the value  of our common stock.

As a public company, we are required to comply with applicable provisions of the Sarbanes-Oxley

Act of 2002, as well as other rules and  regulations  promulgated  by the SEC and the NASDAQ Stock
Market LLC, or NASDAQ, which results in significant  initial and  continuing legal, accounting,
administrative and other costs and expenses. The listing requirements  of The NASDAQ Global  Market
require that we satisfy certain corporate governance requirements relating to director independence,
distributing annual and interim reports,  stockholder meetings, approvals and  voting, soliciting proxies,
conflicts of interest and a code of conduct. Our management  and  other personnel need to devote a
substantial amount of time to ensure  that  we comply with  all of these requirements.

We  are subject to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, and  the related
rules of the SEC that generally require  our management  and  independent registered public accounting
firm to report on the effectiveness of  our  internal control over financial reporting. Beginning with the
second  annual report that we will be required to file with the SEC,  Section 404 requires  an annual
management assessment of the effectiveness of our internal control  over financial  reporting. However,
for so long as we remain an ‘‘emerging  growth company’’  as  defined in the JOBS  Act,  we intend to
take advantage of certain exemptions  from various reporting requirements that are applicable to public
companies that are not emerging growth companies, including, but  not  limited  to,  not  being  required to
comply  with the auditor attestation requirements of Section 404.  Once we  are no  longer an ‘‘emerging
growth company’’ or, if before such date, we  opt to no  longer  take advantage of the  applicable
exemption, we will be required to include an  opinion from  our independent registered public
accounting firm on the effectiveness  of  our internal control over financial  reporting.

We  are in the early stages of the costly and challenging process of  evaluating  and testing our
internal controls for the purpose of providing the  reports required  by these  rules.  We  may not be able
to complete our evaluation, testing and any required remediation  in a  timely fashion.  During the  course
of our review and testing, we may identify deficiencies and be unable to remediate them before  we
must provide the required reports. Furthermore,  if we have  a  material weakness in our internal control
over financial reporting, we may not detect errors  on a  timely basis and  our financial  statements may
be materially misstated. We or our independent registered public accounting  firm  may not be able  to
conclude on an ongoing basis that we have effective  internal  control over financial reporting, which
could harm our operating results, cause investors to lose confidence in  our  reported financial
information and cause the trading price  of our stock to fall. In  addition, we are required to timely file
accurate quarterly and annual reports with the  SEC under  the Securities Exchange Act of 1934, or  the
Exchange Act, as amended. In order to report our results of operations and financial  statements on an
accurate and timely basis, we depend  on  CROs to provide  timely  and  accurate notice of their costs to
us. Any failure to  report our financial  results on an accurate  and timely basis  could  result in  sanctions,
lawsuits, delisting of our shares from The NASDAQ Global  Market or other adverse consequences  that
would materially harm our business.

Risks Related to the Securities Markets and Investment in our  Common Stock

Market volatility may affect our stock price  and the value of your investment.

The market price of our common stock may fluctuate significantly in response to a number of

factors, most of which we cannot control,  including, among others:

(cid:127) plans for, progress of or results from  clinical efficacy  or safety studies of ETC-1002;

51

(cid:127) the failure of the FDA to approve ETC-1002;

(cid:127) announcements  of new products, technologies, commercial relationships, acquisitions  or other

events by us or our competitors;

(cid:127) the success or failure of other LDL-C lowering therapies;

(cid:127) regulatory or legal developments in the United  States and other  countries;

(cid:127) failure of ETC-1002, if approved, to  achieve commercial success;

(cid:127) fluctuations in stock market prices  and trading  volumes of  similar companies;

(cid:127) general market conditions and overall  fluctuations in U.S. equity  markets;

(cid:127) variations in our quarterly operating results;

(cid:127) changes in our financial guidance or securities  analysts’  estimates of  our financial performance;

(cid:127) changes in accounting principles;

(cid:127) our ability to raise additional capital and the terms  on which we can raise it;

(cid:127) sales of large blocks of our common stock, including sales by  our executive officers,  directors

and significant stockholders;

(cid:127) additions or departures of key personnel;

(cid:127) discussion of us or our stock price  by the press  and by online investor communities; and

(cid:127) other risks and uncertainties described in these risk factors.

As a result, you may not be able to sell your shares  of  common stock at or above  the price at

which  you purchase them.

We may  be at an increased risk of securities class action  litigation.

Historically, securities class action litigation has often been brought against a company following a
decline  in the market price of its securities.  This risk is  especially  relevant  for us  because biotechnology
and pharmaceutical companies have  experienced  significant stock price  volatility in recent years. If we
were to be sued, it could result in substantial costs  and a  diversion of management’s attention and
resources, which could harm our business.

If securities or industry analysts cease publishing  research  or reports or publish misleading,  inaccurate  or
unfavorable research about us, our business  or our market, our stock  price and  trading volume could decline.

The trading market for our common  stock is influenced by  the research and  reports that securities

or industry analysts publish about us, our business, our market or our  competitors.  We  only  recently
started receiving research coverage by  securities and industry analysts. If one  or more of the  industry
analysts who covers us downgrades our  stock  or publishes inaccurate  or  unfavorable research about our
business, or provides more favorable relative recommendations about our competitors, our stock price
would likely decline. If one or more  of  these analysts ceases  coverage of us or  fails to publish reports
on us regularly, demand for our stock  could decrease, which could  cause our stock price  or trading
volume to decline.

We are an ‘‘emerging growth company,’’  and as a  result of  the  reduced disclosure and governance
requirements applicable to emerging growth companies, our common stock may be  less attractive to investors.

We  are an ‘‘emerging growth company,’’ as  defined in the JOBS Act,  and we intend to take
advantage of certain exemptions from various reporting requirements that are  applicable to other

52

public companies that are not emerging growth companies including,  but not limited to, not being
required to comply with the auditor  attestation requirements of  Section 404, reduced disclosure
obligations regarding executive compensation  in our periodic reports and  proxy statements,  and
exemptions from the requirements of holding a  nonbinding advisory vote  on executive compensation
and stockholder approval of any golden  parachute payments not previously approved.  We  cannot
predict if investors will find our common stock less attractive because we will rely on these exemptions.
If some investors find our common stock  less attractive as a  result, there may be a less active trading
market for our common stock and our  stock  price may be more volatile. We may take advantage of
these reporting exemptions until we are  no longer an ‘‘emerging  growth company.’’  We will remain an
‘‘emerging growth company’’ until the  earlier of (1) the last day of the  fiscal  year  (a) following the fifth
anniversary of the completion of our  initial public offering, (b) in which we have  total annual gross
revenue of at least $1.0 billion, or (c) in  which  we are deemed to be a  large  accelerated filer, which
means the market value of our common stock  that is held by non-affiliates exceeds $700 million  as of
the prior June 30th, and (2) the date on  which  we have issued  more than $1.0 billion in non-convertible
debt during the prior three-year period.

Anti-takeover provisions in our charter documents  and under  Delaware law could make an acquisition of us,
even one that may be beneficial to our  stockholders, more difficult and  may  prevent attempts by our
stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and bylaws  may delay or prevent an acquisition of  us
or a change in our management. These provisions include a classified board of  directors, a  prohibition
on actions by written consent of our stockholders and the ability of our board of directors to issue
preferred stock without stockholder approval. In addition, because  we  are incorporated in Delaware, we
are governed by the provisions of Section  203 of the Delaware  General Corporation Law, which  limits
the ability of stockholders owning in excess of 15%  of our outstanding voting stock to merge  or
combine with us. Although we believe these provisions  collectively provide for an opportunity to obtain
greater value for stockholders by requiring potential acquirors to negotiate  with our board  of directors,
they would apply even if an offer rejected  by our board  were considered beneficial by some
stockholders. In addition, these provisions  may frustrate or  prevent any attempts by our stockholders to
replace or remove our current management by making it more difficult for stockholders to replace
members of our board of directors, which is  responsible for appointing the  members of our
management.

We do not intend to pay dividends on our  common stock  and, consequently, your ability  to achieve a return on
your investment will depend on appreciation  in  the price of  our common stock.

We  have never declared or paid any cash dividend on  our common stock and  do not currently
intend to do so in the foreseeable future.  We currently anticipate that  we will retain  future earnings for
the development, operation and expansion  of  our  business  and  do not anticipate declaring or paying
any cash dividends in the foreseeable future. Therefore,  the success of  an investment in  shares of our
common stock will depend upon any  future appreciation in  their value. There is no guarantee  that
shares of our common stock will appreciate in  value  or even maintain the price  at which  you purchased
them.

Future sales of our common stock may  cause  our stock price to decline.

Sales of a substantial number of shares  of our common stock in the  public  market or  the
perception that these sales might occur could significantly  reduce  the market price of  our common
stock and impair our ability to raise adequate capital through  the sale  of additional equity securities.

53

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters and clinical  development operations are located  in Plymouth,

Michigan where we lease and occupy approximately 2,083 square feet of office and 4,867 square feet  of
laboratory space. In August 2013, we  entered into the second amendment  to  the operating lease
agreement which extended the expiration date of the initial term  from October 2, 2013  to  April 30,
2014. On February 4, 2014, we entered into a  lease for 7,941 square  feet  of office space at  3891
Ranchero Drive, Suite 150, Ann Arbor,  Michigan 48108. We  anticipate moving into this  space in April
2014, at which point our principal office  space will be relocated there.  This  lease expires  63 months
after its commencement date. We believe our current and new facility will be sufficient to meet our
needs until expiration.

Item 3. Legal Proceedings

We  are not a party to any legal proceedings and we  are not aware of any claims or  actions pending

or threatened against us. In the future, we might from time to time become  involved in litigation
relating to claims arising from our ordinary  course of business.

Item 4. Mine Safety Disclosures

Not applicable

54

Item 5. Market for Registrant’s Common Equity,  Related  Stockholder Matters  and Issuer Purchases

PART II

of Equity Securities

Market Information

Our common stock began trading on  the NASDAQ Global Market  on June 26, 2013 under the

symbol ‘‘ESPR’’. Prior to that time, there was no  public  market for  our common  stock.  Shares  sold in
our  initial public offering which closed on  July  1, 2013  were  priced at  $14.00 per share.

On December 31, 2013, the closing price for our common stock as  reported on  the NASDAQ
Global Market was $13.74. The following table  sets forth the high and low sales prices per share of our
common stock as reported on the NASDAQ  Global Market  for  the period  indicated.

Year  Ended December 31, 2013

High

Low

Second Quarter (from June 26, 2013) . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17.40
$20.10
$19.30

$13.65
$13.55
$10.90

Stockholders

As of March 1, 2014, there were 20 stockholders of record, which excludes stockholders whose

shares were held in nominee or street name by brokers.

55

Performance Graph

The following graph illustrates a comparison of the  total  cumulative stockholder return for our

common stock since July 1, 2013, which  is the date our initial public offering, to two indices: the
NASDAQ Composite Index and the NASDAQ Biotechnology Index. The graph assumes  an initial
investment of $100 on July 1, 2013, in  our common stock, the  stocks comprising the  NASDAQ
Composite Index, and the stocks comprising the NASDAQ  Biotechnology  Index.  Historical  stockholder
return  is not necessarily indicative of the performance to be expected for  any future periods.

Comparison of 6 Month Cumulative  Total Return*
Among Esperion Therapeutics, Inc., the NASDAQ Composite Index and
the NASDAQ Biotechnology Index

160.00

140.00

120.00

100.00

80.00

60.00

40.00

20.00

0.00

7/1/2013

7/31/2013

8/31/2013

9/30/2013

10/31/2013

11/30/2013

12/31/2013

Esperion Therapeutics, Inc.

NASDAQ Composite - Total Returns 

NASDAQ Biotechnology Index

8MAR201418514412

*

$100 invested on July 1, 2013 in  stock  or index. Fiscal Year  ending December 31.

The performance graph shall not be  deemed to be incorporated by  reference by means  of  any
general statement incorporating by reference  this Form  10-K into any filing under the Securities Act of
1933, as amended or the Exchange Act, except to the extent that  we specifically incorporate  such
information by reference, and shall not  otherwise be deemed filed  under such  acts.

Dividend Policy

We  have never paid or declared any cash dividends on  our common  stock, and  we do not
anticipate paying any cash dividends on our common stock  in the foreseeable future.  We intend to
retain all available funds and any future earnings  to  fund  the development and expansion  of  our
business. Any future determination to pay dividends will be at the discretion of our board of directors
and will depend upon a number of factors, including our results of operations, financial condition,
future prospects, contractual restrictions, restrictions imposed by applicable law and  other  factors our
board of directors deems relevant.

Equity Compensation Plans

The information required by Item 5  of Form  10-K regarding  equity compensation plans  is

incorporated herein by reference to Item  11 of  Part  III of  this  Annual  Report.

56

Recent  Sales of Unregistered Securities

Set forth below is information regarding  securities sold by us during the  year ended December  31,

2013 that were not registered under  the Securities Act. Also included is  the consideration, if any,
received by us for the securities and information relating to the section of the Securities Act,  or rule of
the Securities and Exchange Commission, under which  exemption  from registration was claimed.

Issuances of securities

On April 19, 2013, in connection with a preferred stock  financing, we issued 17,000,000 shares of

our  Series A preferred stock to ten accredited  investors at a per share purchase price of $1.00 for
aggregate gross consideration of $17.0 million. Upon the completion of our initial public offering,  the
Series A preferred stock was converted into shares of common stock.

On April 28, 2008, we issued a convertible promissory  note to an  accredited investor  in the original

principal amount of $5.0 million. The convertible promissory note accrued  interest  at a rate of 8.931%
per  year and had a maturity date of April  28, 2018.  Accrued interest under the note  was  capitalized  on
June 30th and December 31st of each  year. On May 29, 2013, we  entered into a stock purchase
agreement pursuant to which we issued  6,750,000 shares  of  our Series A-1  preferred stock to the
noteholder at a price of $1.1560 per share, which purchase price was paid through the cancellation of
all outstanding indebtedness, including accrued interest,  under the convertible promissory note. Upon
the completion of our initial public offering, the  Series A-1  preferred stock was converted into shares
of common stock.

No underwriters were involved in the  foregoing sales of securities.  The  securities described  above

were issued and sold in reliance on the  exemptions from registration  provided by Section 4(2) of  the
Securities Act and/or Rule 506 of Regulation D  promulgated  under the  Securities  Act. Each of the
purchasers in these transactions represented to us in  connection with its purchase  that  it was acquiring
the securities for investment and not  for distribution and that it could bear the risks of the investment.
Each  purchaser received written disclosures that  the securities  had not been  registered under the
Securities Act and that any resale must  be made pursuant to a  registration  statement  or an available
exemption from registration. All of the  foregoing  securities are deemed restricted securities for  the
purposes  of the Securities Act.

Stock option and other equity awards

During  the year ended December 31,  2013,  we granted stock options to purchase an  aggregate of
1,251,749 shares of common stock with a  weighted exercise  price of $10.62 per share pursuant to our
2008 Stock Option and Incentive Plan  and our 2013 Stock  Option and Incentive Plan to our employees,
consultants and non-employee directors.

The issuances of such options were exempt either  pursuant  to  Rule 701  under the Securities Act,
as a transaction pursuant to a compensatory benefit plan,  or  pursuant to Section 4(2) of the Securities
Act, as a  transaction by an issuer not  involving  a public offering.

Issuer  Purchases of Equity Securities

We  did not purchase any of our registered equity  securities during the  period covered by this

Annual Report on Form 10-K.

Use of Proceeds from Registered Securities

On July 1, 2013, we closed the sale of 5,000,000  shares of  common  stock to the public, or the IPO,
at an initial public offering price of $14.00 per share.  On July 11, 2013, the underwriters exercised their
over-allotment option in full, pursuant to which  we sold an  additional 750,000  shares of common  stock

57

at a price of $14.00 per share. The offer and sale of the shares in the  IPO was registered  under the
Securities Act pursuant to registration  statements on Form S-1  (File No. 333-188595),  which was filed
with the SEC on May 14, 2013 and amended  subsequently and  declared effective on  June  25, 2013, and
Form S-1MEF (File No. 333-189590),  which was  filed with the SEC on June 25, 2013  and declared
effective on June 25, 2013. Following  the sale  of the shares  in connection with the  closing  of  our  IPO,
the offering terminated. The offering did not terminate before all the securities registered in  the
registration statements were sold. Credit  Suisse  Securities  (USA) LLC and Citigroup  Global
Markets Inc. acted as joint book-running managers  for the offering and as representatives  of the
underwriters. JMP Securities LLC and Stifel, Nicolaus & Company, Incorporated  acted  as co-managers
for the offering.

We  raised approximately $72.2 million in net  proceeds after deducting underwriting discounts and
commissions of approximately $5.6 million and other  offering expenses of approximately $2.7 million.
No offering expenses were paid directly  or indirectly  to  any of our  directors or officers  (or  their
associates) or persons owning ten percent  or  more  of any  class of our  equity securities or  to  any other
affiliates.

To date, we have not yet used the net proceeds from our IPO.  We invested  the funds received in

cash equivalents and other short-term and long-term  investments in accordance  with our investment
policy. As described in our final prospectus filed with the SEC on June 26,  2013 pursuant to
Rule 424(b) under the Securities Act, we  expect to use  the net proceeds from our IPO  to  fund  the
clinical development of ETC-1002 through the completion of our Phase 2b  clinical studies and  end of
Phase 2 meeting with the FDA, as well as for  working  capital  and general  corporate purposes, including
funding the costs of operating as a public company. We currently  expect to have our end  of  Phase 2
meeting  with the FDA in the first half  of  2015.

Purchases of Equity Securities by the  Issuer and Affiliated Purchasers

None.

58

Item 6. Selected Financial Data

The selected financial data set forth  below is derived from our  audited consolidated financial
statements and may not be indicative of  future operating results. The  following  selected  consolidated
financial data should be read in conjunction with Item 7,  ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ and the consolidated financial statements and the
notes thereto included elsewhere in this report. The  selected  financial data in this section are not
intended to replace our consolidated financial statements and the related notes. Our historical results
are not necessarily indicative of our future  results.

Three Months Ended
December 31,

Years Ended
December 31,

2013

2012

2011

2013

2012

2011

Period From
January 22, 2008
(Inception)
through
December 31,
2013

(in thousands, except share and per  share data)

— $ — $ — $

— $

— $

—

$

244

43,428
18,194

86

61,708

$(61,464)
(6,599)

Grant income . . . . . . . . . . . . . . . . . . . $
Operating expenses:

Research and development . . . . . . . . .
General  and administrative . . . . . . . .
Acquired in-process research and

development . . . . . . . . . . . . . . . . .

7,339
2,397

1,654
506

1,898
788

16,014
6,745

7,998
2,206

7,807
2,357

—

—

—

—

—

—

Total operating expenses . . . . . . . . .

9,736

2,160

2,686

22,759

10,204

10,164

Loss from  operations . . . . . . . . . . . . . . $
Total other income  (expense) . . . . . . . . .

(9,736) $ (2,160) $ (2,686) $ (22,759) $(10,204) $(10,164)
(653)

(3,329)

(1,538)

(158)

(615)

47

Net loss . . . . . . . . . . . . . . . . . . . . . . . $

(9,689) $ (2,775) $ (2,844) $ (26,088) $(11,742) $(10,817)

$(68,063)

Net loss  per  common share  (basic and

diluted) . . . . . . . . . . . . . . . . . . . . . $

(0.63) $ (8.12) $ (9.30) $

(3.31) $ (36.31) $ (36.22)

Weighted average shares outstanding

(basic  and diluted) . . . . . . . . . . . . . . 15,340,713 341,935 305,658 7,885,921

323,382

298,689

The table below presents a summary  of our balance sheet data  as of December 31, 2013  and 2012:

Balance Sheet Data:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total convertible short-term debt
. . . . . . . . . . . . . . . . . . . . . .
Total convertible long-term debt . . . . . . . . . . . . . . . . . . . . . . .
Convertible preferred stock warrant liability . . . . . . . . . . . . . .
Convertible preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deficit accumulated during the development stage . . . . . . . . . .
Total stockholders’ equity (deficit) . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2013

2012

(in thousands)

$ 56,537
56,417
21,063
78,294
—
—
—
—
15
(68,063)
74,091

$ 6,512
(10,035)
—
7,312
15,241
7,529
265
23,975
—
(41,975)
(41,365)

59

Item 7. Management’s Discussion and  Analysis  of Financial  Condition and  Results  of Operation

You should read the following discussion and analysis of our financial condition and results of

operations together with our consolidated  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

Corporate Overview

We  are a clinical stage biopharmaceutical company focused on developing and commercializing
first-in-class, oral, low-density lipoprotein  cholesterol (LDL-C)  lowering therapies for the treatment  of
patients with hypercholesterolemia and  other cardiometabolic risk markers.  ETC-1002, our lead product
candidate, is a unique, first in class, orally  available,  once-daily small molecule designed to lower
LDL-C levels and avoid the side effects associated with  LDL-C lowering therapies currently available.
ETC-1002 is being developed primarily  for  patients intolerant of statins with elevated levels of LDL-C.
Phase 2b clinical trials for ETC-1002  are  currently underway  and build upon a successful  and
comprehensive Phase 1 and Phase 2  program. We  own the exclusive worldwide  rights to ETC-1002 and
our  other product candidates.

We  were incorporated in Delaware in January 2008 and commenced our operations in April 2008.

Since our inception, we have devoted  substantially all of  our resources to  developing  ETC-1002  and our
other product candidates, business planning, raising  capital  and providing general and administrative
support for these operations. We have funded our operations primarily through the  issuance  of
preferred stock, our initial public offering of common stock, which  we closed in  July 2013, convertible
promissory notes and warrants to purchase shares  of  preferred stock.

On July 1, 2013, we completed the initial public offering, or IPO, of our  common stock pursuant

to a registration statement on Form S-1.  In the IPO, we  sold  an aggregate of 5,000,000 shares of
common stock under the registration  statement at a public offering price of $14.00 per share. Net
proceeds from the IPO were approximately $62.7 million, after  deducting underwriting discounts and
commissions and offering expenses. Upon the  closing  of the IPO,  all outstanding shares of our
preferred stock were converted into 9,210,999  shares of common  stock.  Additionally, as part of the
IPO, we granted the underwriters a 30-day  option to purchase up to 750,000 additional  shares of
common stock at the IPO price to cover over-allotments,  if  any. On July  11, 2013, the  underwriters
exercised this option in full. As a result  of this exercise, we received an additional  $9.5 million in
proceeds, net of underwriting discounts and commissions and offering  expenses.

We  are a development stage company and do not have any products approved for  sale. To date, we

have not generated any revenue. We  have  never been profitable and, from  inception to December  31,
2013, our losses from operations have been $61.5 million.  Our net  losses  were  $26.1 million,
$11.7 million and $10.8 million for the  years ended December 31, 2013,  2012 and 2011, respectively.
Substantially all of our net losses resulted from costs incurred in connection  with research and
development programs, general and administrative costs  associated  with our operations. We expect to
incur significant expenses and increasing operating losses for the foreseeable  future. We expect  our
expenses to increase in connection with our ongoing activities,  including,  among  others:

(cid:127) conducting additional clinical studies of  ETC-1002  to  complete its development;

(cid:127) seeking regulatory approval for ETC-1002;

60

(cid:127) commercializing ETC-1002; and

(cid:127) operating as a public company.

Accordingly, we will need additional financing to support our  continuing operations. We will seek

to fund our operations through public  or  private equity or debt financings  or through other sources,
which  may include collaborations with  third parties. 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 Overview

ETC-1002, our lead product candidate, is a novel,  first in class,  orally available, once-daily LDL-C

lowering small molecule therapy designed  to  target  known lipid and  carbohydrate metabolic pathways
to lower levels of LDL-C and to avoid  side effects associated with existing LDL-C  lowering therapies.
We  acquired the rights to ETC-1002  from Pfizer in 2008. We  own the  exclusive  worldwide  rights to
ETC-1002 and we are not obligated to make any royalty or  milestone payments to Pfizer.

In 2011, we incurred $4.6 million in expenses  related to our Phase 1b multiple dose  tolerance

clinical trial (ETC-1002-004), our Phase 2a proof-of-concept clinical study in patients with
hypercholesterolemia (ETC-1002-003) which reported top-line results in March 2012,  and our Phase 2a
proof-of-concept clinical study in patients  with hypercholesterolemia and Type 2  diabetes
(ETC-1002-005) which reported top-line results  in January  2013.

In 2012, we incurred $5.8 million in expenses  related to our Phase 2a proof-of-concept clinical
study in patients with hypercholesterolemia and Type 2 diabetes (ETC-1002-005) and our Phase  2a
proof-of-concept clinical study in patients  with hypercholesterolemia and a history  of  statin intolerance
(ETC-1002-006) which reported top-line results  in June 2013, and our phase 2a  clinical study in
patients with hypercholesterolemia taking 10 mg of atorvastatin (ETC-1002-007) which  reported
top-line  results in September 2013.

During  the year ended December 31,  2013,  we incurred $13.7  million in  expenses related to our

Phase 2a proof-of-concept clinical study in patients with hypercholesterolemia and Type 2  diabetes
(ETC-1002-005), our Phase 2a proof-of-concept clinical  study in patients with hypercholesterolemia and
a history of statin intolerance (ETC-1002-006),  our Phase 2a  clinical study  in patients with
hypercholesterolemia taking 10 mg of  atorvastatin (ETC-1002-007) and our Phase  2b clinical study in
patients with hypercholesterolemia and  either with or  without statin intolerance (ETC-1002-008).

We  also have two other early-stage programs in  pre-clinical development. We licensed one of these

candidates from The Cleveland Clinic  Foundation, or  CCF, and are obligated to make certain royalty
and milestone payments (consisting of  cash and common stock) to CCF, including a  minimum annual
cash payment of $50,000 during years  when a  milestone payment  is not met. No  milestone or royalty
payments will be due to any third-party in connection with the development and commercialization  of
our  other pre-clinical product candidate, ESP41091.

Financial Operations Overview

Revenue

To date, we have not generated any revenue,  other  than  grant income.  In the future,  we may  never

generate revenue from the sale of ETC-1002  or our other product  candidates. If  we fail to complete
the development of ETC-1002 or our  other  product candidates and secure  approval from regulatory

61

authorities, our ability to generate future  revenue, and our results of operations  and financial position
will be adversely affected.

Research and Development Expenses

Since our inception, we have focused  our resources on  our research and development activities,
including conducting preclinical and clinical studies.  Our research  and  development  expenses consist
primarily of costs incurred in connection  with  the development of  ETC-1002, which include:

(cid:127) expenses incurred under agreements with consultants,  contract  research  organizations, or CROs,

and investigative sites that conduct our pre-clinical and clinical  studies;

(cid:127) the cost of acquiring, developing and manufacturing clinical study materials;

(cid:127) employee-related expenses, including salaries, benefits, stock-based compensation and travel

expenses;

(cid:127) allocated expenses for rent and maintenance of  facilities,  insurance and other supplies; and

(cid:127) costs related to compliance with regulatory  requirements.

We  expense research and development  costs as  incurred. To date, substantially  all  of  our  research
and development work has been related  to ETC-1002. 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.

Our research and development expenses are  expected to increase in the foreseeable future.  Costs

associated with ETC-1002 will increase  as we continue to conduct our Phase  2b clinical studies  and
initiate our Phase 3 clinical studies. We cannot  determine  with certainty the  duration and completion
costs associated with the ongoing or  future  clinical studies of ETC-1002. Also,  we cannot  conclude with
certainty if, or when, we will generate revenue from the  commercialization and sale  of  ETC-1002  or
our  other product candidates for which we obtain regulatory approval, if ever. We may  never succeed
in obtaining regulatory approval for any of our product  candidates, including ETC-1002.  The duration,
costs and timing associated with the development and commercialization of ETC-1002 and our  other
product  candidates will depend on a  variety of factors, including  uncertainties  associated with the
results of our clinical studies and our ability  to  obtain  regulatory approval. For example, if the FDA or
another 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 ETC-1002, or if  we experience significant delays  in enrollment
in any of our clinical studies, we could be required to expend significant  additional financial resources
and time on the completion of clinical development or  post-commercialization clinical  studies of
ETC-1002.

General and Administrative Expenses

General and administrative expenses  primarily consist of salaries  and  related costs  for personnel,

including stock-based compensation and travel expenses, associated  with our executive,  accounting and
finance, operational and other administrative  functions. Other  general and administrative expenses
include facility related costs, communication  expenses and professional fees for legal, patent
prosecution, protection and review, consulting  and accounting  services.

62

We  anticipate that our general and administrative  expenses will increase in the future in

connection with the continued research and development and commercialization  of  ETC-1002,
increases in our headcount, expansion  of our information technology infrastructure, increased legal,
compliance, accounting and investor  and  public relations expenses associated with being a  public
company.

Interest Expense

Interest expense consists primarily of non-cash interest costs associated with our convertible

promissory notes.

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, or U.S. GAAP. 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 accrued  expenses and stock-
based compensation. We base 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.

Accrued Clinical Development Costs

As  part  of  the  process  of  preparing  our  financial  statements,  we  are  required  to  estimate  our

accrued expenses. We base our accrued expenses related to clinical trials on estimates of patient
enrollment and related expenses at clinical investigator sites  as well as  estimates  for the  services
received and efforts expended pursuant  to contracts with  multiple research institutions and  CROs  that
conduct and manage clinical trials on  our behalf.  We  generally  accrue expenses related to clinical trials
based on contracted amounts applied  to  the level  of  patient  enrollment  and activity  according to the
protocol. If timelines or contracts are modified based upon changes in  the clinical  trial protocol  or
scope  of  work  to  be  performed,  we  modify  our  estimates  of  accrued  expenses  accordingly  on  a
prospective basis. If we do not identify costs that  we have  begun to incur or  if we underestimate or
overestimate the level of services performed or  the costs of these services,  our  actual expenses  could
differ  from  our  estimates.  We  do  not  anticipate  the  future  settlement  of  existing  accruals  to  differ
materially from our estimates.

Stock-Based Compensation

We  typically grant stock-based compensation to new employees in connection with their
commencement of employment and to  existing  employees in connection with annual performance
reviews. We account for all stock-based  compensation  payments issued to employees, consultants and
directors using an option pricing model for estimating fair value.  Accordingly,  stock-based
compensation expense is measured based  on the  estimated  fair value of the  awards  on the  date of
grant, net of estimated forfeitures. Compensation expense is recognized for  the portion that is
ultimately expected to vest over the period during  which the recipient  renders the required services to

63

us using the straight-line method. In accordance  with authoritative  guidance,  the fair value of
non-employee stock-based awards is  re-measured as the  awards vest, and  the resulting value, if any,  is
recognized as expense during the period the  related services are rendered.

Significant Factors,  Assumptions and Methodologies Used  in Determining  Fair  Value

We  estimate  the  fair  value  of  our  stock-based  awards  to  employees  and  directors  using  the  Black-

Scholes  option  pricing  model.  The  Black-Scholes  model  requires  the  input  of  subjective  assumptions,
including (a) the per share fair value of  our common stock, (b) the expected  stock  price volatility,
(c) the calculation of the expected term of the award, (d) the risk free interest rate and  (e) expected
dividends. Due to our limited operating history and a lack of company  specific  historical and implied
volatility data, we have based our estimate  of expected  volatility  on the historical volatility of a  group of
similar  companies,  which  are  publicly-traded.  When  selecting  these  public  companies  on  which  we  have
based our expected stock price volatility,  we selected companies with comparable  characteristics  to  us,
including  enterprise  value,  risk  profiles,  position  within  the  industry,  and  with  historical  share  price
information  sufficient  to  meet  the  expected  life  of  our  stock-based  awards.  The  historical  volatility  data
was computed using the daily closing  prices  for the  selected  companies’ shares  during the equivalent
period of the calculated expected term of  our  stock-based awards.  We  will continue to apply this
process  until  a  sufficient  amount  of  historical  information  regarding  the  volatility  of  our  own  stock
price becomes available. We have estimated  the expected  life of our employee stock  options using  the
‘‘simplified’’ method, whereby, the expected life  equals the arithmetic average of  the vesting  term and
the original contractual term of the option. The risk-free  interest  rates for periods within the expected
life of the option are based on the U.S. Treasury yield curve in  effect during the period the options
were granted. We have never paid, and  do not expect  to  pay  dividends  in the foreseeable future.

We  are  also  required  to  estimate  forfeitures  at  the  time  of  grant,  and  revise  those  estimates  in
subsequent periods if actual forfeitures  differ from  our estimates. We use historical  data  to  estimate
pre-vesting option  forfeitures and record stock-based compensation expense  only  for those awards that
are expected to vest. To the extent that actual forfeitures  differ  from our estimates,  the difference is
recorded  as  a  cumulative  adjustment  in  the  period  the  estimates  were  revised.

Fair Value Estimate

We  are  required  to  estimate  the  fair  value  of  the  common  stock  underlying  our  stock-based  awards
when performing the fair value calculations with  the Black-Scholes option-pricing model. All options to
purchase shares of our common stock are intended to be granted  with an exercise price per share no
less  than  the  fair  value  per  share  of  our  common  stock  underlying  those  options  on  the  date  of  grant,
based on the information known to us on the date of grant.

Prior to our initial public, on each grant date, we developed an estimate of  the fair value of our

common stock in order to determine an  exercise price for the option grants  based in part on input
from an independent third-party valuation as  there was no active public  market  for our common  stock.
Our  determinations  of  the  fair  value  of  our  common  stock  was  done  using  methodologies,  approaches
and  assumptions  consistent  with  the  American  Institute  of  Certified  Public  Accountants,  or  AICPA,
Audit and Accounting Practice Aid Series: Valuation  of  Privately-Held-Company  Equity  Securities  Issued
as  Compensation, or the AICPA Practice Guide. Our board of directors considered various objective
and  subjective factors, along with input from management and the independent third-party valuation, to
determine the fair value of our common  stock, including: external market conditions  affecting the
biopharmaceutical  industry,  trends  within  the  biopharmaceutical  industry,  the  prices  at  which  we  sold
shares of preferred stock, the superior rights and  preferences of  the preferred stock relative to our
common stock at the time of each grant,  the results of  operations, financial  position, status of our
research  and  development  efforts,  our  stage  of  development  and  business  strategy,  the  lack  of  an  active
public market for our common and our preferred  stock, and the likelihood of achieving a liquidity

64

event such as an IPO. Since our initial public offering, the fair value of our  common stock is  estimated
to be the closing price of our common  stock on the  NASDAQ Global Market on the  applicable  date.

Warrant Liability

Our previously outstanding warrants  to purchase shares of preferred  stock had  provisions by which

the underlying issuance is contingently  redeemable based on events  outside of our control and were
recorded  as a liability in accordance with  ASC 480-10. Warrants  classified as liabilities  are recorded on
our  balance sheet at fair value on the  date of issuance and are marked-to-market on each subsequent
reporting period. Non-cash changes in the  fair value at  each reporting period are recognized in the
statement of operations. Upon the closing  of our IPO on  July 1, 2013, all warrants  exercisable  for
shares of preferred stock became exercisable for shares  of common stock and, as a  result, the warrants
no longer met the criteria to be classified as  liabilities and  were reclassified  to  additional paid-in capital
at fair value.

Results of Operations

Comparison of the Years Ended December 31, 2013 and 2012

The following table summarizes our results of operations for the years ended December  31, 2013

and 2012:

Operating Expenses:
Research and development . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . .

Loss from operations . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of warrant liability . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Other income (expense), net

Year Ended
December 31,

2013

2012

Change

(in thousands)

$ 16,014
6,745

$ 7,998
2,206

$ 8,016
4,539

(22,759)

(10,204)

(12,555)

(936)
(2,587)
194

(1,486)
32
(84)

550
(2,619)
278

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(26,088) $(11,742) $(14,346)

Research and development expenses

Research and development expenses for the year ended December 31, 2013 were $16.0 million,

compared to $8.0 million for the year  ended December 31, 2012,  an  increase of $8.0  million. The
increase in research and development expenses  is primarily related to the further clinical development
of ETC-1002 in our Phase 2 clinical program, which includes  the completion  of two  Phase 2a clinical
studies and the initiation of our Phase  2b  clinical study  in patients with or without statin intolerance.

General and administrative expenses

General and administrative expenses  for the year ended December 31, 2013  were $6.7  million,

compared to $2.2 million for the year  ended December 31, 2012,  an  increase of $4.5  million. The
increase in general and administrative expenses was primarily attributable to costs to support public
company operations, increases in our headcount, which includes  increased stock-based compensation
expense, and other costs to support our  growing  organization.

65

Interest expense

Non-cash interest expense for the year ended December 31, 2013 was $0.9  million, compared to
$1.5 million for the year ended December 31, 2012,  a decrease of $0.6 million. The decrease in  interest
expense was primarily related to the  conversion of our convertible promissory  notes issued  in January,
September and November 2012, into  an  aggregate of  16,623,092 shares of Series A preferred stock in
February 2013 as well as the a decrease  in accrued  interest  on the  8.931% convertible promissory note
issued to Pfizer, which was subsequently  converted into  6,750,000 shares of Series  A-1 preferred stock
on May  29, 2013.

Change in fair value of warrant liability

The outstanding warrants to purchase 277,690  shares of our common stock  required liability
classification and mark-to-market accounting  at each  reporting period in accordance with  ASC 480-10
prior to the completion of our IPO.  The fair values of the warrants  were determined  using the Monte
Carlo or the Black Scholes valuation  models and resulted in the recognition of a  loss of  approximately
$2.6 million related to the change in  fair  values for the year ended December 31, 2013. Subsequent  to
our  IPO, the warrants were reclassified  to  equity  as they no  longer met the criteria for  classification as
liabilities.

Other  income (expense), net

Other income (expense), net for the  year ended December 31,  2013 was income of approximately

$194,000 compared to expense of approximately $84,000 for the  year ended December  31, 2012, a
$278,000 increase in income. This increase was primarily related to gains  on the sale of assets  and an
increase in interest income earned on  our  cash and cash equivalents.

Comparison of the Years Ended December 31, 2012 and 2011

The following table summarizes our results of operations for the years ended December  31, 2012

and 2011:

Operating Expenses:
Research and development
. . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . .

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of warrant liability . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . .

Year Ended
December 31,

2012

2011

Change

(in thousands)

$ 7,998
2,206

$ 7,807
2,357

$ 191
(151)

(10,204)

(10,164)

(40)

(1,486)
32
(84)

(577)

(76)

(909)
32
(8)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(11,742) $(10,817) $(925)

Research and development expenses

Research and development expenses for the  year  ended December 31, 2012 were $8.0 million,
compared to $7.8 million for the year  ended December 31, 2011,  an  increase of $0.2  million primarily
related to the further clinical development of ETC-1002,  including the  initiation of two  Phase 2a
clinical trials, which includes the initiation and completion of our Phase 2a Glucose Proof-of-Concept
clinical trial and the initiation of our Phase 2a Lipid Proof-of-Concept clinical trial.

66

General and administrative expenses

General and administrative expenses  for the  year ended December 31, 2012  were $2.2  million,

compared to $2.4 million for the year  ended December 31, 2011,  a  decrease of $0.2  million. The
decrease in general and administrative  expenses was  primarily  attributable  to  a decreases in
professional consulting services provided  to  us.

Interest expense

Non-cash interest expense for the year ended December 31, 2012 was $1.5  million, compared to
$0.6 million for the year ended December 31, 2011,  a $0.9 million increase in interest expense.  This
increase in interest expense was primarily  related  to  our issuance  of convertible promissory notes in
January, September and November 2012,  which  each bear  interest at a rate of 10%, as well  as the
accrued interest on the 8.931% convertible promissory  note issued to Pfizer,  which had an outstanding
balance of $7,528,845 as of December  31, 2012.

Change in fair value of warrant liability

The outstanding warrants to purchase 1,940,000  shares of our Series A preferred  stock  require

liability classification and mark-to-market accounting  at each  reporting period  in accordance with
ASC 480-10. The fair values of the warrants  were determined using  the Monte Carlo simulation
valuation model and resulted in the recognition of a  gain of $32,000 related to the  change in fair  values
for the year ended December 31, 2012.

Other  income (expense), net

Other expense, net for the year ended December 31, 2012  was  approximately $84,000 compared to
$76,000 for the year ended December 31,  2011, an $8,000  decrease. This  decrease was primarily related
to a reduction in interest income earned  on our money market funds.

Liquidity and Capital Resources

We  have funded our operations since inception through the  sale of common stock in our IPO,
private  placements of preferred stock,  convertible  promissory  notes and warrants to purchase shares of
preferred stock. To date, we have not generated  any  revenue, and we anticipate that we will  continue to
incur losses for the foreseeable future.

In July 2013, we completed our IPO pursuant  to  a registration statement on Form S-1. In the IPO,

we issued and sold an aggregate of 5,750,000 shares of common stock, including the underwriters’
exercise in full of their over-allotment option, under  the registration statement at a public offering  price
of $14.00 per share. Net proceeds were approximately $72.2 million,  after deducting underwriting
discounts and commissions and offering expenses.

As of December 31, 2013, our primary sources  of liquidity were  our cash  and cash equivalents and
available-for-sale investments, which totaled $56.5 million and $21.1  million, respectively. We  invest  our
cash equivalents and investments in highly liquid, interest-bearing  investment-grade and government
securities to preserve principal.

67

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

below:

Cash (used in) operating activities . . . . . . . . . . . . . . . . . . . . .
Cash provided by (used in) investing activities . . . . . . . . . . . . .
Cash provided by financing activities . . . . . . . . . . . . . . . . . . . .

Year Ended
December 31,

2013

2012

(in thousands)
$(18,113) $(10,809)
(2)
(21,002)
15,751
89,141

Net increase (decrease) in cash and cash equivalents . . . . . . . .

$ 50,026

$ 4,940

Operating Activities

We  have incurred,  and expect to continue to incur, significant costs in  the areas of research and

development, regulatory and other clinical study  costs, associated with our development of ETC-1002.

Net cash used in operating activities  totaled $18.1 million  and $10.9  million  for the  year  ended

December 31, 2013 and 2012, respectively. The primary use of our cash  was  to  fund  the development
of ETC-1002, adjusted for non-cash expenses,  such as  depreciation and amortization, interest expense,
stock-based compensation expense, mark-to-market of our warrants previously classified as  liabilities,
and changes in working capital.

Investing Activities

Net cash used in investing activities of $21.0 million for the year ended  December 31,  2013
consisted primarily of our purchase of highly liquid, interest bearing investment-grade and government
securities. Net cash used in investing  activities of  approximately $1,700  in the year ended  December 31,
2012 consisted primarily of property and equipment purchases,  partially off-set by our sale of certain
assets.

Financing Activities

Net cash provided by financing activities of  $89.1 million  for  the year ended December 31, 2013
related primarily to the net proceeds of  our  IPO in  July 2013 and  the  issuance  and sale of 17,000,000
shares of our Series A preferred stock  at  a price of $1.00 per share  in April 2013. Net cash provided  by
financing activities of $15.8 million for the year ended December 31, 2012 consisted  primarily  of  the
issuance of convertible promissory notes.

Plan of Operations and Funding Requirements

ETC-1002 is currently in Phase 2b clinical development,  and we expect  to continue to incur

significant expenses and increasing operating losses  for the  foreseeable  future. We expect that our
existing cash and cash equivalents and  available-for-sale  investments  will enable us to fund our
operating expenses and capital expenditure requirements through  at least the  end of 2015  and that we
will likely need to raise additional capital thereafter to continue  to  fund the further  development of
ETC-1002 and our operations. We expect  to announce top-line results from our Phase 2b
ETC-1002-008 clinical study and our  Phase  2b ETC-1002-009  clinical study by the end of 2014 and to
have an end-of-Phase 2 meeting with the  FDA in the first half of 2015.  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. Because of  the numerous risks  and uncertainties associated with the
development and commercialization of ETC-1002, and the extent  to  which we may enter into
collaborations with pharmaceutical partners regarding the development  and commercialization of

68

ETC-1002, we are unable to estimate the amounts of increased capital  outlays and operating  expenses
associated with completing the development and commercialization of ETC-1002. Our future funding
requirements will depend on many factors,  including, but not limited to:

(cid:127) our ability to successfully develop and commercialize ETC-1002  and  our other product

candidates;

(cid:127) the costs, timing and outcomes of our ongoing and  planned  clinical studies of ETC-1002;

(cid:127) the time and cost necessary to obtain regulatory approvals  for ETC-1002, if at  all;

(cid:127) our ability to establish a sales, marketing and distribution infrastructure to commercialize

ETC-1002 in the United States and abroad or  our ability  to establish any future  collaboration  or
commercialization arrangements on favorable terms,  if at all;

(cid:127) the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing  our

intellectual property rights and defending  intellectual property-related claims; and

(cid:127) the implementation of operational and financial information technology.

Until such time, if ever, as we can generate  substantial product revenues, we expect to finance our
cash needs through a combination of equity  offerings,  debt  financings, collaborations, strategic alliances
and licensing arrangements. We do not  have any  committed external source  of  funds. 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, 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, we may have  to  relinquish valuable rights to our technologies,  future revenue
streams or ETC-1002 or grant licenses  on terms that may not be favorable to us. If we are unable to
raise additional funds through equity  or debt  financings or through collaborations, strategic  alliances  or
licensing 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
ETC-1002 that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

We  lease office and laboratory space  in  Plymouth,  MI under an  operating lease  agreement that

was originally scheduled to expire on October  2, 2013. In August 26, 2013, we  entered into an
amendment to the lease to extend the expiration  date of  the initial  term from October  2, 2013 to
April 30, 2014.

The following table summarizes our future minimum  lease obligations as  of  December 31, 2013:

Total

Less than
1 Year

1 - 3 Years

3 - 5  Years

(in thousands)

More than
5 Years

Operating lease . . . . . . . . . . . . .

$101

Total

. . . . . . . . . . . . . . . . . . . . .

$101

$101

$101

$—

$—

$—

$—

$—

$—

On February 4, 2014 we entered into  a lease for facilities  in Ann Arbor, MI, scheduled to expire

63 months after its commencement. We  anticipate moving  into this  space in April 2014, at which point
our  principal office space will be relocated there. The lease provides for a fixed monthly rent of
approximately $7,941 per month, with monthly rent  increasing  every 12 months  subsequent to the first

69

3 months of the lease, and also provides  for certain rent adjustments  to  be paid  as determined by the
landlord.

We  also hold a license agreement in which we are obligated to make future  minimum annual
payments of $50,000 in years where there  is not a  milestone payment required under the terms  of  the
agreement (see Note 15 to our audited  financial statements).  Further,  we  are is contractually obligated
to issue up to an aggregate of 11,451  shares of common stock upon meeting various future milestones
set forth in the agreement.

There have been no material changes to our  contractual obligations and commitments outside  the

ordinary course of business from those disclosed above.

Off-Balance Sheet Arrangements

We  do not currently have, nor did we have during the  periods presented, any off-balance sheet

arrangements as defined by Securities  and Exchange Commission rules.

70

Item 7A. Quantitative and Qualitative  Disclosures about Market  Risk

We  had cash and cash equivalents and available-for-sale investments of  approximately  $56.5 million

and $21.1 million at December 31, 2013. The primary objectives of our investment activities are to
preserve principal, provide liquidity and maximize  income without significantly increasing risk. Our
primary exposure to market risk relates to fluctuations  in interest rates which  are affected by changes
in the general level of U.S. interest rates.  Given the short-term  nature of  our cash equivalents, we
believe that a sudden change in market  interest rates would not be expected  to  have a material impact
on our financial condition and/or results  of  operation.  We do not have  any  foreign currency or other
derivative financial instruments.

We  do not believe that our cash, cash equivalents and  available-for-sale investments  have

significant risk of default or illiquidity. While we believe our  cash and cash equivalents  do  not  contain
excessive risk, we cannot provide absolute assurance  that in the future our investments will not be
subject to adverse changes in market  value. In  addition, we maintain significant amounts of cash and
cash equivalents at one or more financial  institutions that  are in excess of  federally  insured limits.

Inflation generally affects us by increasing our cost of labor and clinical  study costs. We  do  not

believe that inflation has had a material  effect on our results of operations  during  the year ended
December 31, 2013.

71

Item 8. Financial Statements and Supplementary Data

The financial statements required to  be  filed pursuant  to  this  Item  8 are appended  to  this  report.

An index of those financial statements is  found in Item 15.

Item 9. Changes in and Disagreements with Accountants  on Accounting  and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and  Procedures

We  maintain disclosure controls and procedures that  are designed  to  ensure that information
required to be disclosed in the reports that we  file or submit under the Securities and Exchange Act of
1934 is (1) recorded, processed, summarized, and reported  within the time periods specified in  the
SEC’s rules and forms and (2) accumulated and communicated  to  our management, including  our
President and Chief Executive Officer, who is our principal executive  officer and principal financial
officer, to allow timely decisions regarding required  disclosure.

As of December 31, 2013, our management, with the participation of our  principal  executive

officer and principal financial officer,  evaluated the  effectiveness  of our  disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e)  under the Securities and Exchange Act of
1934). Our management recognizes that any controls and procedures, no matter how well designed  and
operated, can provide only reasonable assurance of achieving their  objectives, and  management
necessarily applies its judgment in evaluating the  cost-benefit  relationship  of  possible  controls and
procedures. Our principal executive officer and principal  financial officer has concluded based upon the
evaluation described above that, as of December  31, 2013, our  disclosure  controls and  procedures  were
effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

This Annual Report on Form 10-K does not  include a report of  management’s assessment
regarding internal control over financial  reporting or an  attestation report  of  our  independent
registered public accounting firm due to a  transition period established  by rules of  the Securities and
Exchange Commission for newly public  companies.

Changes  in Internal Control over Financial Reporting

There were no changes to our internal control over financial  reporting  that  occurred during the
period covered by this report that have materially affected,  or are reasonably  likely to materially affect,
our  internal control over financial reporting.

Item 9B. Other Information

None.

72

Item 10. Directors, Executive Officers and  Corporate Governance

PART III

The information required by this Item  is incorporated herein  by reference to the information that

will be contained in our proxy statement  related to the  2014 Annual  Meeting  of Stockholders, which  we
intend to file with the Securities and Exchange Commission within 120 days  of  the end of our fiscal
year pursuant to General Instruction  G(3) of Form 10-K.

Item 11. Executive Compensation

The information required by this Item  is incorporated herein  by reference to the information that

will be contained in our proxy statement  related to the  2014 Annual  Meeting  of Stockholders, which  we
intend to file with the Securities and Exchange Commission within 120 days  of  the end of our fiscal
year pursuant to General Instruction  G(3) of Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners  and  Management and Related Stockholder

Matters

The information required by this Item  is incorporated herein  by reference to the information that

will be contained in our proxy statement  related to the  2014 Annual  Meeting  of Stockholders, which  we
intend to file with the Securities and Exchange Commission within 120 days  of  the end of our fiscal
year pursuant to General Instruction  G(3) of Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director  Independence

The information required by this Item  is incorporated herein  by reference to the information that

will be contained in our proxy statement  related to the  2014 Annual  Meeting  of Stockholders, which  we
intend to file with the Securities and Exchange Commission within 120 days  of  the end of our fiscal
year pursuant to General Instruction  G(3) of Form 10-K.

Item 14. Principal Accounting Fees and  Services

The information required by this Item  is incorporated herein  by reference to the information that

will be contained in our proxy statement  related to the  2014 Annual  Meeting  of Stockholders, which  we
intend to file with the Securities and Exchange Commission within 120 days  of  the end of our fiscal
year pursuant to General Instruction  G(3) of Form 10-K.

Item 15. Exhibits, Financial Statement  Schedules

(a) The following documents are filed as  part of this report:

(1) Financial Statements:

Report of Independent Registered Public Accounting  Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations  and  Comprehensive  Loss . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes  in  Stockholders’ Equity (Deficit) . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

(2) Financial Statement Schedules:

All financial statement schedules have been  omitted because they are not applicable, not
required or the information required is shown  in the financial statements  or the notes  thereto.

(3) Exhibits. The exhibits filed as part of this Annual Report on Form 10-K are set  forth  on the

Exhibit Index immediately following our consolidated financial statements. The Exhibit Index is
incorporated herein by reference.

73

Pursuant to the requirements of the Section  13 or 15(d) of the Securities Exchange  Act of 1934,
the Registrant has  duly caused this Form  10-K to be signed on  its behalf by the undersigned, thereunto
duly authorized.

SIGNATURES

ESPERION THERAPEUTICS, INC.

Date: March 13, 2014

By:

/s/ TIM M.  MAYLEBEN

Tim M. Mayleben
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on
Form 10-K has been signed by the following persons  in the capacities  indicated below and  on the  dates
indicated:

Signature

Title

Date

/s/ TIM M. MAYLEBEN

Tim M. Mayleben

President, Chief Executive Officer and
Director (Principal Executive Officer and March 13, 2014
Principal Financial Officer)

/s/ RICHARD B. BARTRAM

Richard B. Bartram

Controller (Principal Accounting Officer) March 13,  2014

/s/ ROGER S. NEWTON, PH.D., FAHA

Roger S. Newton, Ph.D., FAHA

Executive Chairman, Chief Scientific
Officer and Director

March 13, 2014

/s/ PATRICK ENRIGHT

Patrick Enright

/s/ DOV A. GOLDSTEIN, M.D.

Dov A. Goldstein, M.D.

Director

Director

/s/ ANTONIO M. GOTTO, M.D., D. PHIL

Antonio M. Gotto, M.D., D. Phil

Director

74

March 13,  2014

March 13,  2014

March 13,  2014

Signature

Title

Date

/s/ DANIEL JANNEY

Daniel Janney

Director

March 13,  2014

/s/ LOUIS G. LANGE, M.D., PH.D.

Louis G. Lange, M.D., Ph.D.

Director

/s/ MARK E. MCGOVERN, M.D.

Mark E. McGovern, M.D.

/s/ NICOLE VITULLO

Nicole Vitullo

Director

Director

March 13,  2014

March 13,  2014

March 13,  2014

75

Esperion Therapeutics, Inc.
(A Development Stage Company)

Index to the Financial Statements

Years Ended December 31, 2013 and  2012, and Period From
January 22, 2008 (Inception) to December 31, 2013

Contents

Report of Independent Registered Public Accounting  Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-2

Financial Statements

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statements of Operations and Comprehensive  Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statements of Convertible Preferred  Stock  and Stockholders’ Equity (Deficit) . . . . . . . . . . . . .

Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-3

F-4

F-5

F-6

F-7

F-1

Report of Independent Registered Public  Accounting Firm

The Board of Directors and Shareholders
Esperion Therapeutics, Inc.

We  have  audited  the  accompanying  balance  sheets  of  Esperion  Therapeutics, Inc.  (a  development

stage company) (the Company) as of  December 31, 2013 and 2012,  and the related statements of
operations  and  comprehensive  loss,  convertible  preferred  stock  and  stockholders’  equity  (deficit),  and
cash flows for each of the three years in the period  ended December 31,  2013,  and for the period from
January 22, 2008 (Inception) to December 31, 2013. These financial statements are  the responsibility of
the  Company’s  management.  Our  responsibility  is  to  express  an  opinion  on  these  financial  statements
based on our audits.

We  conducted  our  audits  in  accordance  with  the  standards  of  the  Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that  we  plan  and  perform  the  audit  to  obtain
reasonable assurance about whether  the  financial  statements are free  of material misstatement.  We
were not engaged to perform an audit  of the  Company’s internal control over  financial reporting.  Our
audits  included  consideration  of  internal  control  over  financial  reporting  as  a  basis  for  designing  audit
procedures that are appropriate in the circumstances, but  not  for the  purpose of expressing an opinion
on the effectiveness of the Company’s  internal control over financial reporting. Accordingly, we  express
no  such  opinion.  An  audit  also  includes  examining,  on  a  test  basis,  evidence  supporting  the  amounts
and  disclosures  in  the  financial  statements,  assessing  the  accounting  principles  used  and  significant
estimates made by management, and  evaluating the  overall financial  statement presentation. We believe
that our audits provide a reasonable  basis  for our  opinion.

In  our  opinion,  the  financial  statements  referred  to  above  present  fairly,  in  all  material  respects,
the financial position of Esperion Therapeutics, Inc. at December 31, 2013 and 2012, and the results of
its  operations and its cash flows for each of the three years  in the  period ended  December 31, 2013,
and for the period from January 22,  2008  (Inception) through December 31,  2013, in conformity with
U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Detroit, Michigan
March 13, 2014

F-2

Esperion Therapeutics, Inc.

(A Development Stage Company)

Balance Sheets

Assets
Current assets:

December 31, December  31,

2013

2012

Cash and cash equivalents
Short-term Investments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid clinical development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other prepaid and current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,537,361 $ 6,511,521
—
367,216
259,669

3,525,123
195,652
361,513

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60,619,649
80,808
55,740
17,537,663

7,138,406
120,210
53,825
—

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,293,860 $ 7,312,441

Liabilities, convertible preferred stock and stockholders’ equity  (deficit)
Current liabilities:

Short term borrowings with related parties, net  of debt  discount . . . . . . . . . . . . . . . $
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued clinical development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrant liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $ 15,241,007
738,192
—
476,277
2,231,890
242,171
883,465
265,323
—
210,329
1,087,136

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt

4,202,491
—

17,173,299
7,528,845

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,202,491 $ 24,702,144

Commitments and contingencies (Note 6)
Convertible preferred stock:

Series A preferred stock par value $0.001; no shares authorized,  issued  or

outstanding as of December 31, 2013;  34,785,000  shares  authorized  and  23,975,000
shares issued and outstanding at December  31,  2012, aggregate liquidation
preference of $23,975,000 at December  31,  2012 . . . . . . . . . . . . . . . . . . . . . . . .

Stockholders’ equity (deficit):

Preferred stock, $0.001  par value; 5,000,000  shares  authorized  and  no shares  issued

or outstanding as of  December 31, 2013; no  shares authorized,  issued  or
outstanding as of December 31, 2012.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common stock, $0.001 par value; 120,000,000  shares authorized  as  of December  31,
2013 and 50,000,000  shares authorized  as of  December  31, 2012,  respectively;
15,357,413 shares issued and 15,340,710 outstanding  at  December 31,  2013  and
346,478 shares issued and outstanding at December  31,  2012 . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deficit accumulated during the  development  stage . . . . . . . . . . . . . . . . . . . . . . . .

— 23,975,000

—

—

15,357
142,142,204
(3,034)
(68,063,158)

346
609,976
—
(41,975,025)

Total stockholders’  equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74,091,369

(41,364,703)

Total liabilities, convertible preferred stock and stockholders’  equity  (deficit) . . . . . . . . $ 78,293,860 $ 7,312,441

See accompanying notes to the condensed  financial  statements.

F-3

Esperion Therapeutics, Inc.

(A Development Stage Company)

Statements of Operations and Comprehensive Loss

Years Ended December 31,

2013

2012

2011

Period from January  22,
2008 (Inception)
to December  31, 2013

Grant income . . . . . . . . . . . . . . . . .

$

— $

— $

—

$

244,479

Operating expenses:

Research and development
. . . . .
General and administrative . . . . .
Acquired in-process research and

development . . . . . . . . . . . . . .

16,014,205
6,744,493

7,998,128
2,205,632

7,807,702
2,356,669

43,428,066
18,194,189

—

—

—

85,612

Total operating expenses . . . . . . . . .

22,758,698

10,203,760

10,164,371

61,707,867

Loss from operations . . . . . . . . . . .

(22,758,698)

(10,203,760)

(10,164,371)

(61,463,388)

Interest expense . . . . . . . . . . . . . . .
Change in fair value of warrant

liability . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . .

(936,580)

(1,486,696)

(577,157)

(4,320,696)

(2,586,865)
194,010

32,367
(83,647)

—
(75,813)

(2,554,498)
275,424

Net loss . . . . . . . . . . . . . . . . . . . . .

$(26,088,133) $(11,741,736) $(10,817,341)

$(68,063,158)

Net loss per common share (basic

and diluted) . . . . . . . . . . . . . . . .

$

(3.31) $

(36.31) $

(36.22)

Weighted-average shares

outstanding (basic  and diluted) . .

7,885,921

323,382

298,689

Other comprehensive loss:

Unrealized loss on investments . .

$

(3,034) $

— $

—

$

(3,034)

Total  comprehensive loss . . . . . . . .

$(26,091,167) $(11,741,736) $(10,817,341)

$(68,066,192)

See accompanying notes to the condensed financial statements.

F-4

Esperion Therapeutics, Inc.

(A Development Stage Company)

Statements of Convertible Preferred  Stock and Stockholders’ Equity (Deficit)

Series A Convertible
Preferred Stock

Series  A 1 Convertible
Preferred Stock

Common Stock

Shares

Amount

Shares

Amount

Shares

Amount

Deficit
Accumulated
During the
Development Comprehensive

Accumulated
Other

Stage

Loss

Total
Stockholders’
Equity
(Deficit)

Additional
Paid-In
Capital

— $

—

— $

— $ — $

— $

$ —

$

.

Balance at  January 22, 2008
.

(Inception)
.
.
Issuance of Series A preferred
stock in exchange for cash .
Issuance of Series A preferred

.

.

.

.

.

.

.

.

.

stock in exchange for
.
convertible note

$0.0001 per share .

.
Issuance of common stock at
.
.
Exercise  of  stock options .
.
Stock-based compensation .
.
.
.
Net  loss .

.

.

.

.

.

.

.

.

.

.

.
.
.
.

Exercise  of  stock options .

Balance  at  December  31,  2010 .
Issuance of Series A preferred
stock in exchange for cash .
.
Issuance of common stock in
consideration  for a license
.
.
agreement
.
.

.
Stock-based compensation .
.
.
.
Net  loss .

.

.

.

.

.

.

.

.

.

.

.

.

.

Balance  at  December  31,  2011 .
Exercise  of  stock options .
.
.
Beneficial conversion feature

from issuance of  convertible
.
.
.
.
notes
.
.
Stock-based compensation .
.
.
.
.
Net  loss .

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Balance December 31, 2012 .

.
Issuance of Series A preferred

.

.

.

.

.
.
.
.

.

.
.

.
.
.

.
.

.
.
.

.

17,025,000

17,025,000

250,000

250,000

—
—
—
—

—
—
—
—

17,275,000

17,275,000

6,700,000
—

6,700,000
—

—
—
—

—
—
—

23,975,000
—

23,975,000
—

—
—
—

—
—
—

23,975,000

23,975,000

stock in exchange for
convertible promissory notes .

16,623,092

16,623,092

Issuance of Series A preferred
stock, net of issuance costs
.
.
($119,537)
Issuance of Series A-1  preferred

.

.

.

.

.

.

.

.

17,000,000

16,880,463

stock in exchange for
convertible promissory notes,
net  of issuance costs  ($53,469)

Early  exercise of stock options

.

.

.

.

.

.

common  stock .

and vesting of restricted stock
Preferred  shares converted into
.
Issuance of common stock from
initial public offering, net of
issuance  costs ($2,671,169) .
.
Reclassification of warrants from
.
.
.
.
.

.
.
.
Exercise  of  stock options .
Stock-based compensation .
.
Other  comprehensive loss .
.
.
.
Net  loss .

liabilities  to equity

.
.
.
.
.

.

.

.

.

.

.

.

.

.

—

—

—

—
—
—
—
—

—

—

—
—
—
—

—

—
—

—
—
—

—
—

—
—
—

—

—

—

—

—

—

—
—
—
—

—

—
—

—
—
—

—
—

—
—
—

—

—

—

—

—

286,286
3,578
—
—

289,864

—
15,016

2,862
—
—

307,742
38,736

—
—
—

—

—

286
4
—
—

290

—
15

3
—
—

308
38

—
—
—

—

—

(86)
3,746
98,796

—
—
—
— (19,415,948)

102,456

(19,415,948)

—
15,871

—
—

4,397
78,451

—
—
— (10,817,341)

201,175
40,950

(30,233,289)
—

287,990
79,861

—
—
— (11,741,736)

346,478

346

609,976

(41,975,025)

—

—

—

—

—

—

26

—

—

—

21,167

—

—

—

—

—

—

—

—

—

—

—

—
—
—
—

—

—
—

—
—
—

—
—

—
—
—

—

—

—

—

—

—

—

—

—

—

200
3,750
98,796
(19,415,948)

(19,313,202)

—
15,886

4,400
78,451
(10,817,341)

(30,031,806)
40,988

287,990
79,861
(11,741,736)

(41,364,703)

—

—

—

21,193

65,225,165

72,193,831

2,852,188
27,874
1,226,988
(3,034)
(26,088,133)

— 6,750,000

7,749,531

—

—

—

25,765

(57,598,092)

(57,478,555) (6,750,000)

(7,749,531)

9,210,999

9,211

65,215,954

—

—
—
—
—
—

—

—

—
—
—
—
—

— $

—

—
—
—
—
—

—

5,750,000

5,750

72,188,081

—
24,171
—
—
—

—
24
—
—
—

—
2,852,188
—
27,850
—
1,226,988
—
—
— (26,088,133)

—
—
—
(3,034)
—

Balance December 31, 2013 .

.

.

.

— $

15,357,413 $15,357 $142,142,204 $(68,063,158)

$(3,034)

$ 74,091,369

See accompanying notes to the financial statements.

F-5

Esperion Therapeutics, Inc.

(A Development Stage Company)

Statements of Cash Flows

Operating activities
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile  net  loss to  net cash  used in

operating  activities:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . .
Amortization  of debt discount  and beneficial  conversion .
Amortization  of debt issuance costs . . . . . . . . . . . . . .
Amortization  of premiums and discounts  on investments
Revaluation  of warrants . . . . . . . . . . . . . . . . . . . . . .
Noncash interest  expense on convertible  notes . . . . . . .
Write-off of acquired  in-process  research and

development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . .
Common stock issued in license  agreement
. . . . . . . . .
Loss related to  assets held for sale . . . . . . . . . . . . . . .
Gain on sale  of assets . . . . . . . . . . . . . . . . . . . . . . .
Changes  in assets and liabilities:

Prepaids and  other assets . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Other accrued liabilities

Year Ended December 31,

2013

2012

2011

Period from
January 22,
2008
(Inception) to
December  31,
2013

$(26,088,133)

$(11,741,736)

$(10,817,341)

$ (68,063,158)

70,551
458,993
18,533
46,758
2,586,865
459,055

—
1,226,988
—
27,000
(147,805)

28,489
1,755,613
1,443,732

139,433
116,988
15,378
—
(32,367)
1,369,709

—
79,861
—
86,887
(2,549)

(429,720)
(214,903)
(195,548)

178,471
—
—
—
—
577,065

—
78,451
4,400
108,308
—

168,277
619,238
14,406

1,447,722
575,981
33,911
46,758
2,554,498
3,726,092

85,612
1,484,096
4,400
322,701
(166,264)

(508,281)
2,231,890
1,896,229

Net cash used in operating  activities . . . . . . . . . . . . . .

(18,113,361)

(10,808,567)

(9,068,725)

(54,327,813)

Investing  activities
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . .
Proceeds  from sales/maturities of  investments . . . . . . . . .
Cash  obtained in  stock acquisition . . . . . . . . . . . . . . . . .
Proceeds  from sale  of assets . . . . . . . . . . . . . . . . . . . . .
Purchase  of  property and equipment . . . . . . . . . . . . . . .
Other investing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(24,676,822)
3,504,791
—
201,265
(31,373)
—

Net cash (used in) provided by investing activities

. . . . . .

(21,002,139)

Financing  activities
Proceeds  from initial public offering,  net  of issuance costs .
Proceeds  from issuance  of preferred  stock,  net of  issuance

costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds  from exercise of common  stock options . . . . . . .
Proceeds  from warrant issuance . . . . . . . . . . . . . . . . . .
Proceeds from debt issuance with  related  parties . . . . . . .

72,193,831

16,824,235
123,274
—
—

—
—
—
5,100
(6,783)
—

(1,683)

—
500,350
—
42,312
(33,635)
—

(56,245,988)
35,020,141
2,500,000
952,464
(298,932)
50,626

509,027

(18,021,689)

—

—

72,193,831

—
40,987
297,690
15,412,010

6,700,000
15,886
—
—

40,799,235
184,097
297,690
15,412,010

Net cash provided  by financing activities . . . . . . . . . . . . .

89,141,340

15,750,687

6,715,886

128,886,863

Net increase (decrease) in cash and cash  equivalents . . . . .
Cash  and cash equivalents at  beginning  of  period . . . . . . .

50,025,840
6,511,521

4,940,437
1,571,084

(1,843,812)
3,414,896

56,537,361
—

Cash  and cash equivalents at end of period . . . . . . . . . . .

$ 56,537,361

$ 6,511,521

$ 1,571,084

$ 56,537,361

Supplemental disclosure of cash flow  information:
Conversion  of  convertible promissory  notes, including
accrued interest of $923,092 into  Series A  preferred
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conversion  of  convertible long-term  Pfizer note,  including
accrued interest of $274,155 into  Series A-1 preferred
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 16,623,092

$

— $

— $ 16,623,092

$ 7,803,000

$

— $

— $

7,803,000

See accompanying notes to the financial statements.

F-6

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements

1. The Company and Basis of Presentation

The Company is a clinical stage biopharmaceutical company focused on developing and

commercializing first-in-class, oral, low-density lipoprotein cholesterol  (LDL-C) lowering therapies for
the treatment of patients with hypercholesterolemia and other cardiometabolic risk markers. ETC-1002,
the Company’s lead product candidate, is a unique,  first-in-class, orally available, once-daily small
molecule designed to lower LDL-C levels  and avoid the  side effects associated  with LDL-C lowering
therapies currently available. ETC-1002  is being  developed primarily for patients intolerant  of statins
with elevated levels of LDL-C. Phase  2b  clinical trials for ETC-1002 are currently underway and build
upon a successful and comprehensive  Phase 1  and  Phase 2 program. The Company owns the exclusive
worldwide rights to ETC-1002 and our other product  candidates.

HDL Therapeutics, Inc. (HDL) was incorporated in  the state of Delaware on  January 22, 2008.  On

April 28, 2008, HDL acquired all of  the  capital stock  of  Esperion Therapeutics, Inc. (Esperion), a
wholly owned subsidiary of Pfizer Inc. On May 5, 2008, Esperion was merged with and into HDL and
the Company assumed the name Esperion Therapeutics, Inc. (the Company). Its facilities are located in
Plymouth, Michigan.

The Company’s primary activities since incorporation have been recruiting personnel, conducting

research and development activities, including  pre-clinical  and clinical  testing, performing business and
financial planning, and raising capital.  Accordingly, the Company is considered to be in development
stage.

The Company is subject to the risks associated with a  development stage entity, which  includes the

need to: research, develop, and clinically test potential therapeutic products; obtain regulatory
approvals for its products and commercialize them,  if approved; expand its management and scientific
staff; and finance its operations with  an  ultimate  goal of achieving profitable operations.

The Company has sustained operating  losses since inception and expects  such losses to continue
over the foreseeable future. Management plans to continue to finance operations with a  combination of
public and private equity issuances, debt  arrangements, collaborations and strategic and licensing
arrangements. If adequate funds are  not  available, the  Company may  not  be  able to continue the
development of its current or future  product  candidates,  or to commercialize its current  or future
product  candidates, if approved.

Reverse Stock Split

On June 11, 2013, in connection with its  initial public  offering  (the  IPO), the Company effectuated

a 1-for-6.986 reverse stock split of its  outstanding  common stock, which was approved  by  the
Company’s board of directors on June  5, 2013.  The reverse stock split resulted in an  adjustment to the
Series A preferred stock and Series A-1 preferred  stock conversion prices to reflect a proportional
decrease in the number of shares of  common  stock to be issued  upon conversion. The  accompanying
financial statements and notes to the  financial statements give effect to the reverse stock split  for all
periods presented. The shares of common  stock retained a par value of $0.001 per share. Accordingly,
the stockholders’ equity reflects the reverse  stock split by reclassifying from ‘‘common stock’’ to
‘‘Additional paid-in capital’’ in an amount equal  to  the par value of the  decreased shares resulting  from
the reverse stock split.

F-7

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

1. The Company and Basis of Presentation  (Continued)

Initial Public Offering

On July 1, 2013, the Company completed its IPO whereby the Company sold  5,000,000 shares  of
common stock at a price of $14.00 per  share.  The shares  began trading on the Nasdaq Global Market
on June 26, 2013. On July 11, 2013, the  underwriters exercised their over-allotment option in full  and
purchased an additional 750,000 shares  of  common stock at a price of $14.00 per share. The Company
received approximately $72.2 million  in net proceeds from the IPO, including proceeds  from the
exercise of the underwriters’ over-allotment  option, net  of  underwriting discounts and commissions and
offering expenses. Upon closing of the  IPO, all outstanding shares of preferred stock converted into
9,210,999 shares of common stock; and  warrants exercisable for convertible preferred stock were
automatically converted into warrants exercisable for 277,690 shares of common  stock, resulting in  the
reclassification of the related convertible  preferred stock warrant liability of $2,852,188  to  additional
paid-in capital (See Note 5).

The following table summarizes the Company’s capitalization upon  closing  of its  initial public

offering:

Total common stock issued as of June 30,  2013 . . . . . . . . . . . . . . . . . . .
Conversion of Series A preferred stock  into  common stock upon  closing
of IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

396,414

8,244,781

Conversion of Series A-1 preferred stock into common stock upon

closing of IPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of common stock through IPO . . . . . . . . . . . . . . . . . . . . . . . . . .

966,218
5,000,000

Common stock issued as of July 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock to underwriters  due  to  exercise of

14,607,413

over-allotment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

750,000

Total common stock issued as of July 11, 2013 . . . . . . . . . . . . . . . . . . .

15,357,413

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements  in conformity with  U.S. generally  accepted accounting
principles (GAAP) requires management to make estimates  and assumptions that affect the reported
amounts of assets, liabilities, expenses  and related  disclosures.  Actual results could differ from those
estimates.

Prior to the completion of the IPO on July 1, 2013, the  Company utilized significant  estimates and

assumptions in determining the fair value of its Common Stock.  The Company utilized valuation
methodologies in accordance with the  framework  of  the 2004 American Institute of Certified Public
Accountants Technical Practice Aid, Valuation of Privately-Held  Company Equity  Securities  Issued as
Compensation, to estimate the fair value  of its Common Stock. Each  valuation  methodology includes
estimates and assumptions that require the Company’s judgment.  These  estimates and assumptions
include a number of objective and subjective factors, including  external market conditions affecting  the
biotechnology industry sector, the prices  at  which the  Company sold shares  of its  Preferred Stock,  the

F-8

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

superior rights and preferences of securities senior  to  its Common  Stock at  the time  and the  likelihood
of achieving a liquidity event, such as  an  initial public offering or sale. Significant changes to the key
assumptions used in the valuations could  result  in different fair values of  Common Stock at each
valuation date.

Cash and Cash Equivalents

The Company invests its excess cash in bank  deposits, money market accounts, and short-term
investments. The Company considers all  highly liquid  investments  with an original maturity of 90  days
or less  at the time of purchase to be  cash  equivalents. Cash equivalents are  reported at fair value.

Investments

Investments are considered to be available-for-sale and are  carried  at fair  value. Unrealized gains

and losses, if any, are reported as a separate  component  of stockholders’ deficit. The  cost of
investments classified as available-for-sale are adjusted for the amortization of  premiums and accretion
of discounts to maturity and recorded in  other income (expense), net.  Realized gains and  losses, if any,
are determined using the specific identification method and in other income  (expense),  net.
Investments with original maturities beyond  90 days at the date of purchase and which mature at, or
less  than twelve months from, the balance  sheet date are  classified as current.  Investments  with a
maturity beyond twelve months from  the balance sheet date are classified  as long-term.

Concentration of Credit Risk

Cash, cash equivalents, and marketable securities consist of  financial instruments that potentially

subject the Company to concentrations of  credit risk. The Company has established  guidelines for
investment of its excess cash and believes  the guidelines  maintain safety and liquidity through
diversification of counterparties and maturities.

Segment Information

The Company views its operations and manages its business in one  operating segment, which is the

business of researching, developing and commercializing  therapies for the  treatment of patients with
elevated  levels of low-density lipoprotein  cholesterol  and  other cardiometabolic  risk markers.

Fair  Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, investments,

other current assets, accounts payable and accrued liabilities that approximate  their carrying value  at
December 31, 2013 and 2012.

Property and Equipment, Net

Property and equipment are recorded at cost, less accumulated depreciation. Depreciation  is

provided using the straight-line method over  the estimated useful lives of the respective  assets,
generally three to ten years. Leasehold  improvements are amortized over the lesser of  the lease term
or the estimated useful lives of the related  assets.

F-9

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Impairment of Long-Lived Assets

The Company reviews long-lived assets,  including property and  equipment,  for impairment
whenever events or changes in business circumstances indicate that the carrying amount of the assets
may not be fully recoverable. An impairment  loss would  be  recognized when estimated undiscounted
future cash flows expected to result from the  use of the  asset and its  eventual disposition are less than
its  carrying amount. The impairment loss,  if recognized,  would be based  on the excess  of  the carrying
value of the impaired asset over its respective  fair value. Excluding impairment losses  recorded on
assets held for sale, no other impairment  losses have  been recorded through  December 31, 2013.

Research and Development

Research and development expenses consist of costs incurred  to  further the  Company’s research
and development activities and include  salaries and related benefits,  costs associated with pre-clinical
studies and trials, non-clinical activities  (such  as toxicology  studies), regulatory activities,  manufacturing
activities to support clinical activities, research-related overhead expenses, and  fees  paid to external
service providers that conduct certain research and development, clinical, and manufacturing  activities
on behalf of the Company. Research  and development costs  are expensed as  incurred.

In-Process Research and Development

In April 2008, the Company acquired certain tangible research  and  development assets and
intellectual property from Pfizer Inc. (Pfizer).  As the acquired in-process  research  and development
had not reached technological feasibility  and  had no alternative future uses  in connection with this
asset and intellectual property acquisition and the  related purchase price  allocation, the Company
expensed $85,612 as in-process research  and development costs  in 2008.

Accrued Clinical Development Costs

Outside research costs are a component  of research and development expense. These  expenses
include fees paid to contract research organizations  and other service  providers  that  conduct certain
clinical and product development activities  on behalf  of  the Company. Depending upon the timing of
payments to the service providers, the  Company  recognizes  prepaid  expenses or  accrued expenses
related to these costs. These accrued  or  prepaid expenses are based  on management’s  estimates of  the
work performed under service agreements, milestones achieved  and  experience with similar contracts.
The Company monitors each of these  factors  and  adjusts estimates accordingly.

Income Taxes

The Company utilizes the liability method of  accounting for income taxes as  required by ASC 740,

Income Taxes. Under this method, deferred tax assets and  liabilities  are  determined  based on
differences between financial reporting  and  the tax basis of  assets and liabilities  and are measured
using enacted tax rates and laws that will  be  in effect when the differences are expected to reverse. The
Company has incurred operating losses  since inception.  Accordingly, it is not more  likely than not that
the Company will  realize deferred tax  assets and as  such, it  has recorded a  full valuation  allowance.

F-10

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Warrants

The Company accounts for its warrants issued in  connection with its various financing transactions

based upon the characteristics and provisions of the instrument.  Warrants classified as  liabilities are
recorded  on the Company’s balance sheet  at their fair value on the date of issuance and  are
marked-to-market on each subsequent reporting period,  with the fair  value  changes recognized  in the
statement of operations. The warrants  are  measured using the Black-Scholes  option-pricing  model
subsequent to the pricing of the Company’s IPO  and  a Monte Carlo valuation model for  previous
periods which are based, in part, upon inputs  where there is  little or no market data, requiring  the
Company to develop its own independent assumptions. The Company adjusts the liability for changes
in the fair value of the warrants until the  earlier of the  exercise  of  the warrants, the expiration of the
warrants, or until such time as the warrants are no longer  determined to be liabilities and reclassified
into paid-in-capital at fair value. The warrants were reclassified into  paid-in-capital upon closing of the
IPO. (See Note 5).

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with  the provisions  of
ASC 718, Compensation—Stock Compensation. Accordingly, compensation costs related to equity
instruments granted are recognized over  the requisite  service  periods of the awards on  a straight-line
basis at the grant-date fair value calculated using  a Black-Scholes option pricing model. Additionally,
under the provisions of ASC 718, the Company  is required to include an estimate of the number of
awards that will be forfeited in calculating compensation costs.  Any changes to the estimated forfeiture
rates are accounted for prospectively.  Stock-based compensation arrangements with non-employees are
recognized at the grant-date fair value  and  then re-measured  at each reporting  period. Expense  is
recognized during the period the related services  are rendered.

Reclassifications

Certain prior period information has  been reclassified to be comparable  to the  current year
presentation.  These  items  had  no  impact  on  the  amounts  of  previously  reported  net  loss  or  total
shareholder’s equity (deficit).

Recent  Accounting Pronouncements

In February 2013, the Financial Accounting Standards  Board (FASB)  issued  Accounting Standards

Update (ASU) 2013-02 which is an amendment  to  the accounting guidance for the presentation of
comprehensive income. Under the amended guidance, items that are reclassified to net income from
accumulated other comprehensive income  in the same  reporting period require separate  disclosure on
the face of the financial statements where net income is presented or within  the notes  to  the financial
statements. The adoption of this update did not have a  material  impact on the  Company’s financial
statements.

In July 2013, the FASB issued ASU 2013-11  which is an amendment to the accounting guidance  on

income taxes. This guidance provides clarification on the financial statement presentation  of an
unrecognized benefit when a net operating loss carryforward, a similar tax loss, or a  tax credit

F-11

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

carryforward exists. The amendment  will be effective for the  Company for interim and annual  periods
beginning after December 15, 2013, with  early adoption permitted. The adoption of  this standard  is not
expected to have a material impact on  the Company’s financial statements.

3. Stock Acquisition

On April 28, 2008, HDL acquired all  of the capital  stock of Esperion from Pfizer in  exchange for a

non-subordinated convertible promissory  note in  the original principal amount of $5,000,000 (see
Note 4).

The Company allocated the purchase price  of the Esperion  acquisition  in accordance with  the
provisions of Statement of Financial Accounting  Standards  (SFAS) No.  141, Business Combinations,
related to the purchase of a group of  assets.  SFAS  No. 141 provides that the cost  of  a group of assets
acquired in a transaction other than  a business combination shall be allocated to the individual  assets
acquired based on their relative fair values and shall not give rise to goodwill.

In accordance with the provisions of  SFAS  No.  141, this  transaction  did not meet the criteria of a

business combination, and all identifiable  intangible assets, including  in-process research and
development, were assigned a portion of  the purchase price  based on their  relative fair  values.  To this
end, an independent valuation of the tangible assets acquired was used to determine the fair  value of
the identifiable tangible assets. The Company determined  the value assigned  to  in-process research and
development and intangible assets. The fair  value of  assets acquired exceeded the transaction
consideration and therefore, under SFAS No.  141, the excess of fair  value of  assets received over
consideration paid was allocated on a  relative  fair market value basis to in-process  research  and
development, tangible and intangible assets.

The Company allocated total cost of the  Esperion acquisition  as follows:

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,500,000
1,317,005
50,000
85,612
1,047,383

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,000,000

The income approach was used to estimate  the fair value of the acquired in-process  research  and

development based on projected cash  flows through  2014 and a  35 percent discount rate.  Material cash
inflows were projected to begin in 2014. The replacement cost method was used to estimate the fair
value of the tangible assets.

F-12

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

4. Debt

The following is a reconciliation of the Company’s  various debt instruments:

Short term convertible notes issued January 2012 . . . . . .
Short term convertible notes issued September 2012 . . . .
Short term convertible notes issued November 2012 . . . .
Discount on short term convertible notes . . . . . . . . . . . .

$

Total short term convertible notes, net of  debt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
discount
Long term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated paid-in-kind interest . . . . . . . . . . . . . . . . .

Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2013

2012

— $ 6,000,000
4,000,000
—
5,700,000
—
(458,993)
—

— 15,241,007
5,000,000
—
2,528,845
—

—

7,528,845

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

— $22,769,852

Convertible Notes

In January 2012, the Company issued $6,000,000 of 10%  convertible  promissory  notes to certain
existing investors for cash. In September  and November 2012, the Company issued  the aggregate of
$9,700,000 of 10% convertible promissory notes that mature on September 4,  2013 for cash  to  certain
existing investors. In connection with  the September convertible note financing, the Company and  the
holders  of the January 2012 convertible  promissory notes  agreed to extend the maturity date of the
January 2012 notes to September 4, 2013. In  February 2013, these convertible  promissory  notes, with an
outstanding principal of $15,700,000 and accrued interest of $923,092,  were amended and  then
converted into 16,623,092 shares of Series A preferred stock, in accordance with their  terms and at
their conversion price of $1.00 per share, and  following such conversion, the notes were  cancelled.

The holders of the September convertible promissory  notes received  the benefit of a  deemed
conversion price of the September convertible promissory notes that were below the estimated fair
value of the Series A convertible preferred stock  at the  time of their  issuance.  The fair value of this
beneficial conversion feature was estimated to be $287,990. The fair value  of  this  beneficial  conversion
feature was recorded to debt discount and amortized to interest expense using the effective interest
method over the term of the convertible promissory  notes. As a result of the conversion of  the
convertible promissory notes into shares of Series  A preferred stock in  February 2013, the  Company
recorded  the remaining accretion of  the  beneficial conversion feature of  $229,496 as interest expense
during the year ended December 31, 2013.

In connection with the issuance of the September  and the  November 2012 convertible  promissory

notes, the Company issued warrants to purchase shares of Series  A  preferred stock for an aggregate
price of $9,700. The estimated fair value of the warrants at issuance was $297,690. The proceeds  from
the sale of the preferred stock and warrants  was allocated with $9,412,010 to the  convertible promissory
notes and $297,690 to warrants. This  resulted in a discount  on the  convertible promissory notes  which
was amortized into interest expense, using  the effective interest  method, over the  life of the convertible
promissory notes (see Note 5). The Company recorded $58,494 of interest expense for  the accretion  of

F-13

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

4. Debt (Continued)

this  discount during the year ended December  31, 2012. As a result of the conversion of the convertible
promissory notes into shares of Series A preferred  stock in February 2013, the  Company recorded the
remaining $229,496 of interest expense for  the accretion  of  this discount during the  year  ended
December 31, 2013 and $297,690 during the  period from  Inception through  December 31, 2013.

In April 2008, the Company acquired all of the capital  stock  of Esperion from  Pfizer in exchange

for a non-subordinated convertible note in the original principal amount of $5,000,000. This convertible
promissory note had a maturity date of April 28, 2018. The  note bore interest at  8.931% annually,
payable semiannually on June 30 and  December 31 by adding such unpaid  interest  to  the principal of
the note, which would thereafter accrue  interest.  During  the years ended December 31,  2013, 2012,
2011, and the period from Inception  through December 31, 2013, the Company accrued interest related
to  the  note  of  $274,155,  $631,517,  $577,065,  and  $2,803,000,  respectively.

In May 2013 the Company entered into a stock purchase agreement with Pfizer Inc. and sold
6,750,000 shares of Series A-1 preferred stock at  a price of $1.1560 per share, which was the fair  value
at the transaction date. The purchase  price was paid  through the cancellation of all outstanding
indebtedness, including accrued interest, under  the Pfizer convertible promissory note, which had  an
outstanding balance, including accrued interest, of $7,803,000 as of May 29, 2013.  The Series A-1
preferred stock issued in connection with this  transaction was  subsequently converted into 966,218
shares of common stock upon completion  of the IPO on  July 1, 2013.

5. Warrants

In connection with its various financing  transactions, the Company issued warrants to purchase

shares of preferred stock which had provisions where the underlying issuance was contingently
redeemable based on events outside the Company’s control and  were recorded  as a liability in
accordance with ASC 480-10. The warrants  were classified  as liabilities and were  recorded on  the
Company’s balance sheet at fair value  on  the date  of  issuance  and marked-to-market on each
subsequent reporting period, with the  fair value changes  recognized in  the statement of operations.
Subsequent to the  pricing of the IPO, the Company estimated  the  fair values of the  warrants at each
reporting period using a Black-Scholes option-pricing model, which is  based, in part, upon subjective
assumptions including but not limited to stock  price volatility, the expected life of the  warrants, the  risk
free interest rate and the fair value of the common stock underlying the warrants. The Company
estimates the volatility of its stock based on public  company peer group  historical volatility that is in
line with the expected remaining life  of the  warrants. The risk free interest rate is based on  the U.S.
Treasury zero-coupon bond for a maturity similar  to  the expected remaining life  of the warrants.  The
expected remaining life of the warrants is  assumed  to  be  equivalent to their remaining contractual
term. Prior to the pricing of the IPO,  a Monte Carlo  valuation  model was  utilized  to  estimate the fair
value of the warrants based on the probability  and  timing  of  future financings.

The assumptions used in calculating the estimated fair  market value  at each reporting period prior

to the closing of the Company’s IPO represent the Company’s  best estimate,  however, do involve
inherent uncertainties. The estimated  fair  value of the warrants was determined  using  the Monte Carlo
valuation model which totaled $297,690  and was comprised of $141,779  and $155,911  as of and for  the
September and November 2012 financing, respectively, and  was  recorded as a discount on  the related
convertible promissory notes and amortized as interest expense  over the  term of the convertible

F-14

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

5. Warrants (Continued)

promissory notes. Inherent in the Monte Carlo valuation model are assumptions related to expected
stock-price volatility, expected life and  risk-free interest rate. The Company estimates the volatility of
its  stock based on public company peer group  historical  volatility that  is in  line with the expected
remaining life of the warrants. The risk-free interest rate is  based on the  U.S. Treasury zero-coupon
bond on the grant date for a maturity  similar  to  the expected remaining life  of the warrants.  The
expected life of the warrants is assumed to be equivalent  to  their remaining contractual term. The
dividend rate is based on the historical  rate, which  the Company  anticipates to remain  at zero.  The
Monte Carlo model was used prior to the  closing  of  the Company’s  IPO to appropriately  value the
potential future exercise price based on  various  exit scenarios. This requires Level 3 inputs which  are
based on the Company’s estimates of the  probability and timing of potential  future financings.

Upon the closing of the Company’s IPO,  all  warrants exercisable  for  1,940,000 shares  of  Series A

preferred stock, at an exercise price of $1.00 per share, were  automatically  converted  into  warrants
exercisable for 277,690 shares of common stock, at  an exercise price  of $6.99 per share.  As a result, the
Company concluded the warrants outstanding no  longer met the criteria to be classified as liabilities
and were reclassified to additional paid-in  capital at fair value on the date of reclassification. The
277,690 warrants outstanding as of December  31, 2013 expire in February 2018. During the years ended
December 31, 2013, 2012, 2011, and  for the  period from  Inception  through December  31, 2013, the
Company recognized a (loss)/gain of  $(2,586,865), $32,367, $0,  and  $(2,554,498), respectively, relating to
the change in the fair value of the warrant  liability.

6. Commitments and contingencies

In August 2013, the Company entered into the  second  amendment to the operating  lease

agreement for its current office and laboratory  facility  in Plymouth, MI which  extended the expiration
date  of  the initial term from October 2,  2013  to  April 30, 2014. The Company’s  facility lease  provides
for a fixed monthly rent for the term  of the  lease and  also provides  for certain  rent adjustments  to  be
paid as  determined by the landlord.

The total rent expense for the years ended December 31, 2013, 2012, 2011, and for the period
from Inception to December 31, 2013, was approximately $344,604, $335,000, $323,000  and $1,631,004,
respectively. Future minimum payments as of December 31, 2013, under  the facility lease are presented
in the table below:

Total

Less than
1 Year

1 - 3 Years

3 - 5 Years

Operating lease . . . . . . . . . .

$100,868

$100,868

Total . . . . . . . . . . . . . . . . . .

$100,868

$100,868

$—

$—

$—

$—

More  than
5 Years

$—

$—

The Company also holds a license agreement in  which it is  obligated to make future  minimum
annual payments of $50,000 in years where there  is not a milestone  payment required under  the terms
of the agreement (see Note 15). Further,  the Company  is contractually obligated to issue up  to  an
aggregate of 11,451 shares of common  stock  upon meeting  various future milestones  set forth in the
agreement.

F-15

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

7. Property and Equipment

Property and equipment consist of the  following:

Lab equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . .
Assets in Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Subtotal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and amortization . . . . . . . .

December 31,

2013

2012

$511,403
99,412
118,572
11,309
21,381
6,530

768,607
687,799

$1,057,276
99,412
96,668
11,309
21,381
—

1,286,046
1,165,836

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . .

$ 80,808

$ 120,210

Depreciation expense was $70,551, $139,433, $178,471 and $1,447,722  for the  years  ended

December 31, 2013, 2012, 2011 and the period from Inception through December 31, 2013,
respectively.

8. Other Accrued Liabilities

Other accrued liabilities consist of the following:

December 31,

2013

2012

Stock based compensation liability . . . . . . . . . . . . . . . . . . . .
Accrued professional fees . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued franchise and property taxes . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

74,208
209,961
94,600
667,164
41,203

$
—
$136,907
12,697
60,725
—

Total other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . .

$1,087,136

$210,329

F-16

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

9. Investments

The following table summarizes the Company’s cash equivalents and investments:

December 31, 2013

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

Cash equivalents:

Money market funds . . . . . . . .

$ 5,356,453

$ —

$ — $ 5,356,453

Short-term investments:

U.S treasury notes . . . . . . . . . .
U.S. government agency

2,070,774

securities . . . . . . . . . . . . . . .

1,454,426

—

157

(234)

2,070,540

—

1,454,583

Long-term investments:

Certificates of deposit . . . . . . . .
U.S. treasury notes . . . . . . . . . .
U.S. government agency

237,525
9,116,136

—
3,595

—
(2,497)

237,525
9,117,234

securities . . . . . . . . . . . . . . .

8,186,958

640

(4,695)

8,182,903

Total . . . . . . . . . . . . . . . . . . . . . .

$26,422,272

$4,392

$(7,426)

$26,419,238

December 31, 2012

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

Cash equivalents:

Money market funds . . . . . . . . . .

$6,357,542

Total

. . . . . . . . . . . . . . . . . . . . . . .

$6,357,542

—

$—

—

$—

$6,357,542

$6,357,542

At December 31, 2013, remaining contractual  maturities of available-for-sale  investments classified

as current on the balance sheet were less  than 12 months, and remaining  contractual  maturities of
available-for-sale investments classified as  long-term were less than  two  years.

There were no unrealized gains or losses on  investments reclassified from  accumulated other
comprehensive income to other income  (expense)  in the Statement  of  Operations  during  the year
ended December 31, 2013.

10. Fair Value Measurements

The Company follows accounting guidance that emphasizes that fair  value  is a market-based

measurement, not an entity-specific measurement. Fair value is  defined as  ‘‘the price that would  be

F-17

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

10. Fair Value Measurements (Continued)

received to sell an asset or paid to transfer a liability in an  orderly transaction between market
participants at the measurement date.’’  Fair  value measurements  are  defined on a three  level hierarchy:

Level 1 inputs: Quoted prices for identical  assets or liabilities  in active markets;

Level 2 inputs: Observable inputs other than Level  1 prices,  such as quoted market

prices for similar assets or liabilities or  other  inputs  that  are
observable or can be corroborated by market data; and

Level 3 inputs: Unobservable inputs  that are supported by little or no  market

activity and require the reporting entity to develop  assumptions  that
market participants would use when pricing the asset  or liability.

The following table presents the Company’s  financial assets and liabilities that have been measured

at fair value on a recurring basis:

Description

December 31, 2013
Assets:

Total

Level 1

Level 2

Level 3

Money market funds . . . . . . . . . . . . . . . . . . . . .
Available for sale securities:

$ 5,356,453

$ 5,356,453

$

— $

Certificates of deposit . . . . . . . . . . . . . . . . . .
U.S. treasury notes . . . . . . . . . . . . . . . . . . . .
U.S. government agency securities . . . . . . . . .

237,525
11,187,774
9,637,486

237,525
11,187,774

—
—
— 9,637,486

Total assets at fair value . . . . . . . . . . . . . . . . . . . .

$26,419,238

$16,781,752

$9,637,486

$

December 31, 2012
Assets:

Money market funds . . . . . . . . . . . . . . . . . . . . .

$ 6,357,542

$ 6,357,542

Total assets at fair value . . . . . . . . . . . . . . . . . . . .

$ 6,357,542

$ 6,357,542

$

$

— $

— $

—

—
—
—

—

—

—

Liabilities:

Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities at fair value . . . . . . . . . . . . . . . . .

$

$

265,323

265,323

$

$

— $

— $

— $265,323

— $265,323

There were no transfers between Levels 1, 2  or 3 during the  year ended December  31, 2013 or

December 31, 2012.

F-18

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

10. Fair Value Measurements (Continued)

The following table summarizes the changes in the fair value of  the Company’s  Level 3 warrant

liability for the years ended December 31, 2012  and 2013:

Level 3 Liabilities:
As of January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of warrants liabilities to additional paid-in  capital in
conjunction with the conversion of the convertible preferred stock
into common stock upon the closing of the Company’s  IPO . . . . .

Warrant Liability

$

—
297,690
(32,367)

$

265,323
2,586,865

(2,852,188)

As of December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

—

Fair  Value Measurements on  a Nonrecurring Basis

In addition to items that are measured at fair  value on a  recurring basis, the Company also
measures assets held for sale at the lower  of  its  carrying  amount or fair value  on a nonrecurring basis.
The Company recognized an impairment  expense and other losses relating to assets held for sale
during the year ended December 31, 2013, 2012, 2011 and the  period from Inception  through
December 31, 2013 of $27,000, $86,887,  $108,308 and  $214,393 based on  recent market sales data for
similar equipment less the related costs  to sell  and recent purchase offers. The fair value of assets  held
for sale at December 31, 2013 was estimated at $29,108  using a market approach, considering the
estimated fair value for other comparable  equipment which are Level 3 inputs.

11. Convertible Preferred Stock and Stockholders’ Deficit

On January 22, 2008, HDL was incorporated in the state of Delaware with 1,000 shares of
authorized common stock. In April 2008, the Board  of  Directors approved an amended and  restated
certificate of incorporation. The amendment increased  HDL’s  authorized number of shares of common
stock to a total of 44,025,145 and authorized two  new series of preferred stock designated  as Series  A
and Series A-1 preferred stock consisting  of 33,250,000  shares  of Series A preferred stock and 6,475,145
shares of Series A-1 preferred stock.  In  April  2008, HDL sold 286,286 shares of common  stock and
10,000,000 shares of Series A preferred  stock in a private offering (the Initial Financing), raising net
proceeds of $200 and $10,000,000, respectively. In the Initial  Financing,  the Company converted an
outstanding promissory note in the principal amount of $250,000 from an  officer of the Company  into
250,000 shares of Series A preferred  stock.

As a result of commencing Phase 1 clinical trials in  December 2009,  the Company  issued 6,000,000

additional shares of Series A preferred  stock,  raising net  proceeds  of  $6,000,000 in  January 2010
(Second Tranche Shares in the Initial Financing agreement).

F-19

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

11. Convertible Preferred Stock and Stockholders’ Deficit (Continued)

In April 2010, the Company issued an  additional 1,000,000 shares of Series A  preferred stock to an

officer and new investors for $1,000,000  in net proceeds. In  connection with  this  sale, the  Initial
Financing agreement was amended to  allow  for  the additional issuance of  shares. The Company also
amended its certificate of incorporation  to increase  its number of authorized shares to 45,025,145
shares of common stock and 40,725,145  shares  of preferred stock, including 34,250,000  shares of
Series A preferred stock and 6,475,145 shares of Series  A-1  preferred stock.

In November 2010, the Company issued an  additional 25,000 shares of Series A preferred  stock to

an officer of the Company in exchange for $25,000.  As a  result of commencing Phase  2a clinical  trials
in December 2010, the Company issued  6,700,000 shares of Series A preferred  stock,  raising  net
proceeds of $6,700,000 in January 2011  (Third Tranche Shares  in the  Initial  Financing agreement). The
Company also amended its certificate  of  incorporation to increase the  number of authorized shares to
50,000,000 shares of common stock and 41,682,329  shares of preferred  stock, including  34,785,000
shares of Series A preferred stock and 6,897,329 shares of Series A-1  preferred stock.

In September 2012, the Company amended  its  certificate  of incorporation to increase the number

of authorized preferred shares to 42,647,283, including 34,785,000 shares of Series  A preferred stock
and 7,862,283 shares of Series A-1 preferred stock.

As of December 31, 2012, the Company did not have sufficient preferred and common shares
authorized under its certificate of incorporation to permit  the conversion of the  outstanding convertible
promissory notes issued during 2012.  Pursuant to the terms  of the note purchase agreements, in  the
event any or all of the notes were to be converted, the  purchasers and the Company agreed to take all
action necessary to amend the certificate  of incorporation to increase  the  number of  authorized shares
of Series A preferred stock and common stock  to  permit such conversion. The Company  subsequently
amended its certificate of incorporation  to increase  the number  of shares of  Series A  preferred stock
authorized to 41,636,970 and number of  shares of common  stock  authorized  to  56,519,253 in
connection with the conversion of the notes  on February 12, 2013 into 16,623,092  shares of Series A
preferred stock.

In March 2013 and April 2013, the Company  amended its certificate of incorporation to increase

the number of shares of Series A preferred stock authorized to 42,538,092  and 59,538,092,  respectively,
and the number of shares of common stock authorized to 58,220,375 and 75,220,375, respectively. On
April 19, 2013, the Company issued and sold an  aggregate of 17,000,000  shares of Series A preferred
stock at a price of $1.00 per share for  proceeds of $16,880,463, which is net of issuance costs  of
$119,537, to funds affiliated with Longitude Capital and certain  existing investors. Each  share of
Series A preferred stock issued in the  financing was convertible into 0.143  shares of common  stock
upon the closing of the Company’s IPO.

On May 29, 2013, the Company entered  into  a stock purchase agreement  with Pfizer Inc.  and
issued and sold 6,750,000 shares of Series A-1 preferred stock  at a  price of $1.1560 per share. The
purchase price was paid through the  cancellation of all outstanding  indebtedness, including accrued
interest, under the Pfizer convertible  promissory note, which had an  aggregate balance, including
accrued interest, of $7,803,000 as of  May 29, 2013.  Each share of Series  A-1 preferred stock issued  in
the  agreement  was  convertible  into  0.143  shares  of  common  stock  upon  the  closing  of  the  Company’s
IPO.

F-20

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

11. Convertible Preferred Stock and Stockholders’ Deficit (Continued)

Upon the closing of the Company’s IPO  on July 1, 2013,  all of the outstanding shares of

convertible preferred stock were converted into  9,210,999 shares of common stock. As of December  31,
2013, the Company did not have any  convertible preferred stock issued  or  outstanding.

Convertible Preferred Stock

As of December 31, 2013, the Company had authorized a total of 5,000,000 undesignated
preferred shares. As of December 31,  2012, the Company had 42,647,283 shares of  preferred stock
designated in various series. The preferred stock designated as of  December 31,  2012 is summarized  as
follows:

Series A . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A-1 . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 2012

Shares
Designated

34,785,000
7,862,283

42,647,283

Liquidation
Preference
Per Share

Shares
Issued and
Outstanding

$1.00
—

$1.00

23,975,000
—

23,975,000

Voting

The holders of preferred stock have various rights and preferences. Each share of  Series A  and
Series A-1 preferred stock has certain voting rights  equal  to the number of shares  of  common stock
into which it is convertible and votes together as one class with the common stock.

A separate vote of a majority of the  Series A  preferred stock, equal to the  number of shares of

common stock into which it is convertible,  is required for certain activities,  including certain  issuances
of common stock; for any redemption, repurchase,  dividend, or other distribution with respect to the
common stock; any agreement by the Company or  its stockholders  regarding certain mergers or
consolidations of the Company; a sale of all  or substantially all of the  assets of the Company; or  any
redemption, repurchase, dividend, or other distribution with respect  to  any shares of preferred stock.

As the Series A preferred stock could be redeemed in a ‘‘deemed liquidation’’ in the  event of a

change of control and the redemption features are  considered to be outside the control of the
Company, all shares of Series A preferred stock have been presented outside of permanent equity in
accordance with ASC 480.

Liquidation

In the event of any liquidation, dissolution, or  winding-up of the  Company, including a merger,
acquisition, or sale of assets where the  holders  of the Company’s  common stock and  preferred stock
own less than 50% of the resulting voting  power  of the surviving entity, the holders  of Series A
preferred stock shall be entitled to receive prior and in preference to any distribution of the  assets of
the Company to the holders of Series  A-1 preferred stock and  common stock, an amount equal  to
$1.00 for each share of Series A preferred stock held, plus any declared  but unpaid dividends. After
payment of the full liquidation preference to holders of Series A preferred  stock, but prior  to  any
distribution or payment to holders of common  stock,  the holders of Series A-1 preferred  shall  be

F-21

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

11. Convertible Preferred Stock and Stockholders’ Deficit (Continued)

entitled to receive a distribution equal  to  the original issue price of a share of Series  A-1 preferred
stock plus any declared but unpaid dividends. After payment of the full liquidation preference(s) to the
Series A and Series A-1 stockholders, the remaining assets legally available for distribution shall  be
distributed ratably to the holders of common stock and preferred stock on an  as if converted to
common stock basis.

Dividends

Holders of Series A and Series A-1 preferred stock, in preference  to  the holders of common stock,

are entitled to receive cash dividends  at the  rate  of  eight percent of the respective original issue price
per  annum on each outstanding preferred share on a pari passu basis.  Such  dividends  are payable  only
when, as and if declared by the Board  of Directors and are  non-cumulative. There have  been no
dividends declared, accrued or paid during  the period  from Inception  through December  31, 2013.

Conversion

Any share of Series A or Series A-1 preferred  stock may be converted  at  the option  of  the holder
at any time into shares of common stock  at the Series  A preferred conversion  price or the  Series A-1
preferred conversion price then in effect.

Each  share of Series A and Series A-1 preferred stock shall automatically be converted into shares
of common stock based upon the then-effective  Series A preferred conversion price  and the  Series A-1
preferred conversion price, respectively, upon the affirmative election of the holders of at least 60% of
the outstanding shares of the Series A  preferred stock and Series  A-1 preferred stock voting  as a single
class.

Each  share of Series A preferred stock  shall automatically  convert into shares of  common stock
based upon the effective Series A preferred conversion price upon (i) the affirmative  election of the
holders  of at least two-thirds of the outstanding shares  of the Series A preferred stock; (ii)  the
Company’s sale of  its common stock in a firmly  underwritten public offering  in which  the per share
price is at least three times the Series A original issue price adjusted  for  stock  splits, dividends,
recapitalizations, and the like, and which  would  result in gross  proceeds to  the Company of at least
$40 million (prior to deducting underwriting  discounts and commissions); or  (iii) the  affirmative
election of at least a majority of the  outstanding  shares of  the Series  A  preferred stock following the
closing of a firmly underwritten public  offering  that covers the  offer and sale of common  stock  for the
Company that does not meet the three times original  issue  price or gross  proceeds requirements above.
Upon an automatic conversion, any declared and unpaid  dividends shall be paid  to  the holders of
Series A preferred stock.

The Series A preferred conversion rate is  the $1.00 Series A  original  issue price, divided  by  the

Series A preferred conversion price,  which  was initially set at $1.00 and was adjusted to $6.986, on
June 11, 2013 when the Company effected its 1-for-6.986 reverse stock split, making the Series A
preferred conversion rate equal to 0.143.  The  Series A-1 preferred conversion  rate is the $1.1560
Series A-1 original issue price, divided by the Series A preferred  conversion  price, initially set at
$1.1560 and was adjusted to $8.076 on  June 11,  2013 when  the Company  effected its 1-for-6.986  reverse
stock  split,  making  the  Series A-1  preferred  conversion  rate  equal  to  0.143.  Upon  closing  of  the

F-22

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

11. Convertible Preferred Stock and Stockholders’ Deficit (Continued)

Company’s  IPO,  all  outstanding  shares  of  preferred  stock  converted  into  9,210,999  shares  of  common
stock (see Note 1).

12. Stock Compensation

2013 Stock Option and Incentive Plan

On June 7, 2013, the Company’s stockholders approved the  2013 Stock Option and  Incentive Plan
(the 2013 Plan), which became effective on June 25,  2013. The number of shares  of  stock reserved and
available for issuance under the 2013  Plan  is the sum of (i)  1,100,000, plus  (ii) 54,129  shares originally
reserved under the Company’s 2008  Incentive Stock Option and Restricted  Stock Plan (the 2008 Plan)
that became available for issuance under the  2013 Plan upon completion  of the Company’s  initial
public offering, plus (iii) the shares underlying any awards granted  under  the 2008 Plan that are
forfeited,  canceled, held back upon the exercise of an option or settlement of an award to cover the
exercise price or tax withholding, reacquired  by the  Company prior  to  vesting, satisfied without  the
issuance of stock or otherwise terminated  (other than by exercise). Additionally,  on January 1, 2014 and
each  January 1 thereafter, the number  of  shares reserved and available for issuance under  the 2013
Plan shall be cumulatively increased by two and a half percent of the number  of  shares issued  and
outstanding on the immediately preceding December 31 or such lesser  number  of shares as determined
by the plan administrator.

2008 Stock Option and Restricted Stock Plan

In April 2008, the Company adopted the 2008 Incentive Stock Option  and  Restricted Stock  Plan

(the 2008 Plan), administered by the Board of Directors or a  committee appointed by the Board of
Directors. The 2008 Plan provides for the  granting  of  stock  options and  restricted stock to employees
and nonemployees of the Company.  Options granted under  the 2008 Plan may  either be incentive  stock
options (ISOs), restricted stock awards (RSAs)  or nonqualified stock options (NQSOs).  Stock options
and restricted stock grants may be granted to employees, directors and  consultants.

Stock awards under the 2008 Plan may  be  granted for up to ten  years  from the adoption of  the

2008 Plan at prices no less than 100 percent of the  fair value of the shares on the date  of the grant as
determined by (i) the closing price of  the Company’s common stock  on any national  exchange, (ii) the
National Association of Securities Dealers  Inc. Automated Quotation  System (NASDAQ), if so
authorized for quotation as a NASDAQ  security, or  (iii)  by reasonable application of a reasonable
valuation method. The valuation methods  utilized by the  Company are consistent with  the AICPA
Technical Practice Aid.

Under the 2013 Plan and the 2008 Plan the  vesting  of  options granted  or restricted  awards  given

will be determined individually with each  option grant. Generally, 25 percent of the  granted amount
will vest upon the first anniversary of  the option grant with the remainder vesting  ratably on the first
day of each calendar quarter for the  following  three years. Stock options have  a 10 year life and expire
if not exercised within that period, or if not exercised  within 90 days  of  cessation of employment with
the Company.

F-23

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

12. Stock Compensation (Continued)

The following table summarizes the activity relating to the Company’s options to purchase common

stock for the year ended December 31, 2013:

Outstanding at December 31, 2012 . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Options

211,500
1,251,749
(12,212)
(49,936)

Outstanding at December 31, 2013 . . . . . . . .

1,401,101

Weighted-Average
Price
Per Share

Weighted-Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value

$ 1.43
$10.62
$ 2.03
$ 2.47

$ 9.59

7.5

$ 141,389

8.95

$7,755,321

The following table summarizes information  about the  Company’s stock option plan  as of

December 31, 2013:

Number of
Options

Weighted-Average
Price
Per Share

Weighted-Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value

Vested and expected to vest at December 31,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,334,221

Exercisable at December 31, 2013 . . . . . . . .

594,176

$9.49

$2.81

8.92

8.16

$7,505,458

$6,572,563

The following table shows the weighted-average  assumptions  used  to  compute the share-based

compensation costs for the stock options granted to employees  and non-employees during the period
from Inception to December 31, 2013, using  the Black-Scholes option pricing model:

Year ended
December 31,

2013

2012

2011

Period From
January 22, 2008
(Inception)
Through
December  31, 2013

Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Weighted-average expected life of options  (years) . . . . . . . . .
6.26
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.45% 0.85% 2.50%
—
6.25

—
6.25

74% 80% 80%

1.58%
—
6.26

75%

The risk-free interest rate assumption was based on the  United States Treasury’s rates for U.S.

Treasury zero-coupon bonds with maturities  similar to those of the expected term of the  award  being
valued.  The assumed dividend yield was based  on the Company’s expectation of not paying  dividends in
the foreseeable future. The weighted-average  expected life of the options was calculated  using  the
simplified method as prescribed by the Securities  and Exchange Commission (SEC) Staff Accounting
Bulletin No. 107 (SAB No. 107). This  decision was based  on the  lack of relevant  historical  data  due  to
the Company’s limited historical experience. In addition, due to the Company’s limited historical data,
the estimated volatility also reflects the  application of SAB No.  107, incorporating the historical
volatility of comparable companies whose  share prices are  publicly  available.

F-24

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

12. Stock Compensation (Continued)

The weighted-average grant-date fair values of stock  options  granted during the years ended
December 31, 2013, 2012, 2011, and  the period  from Inception  through December 31, 2013  were $7.14,
$1.33, $1.12 and $5.94, respectively. During the years ended  December 31, 2013, 2012,  2011, and  the
period from Inception through December  31, 2013,  the Company recognized stock-based compensation
expense of $1,226,988, $79,861, $78,451, and $1,484,096, respectively.

As of December 31, 2013, there was  approximately $7,346,725  of  unrecognized compensation cost
related to unvested options, adjusted for  forfeitures, which will  be  recognized  over a weighted-average
period of approximately 3.5 years.

13. Employee Benefit Plan

During  2008, the Company adopted the  Esperion Therapeutics, Inc. 401(k)  Plan  (the 401(k)  Plan),

which  qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the 401(k) Plan, participating  employees may  defer  a  portion of their pretax earnings. The
Company may, at its sole discretion,  contribute  for the benefit  of  eligible employees. There  have been
no Company contributions to the 401(k) Plan during 2013,  2012, 2011, or  from Inception  through
December 31, 2013.

14. Income Taxes

There was no provision for income taxes for the year ended December 31,  2013, 2012 and 2011

because the Company has incurred operating  losses  since inception. At  December 31,  2013, the
Company has concluded that it is more likely than not that the Company will  not  realize the benefit  of
its  deferred tax assets due to its history  of  losses. Accordingly,  the  net deferred tax assets  have been
fully reserved.

As of December 31, 2013, 2012 and 2011, the  Company had deferred tax assets, before valuation
allowance of approximately $22,804,000, $14,351,000 and $10,386,000,  respectively. Realization  of the
deferred assets is dependent upon future taxable  income,  if any, the  amount  and timing  of  which are
uncertain. Accordingly, the net deferred  tax  assets have been fully  offset by a valuation allowance.

As of December 31, 2013, 2012 and 2011, the  Company had federal net operating  loss

carryforwards of approximately $62,272,000, $40,465,000 and $29,206,000, respectively. The federal net
operating loss will expire at various dates beginning in  2028, if not utilized. As  of  December 31, 2013,
2012 and 2011, the Company had state  net  operating loss carryforwards of approximately $33,129,000,
$11,322,000 and $0, respectively. The state  net operating loss will expire at various  dates beginning in
2022, if  not utilized. We have $191,000 of  NOLs  related to excess tax benefits  generated upon  the
settlement of stock awards that increased  a current  year  net operating loss. We  cannot record the
benefit of these losses in the financial  statements until  the losses are utilized to reduce our income
taxes payable at which time we will recognize the  tax  benefit in equity.

F-25

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

14. Income Taxes (Continued)

A reconciliation of the U.S. statutory income tax  rate  to  the Company’s effective tax rate is as

follows:

December 31,

2013

2012

2011

Federal income tax (benefit) at statutory rate . . . . . . . . . . .
State income tax benefit, net of federal  benefit . . . . . . . . . .
Permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . .

(34.0)% (34.0)% (34.0)%
—% —% (0.7)%
4.9% 0.4% (0.1)%
—% (0.2)% 3.2%
29.1% 33.8% 31.6%

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . .

0.0% 0.0% 0.0%

If the Company experiences a greater than 50 percentage point aggregate  change in ownership of

certain significant stockholders over a three-year period,  a Section 382 ownership change could be
deemed to have occurred. If a section 382  change occurs,  the Company’s future utilization of  the net
operating loss carryforwards and credits  as of the ownership change  will be subject to an annual
limitation under Section 382 of the Internal Revenue Code of 1986,  as amended, and  similar state
provisions. Such an annual limitation  may  result  in the expiration of net  operating losses before
utilization.

The Company’s reserves related to taxes are  based on a determination of whether and how much

of a tax benefit taken by the Company in its tax filings or positions is more  likely than not to be
realized following resolution of any potential  contingencies present  related to the  tax benefit.  The
Company recognized no material adjustment  for unrecognized  income  tax  benefits. Through
December 31, 2013, the Company had  no  unrecognized tax benefits or related interest and  penalties
accrued.

Significant components of the Company’s deferred tax assets are summarized in the table below:

December 31,

2013

2012

Deferred tax assets:

Federal and state operating loss carryforwards . . . . .
Temporary differences . . . . . . . . . . . . . . . . . . . . . . .

$ 22,485,000
319,000

$ 14,207,000
144,000

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . .

22,804,000
(22,804,000)

14,351,000
(14,351,000)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . .

$

— $

—

15. License Agreement

In December 2011, the Company entered into a license agreement for certain U.S. and  foreign
patents and patent applications regarding  new high-density lipoprotein therapies to treat cardiovascular
disease in exchange for 2,862 shares  of common stock, plus  an issue  fee of  $50,000. The license
agreement will expire in 2028, which  is  the  date of the  last to expire of the licensed  patents. The

F-26

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

15. License Agreement (Continued)

Company recorded the common stock,  which  was valued at  its  fair value of $4,400,  and the  issue fee
within general and administrative expenses in  the statements  of operations.

The license agreement provides for a minimum  annual  payment of $50,000  for any years in which
a milestone is not achieved, fully creditable  against any earned royalties per calendar year. In  addition,
the Company is also contractually obligated to issue up  to  an aggregate  of  11,451 shares  of  common
stock upon various milestones set forth  in  the agreement.

Milestone achievement payments are due within 30 days of the milestone achievement. No

milestones have been achieved to date under the license agreement. Additionally,  the agreement
provides for the Company to reimburse  the patent holder for certain patent costs  during the term of
the agreement. The Company recognized  expenses associated with this  license  agreement of $50,000,
$50,000, $54,400, and $154,400 during  the years ended December  31, 2013,  2012, 2011, and the period
from Inception through December 31, 2013, respectively,  in general and administrative expenses.

16. Net Loss Per Common Share

Basic net loss per share is calculated by dividing  net loss  by the weighted-average number of
common shares outstanding during the period, without consideration for common stock equivalents.
Diluted net loss per share is computed  by dividing net loss  by the weighted-average  number of  common
share equivalents outstanding for the  period determined  using  the treasury-stock method.  For purposes
of this calculation, convertible preferred  stock,  convertible debt, warrants for preferred stock and stock
options are considered to be common stock equivalents and are only included in the  calculation of
diluted net loss per share when their  effect  is dilutive. Interest expense  for  convertible debt that is
dilutive is added back to net income in  the calculation of diluted net  loss per share.

The shares outstanding at the end of  the respective periods presented  below,  after giving effect for
the 1-for-6.986 reverse stock split, were  excluded  from the calculation of diluted net loss per share  due
to their anti-dilutive effect:

December 31,
2013

December 31,
2012

Convertible preferred stock . . . . . . . . . . . . . . . . . . . . . . .
Warrants for common stock . . . . . . . . . . . . . . . . . . . . . . .
Common shares under option . . . . . . . . . . . . . . . . . . . . .
Unvested restricted stock . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

277,690
1,401,101
16,703

— 3,431,865
277,690
211,500
—
— 3,430,723

Total potential dilutive shares . . . . . . . . . . . . . . . . . . . . .

1,695,494

7,351,778

F-27

Esperion Therapeutics, Inc.

(A Development Stage Company)

Notes to the Financial Statements (Continued)

17. Selected Quarterly Financial Data (Unaudited)

The following table summarizes the unaudited quarterly financial data for the last two  years:

March 31

June 30

September 30

December 31

2013

Operating expenses:

Research and development . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . .

$ 2,092,593
1,251,419

$ 3,100,422
1,171,425

$ 3,482,673
1,924,150

$ 7,338,517
2,397,499

Total operating expenses . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Loss from operations:

3,344,012
(3,344,012)

Interest expense . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of warrant liability . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . .

(828,223)
(41,958)
(24,984)

4,271,847
(4,271,847)

(108,357)
(2,544,907)
4,035

5,406,823
(5,406,823)

9,736,016
(9,736,016)

—
—
168,389

—
—
46,570

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . .

$(4,239,177) $(6,921,076) $(5,238,434) $(9,689,446)

Net loss per  common share (basic and diluted) .
Weighted-average shares outstanding  (basic  and
diluted) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(12.24) $

(19.82) $

(0.34) $

(0.63)

346,478

349,170

15,253,704

15,340,713

March 31

June 30

September 30

December 31

2012

Operating expenses:

Research and development . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . .

$ 1,557,211
632,372

$ 2,330,223
533,658

$ 2,456,412
533,837

$ 1,654,282
505,765

Total operating expenses . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Loss from operations:

2,189,583
(2,189,583)

2,863,881
(2,863,881)

2,990,249
(2,990,249)

2,160,047
(2,160,047)

Interest expense . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of warrant liability . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . .

(260,428)
—
1,059

(303,167)
—
894

(361,426)
—
401

(561,675)
32,367
(86,001)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . .

$(2,448,952) $(3,166,154) $(3,351,274) $(2,775,356)

Net loss per  common share (basic and diluted) .
Weighted-average shares outstanding  (basic and
diluted) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(7.96) $

(9.94) $

(10.31) $

(8.12)

307,742

318,654

325,023

341,935

18. Subsequent Events

On February 4, 2014, the Company entered into an operating lease agreement to lease a  new
office facility in Ann Arbor, MI. The term of this lease is for 63 months, commencing on April 1,  2014.
The Company’s facility lease provides for  a fixed monthly rent  for the term of the lease, with monthly
rent increasing every 12 months subsequent to the  first 3  months of the lease,  and also provides for
certain rent adjustments to be paid as  determined by the  landlord.

F-28

Exhibit No.

Exhibit List

Exhibit Index

3.1

3.2

4.1

4.2

4.3

4.4

4.5

Amended and Restated Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.2 to the Registrant’s Amendment No. 2  to  the Registration
Statement on Form S-1, File No. 333-188595, filed on June 12,  2013)

Amended and Restated By-laws  of  the  Registrant (incorporated by reference to
Exhibit 3.4 to the Registrant’s Amendment No. 1 to the Registration Statement on
Form S-1, File No. 333-188595, filed on  June  7, 2013)

Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1  to  the
Registrant’s Amendment No. 2 to the  Registration Statement on Form S-1,
File No. 333-188595, filed on June 12, 2013)

Form of Warrant to Purchase Preferred Stock dated September 4, 2012 (incorporated by
reference to Exhibit 4.3 to the Registrant’s Registration Statement  on Form S-1,
File No. 333-188595, filed on May 14, 2013)

Investor Rights Agreement by and between  the Registrant  and  certain of  its stockholders
dated April 28, 2008 (incorporated by reference  to  Exhibit  4.4 to the Registrant’s
Registration Statement on Form S-1, File No. 333-188595, filed  on  May  14, 2013)

Amendment No. 1 to Investor Rights Agreement by and  between  the Registrant and
certain of its stockholders dated April 11, 2013 (incorporated by reference to Exhibit 4.5
to the Registrant’s Registration Statement on  Form S-1, File No. 333-188595,  filed on
May 14, 2013)

Registration Rights and Securityholder  Agreement  by and between the  Registrant and
Pfizer Inc. dated April 28, 2008 (incorporated  by reference to Exhibit 4.6 to the
Registrant’s Registration Statement on Form S-1, File No.  333-188595,  filed  on May 14,
2013)

10.1*

License Agreement between  Pfizer  Inc.  and the Registrant dated April  28, 2008 and
amended on November 17, 2010 (incorporated by reference to Exhibit 10.7 to the
Registrant’s Registration Statement on Form S-1, File No.  333-188595,  filed  on May 14,
2013)

10.2

10.3

10.4

10.5

10.6

Lease by and between the Registrant  and Michigan Life  Science and Innovation
Center LLC dated October 2, 2008 and  amended on November  15, 2011  (incorporated by
reference to Exhibit 10.10 to the Registrant’s  Registration Statement on Form  S-1,
File No. 333-188595, filed on May 14, 2013)

Second Amendment to Lease by and  between the Registrant  and  the Michigan Land
Bank Fast Track Authority dated August 26, 2013 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current  Report  on Form 8-K, File No.  001-35986, filed
on August 27, 2013)

Valley Ranch Business Park Lease by and between the Registrant  and McMullen
SPE, LLC, dated February 4, 2014 (incorporated by reference  to  Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K, File No. 001-35986, filed  on February 7,  2014)

Form of Officer Indemnification  Agreement  entered into between  the Registrant and its
officers (incorporated by reference to Exhibit  10.8 to the Registrant’s Registration
Statement on Form S-1, File No. 333-188595, filed on May 14, 2013)

Form of Director Indemnification  Agreement  entered into between the Registrant and its
directors (incorporated by reference to Exhibit 10.9  to  the Registrant’s Registration
Statement on Form S-1, File No. 333-188595, filed on May 14, 2013)

Exhibit No.

Exhibit Index

10.7# 2008 Incentive Stock Option and  Restricted  Stock Plan and forms of  agreements

thereunder (incorporated by reference to Exhibit 10.1 to the  Registrant’s  Registration
Statement on Form S-1, File No. 333-188595, filed on May 14, 2013)

10.8# 2013 Stock Option and Incentive  Plan and forms  of agreements thereunder (incorporated

by reference to Exhibit 10.2 to the Registrant’s  Amendment No.  2 to the Registration
Statement on Form S-1, File No. 333-188595, filed on June 12,  2013)

10.9# Senior Executive Cash Bonus  Plan (incorporated  by reference to Exhibit 10.11 to the
Registrant’s Amendment No. 1 to the  Registration Statement on Form S-1,
File No. 333-188595, filed on June 7, 2013)

10.10# Employment Agreement by and  between the Registrant and Dr.  Roger S. Newton  dated
December 4, 2012 (incorporated by reference  to  Exhibit 10.3 to the Registrant’s
Registration Statement on Form S-1, File No. 333-188595, filed  on  May  14, 2013)

10.11# Employment Agreement by and  between the Registrant and Tim M.  Mayleben dated

December 3, 2012 (incorporated by reference  to  Exhibit 10.4 to the Registrant’s
Registration Statement on Form S-1, File No. 333-188595, filed  on  May  14, 2013)

10.12# Transitional Services and Letter Agreement by and  between  Esperion Therapeutics, Inc.
and Troy A. Ignelzi, dated August 8,  2013. (incorporated by reference  to  Exhibit  10.1 to
the Registrant’s Quarterly Report on Form  10-Q  for  the Quarter ended June 30,  2013,
File No, 001-35986, filed on August 12, 2013)

10.13# Transitional Services and Letter Agreement by and  between  Esperion Therapeutics, Inc.

and Noah L. Rosenberg, M.D., dated February 26, 2014  (incorporated by  reference to
Exhibit 10.1 to the Registrant’s Current  Report  on Form 8-K, File No,  001-35986, filed
on February 28, 2014)

21.1

23.1

31.1

32.1

Subsidiaries of the Registrant  (incorporated by  reference to Exhibit 21.1 to the
Registrant’s Registration Statement on Form S-1, File No.  333-188595,  filed  on May 14,
2013)

Consent of Ernst & Young LLP

Certification of Principal Executive Officer and Principle Financial Officer pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange  Act of 1934, as  adopted
pursuant to Section 302 of the Sarbanes-Oxley Act  of  2002

Certification of Principal Executive Officer and Principle Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section  906 of the  Sarbanes-Oxley Act  of
2002

101.INS*** XBRL Instance Document.

101.SCH*** XBRL Taxonomy Extension  Schema Document

101.CAL*** XBRL Taxonomy Extension Calculation Document

101.DEF*** XBRL Taxonomy Extension  Definition  Linkbase Document

101.LAB*** XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE*** XBRL Taxonomy Extension  Presentation Link Document.

(#) Management contract or compensatory plan or arrangement.

(*)

Confidential treatment has been granted by the Securities and Exchange Commission as to
certain portions.

(***) Pursuant to Rule 406T of Regulation S-T,  these interactive data files  are deemed not filed or part

of a registration statement or prospectus for purposes of Sections 11 or  12 of the Securities Act
of 1933 or Section 18 of the Securities  Exchange  Act of 1934 and otherwise are not subject to
liability under these sections.

Consent of Independent Registered Public  Accounting Firm

We  consent to the  incorporation by reference in the Registration Statement  (Form S-8

No. 333-189738) pertaining to the 2008  Incentive Stock Option and Restricted  Stock Plan and the 2013
Stock Option and Incentive Plan of Esperion Therapeutics, Inc.  of  our report dated March 13, 2014
with respect to the financial statements  of  Esperion Therapeutics,  Inc. included  in this Annual Report
(Form 10-K) for the year ended December 31,  2013.

Exhibit 23.1

/s/ Ernst & Young LLP

Detroit, Michigan
March 13, 2014

Exhibit 31.1

I, Tim M. Mayleben, certify that:

CERTIFICATIONS UNDER SECTION  302

1.

I have reviewed this annual report on  Form 10-K  of  Esperion Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement  of  a material fact

or omit to state a material fact necessary  to make the statements  made, in light of the circumstances
under which such statements were made, not misleading  with respect to the period  covered by this
report;

3. Based on my knowledge, the financial statements, and  other financial  information included in
this  report, fairly present in all material  respects  the financial condition, results of operations and  cash
flows of the registrant as of, and for, the  periods presented in  this report;

4. The registrant’s other certifying  officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures,  or caused such  disclosure controls and

procedures to be designed under our  supervision, to ensure that material  information relating to
the registrant, including its consolidated subsidiaries, is  made known  to  us by others within  those
entities, particularly during the period  in which  this report  is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls  and procedures and
presented in this report our conclusions  about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered  by this  report based on such evaluation; and

c) Disclosed in this report any change  in the registrant’s internal control over  financial
reporting that occurred during the registrant’s most recent fiscal  quarter (the registrant’s fourth
fiscal quarter in the case of an annual report) that has  materially affected, or is  reasonably  likely to
materially affect, the registrant’s internal  control over financial reporting; and

5. The registrant’s other certifying  officer(s) and I have disclosed,  based on our  most recent

evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses  in the design or operation of internal

control over financial reporting which are  reasonably likely  to  adversely affect  the registrant’s
ability to record, process, summarize and report  financial information; and

b) Any fraud, whether or not material, that involves management or other employees who

have a significant role in the registrant’s  internal control over financial reporting.

Date: March 13, 2014

/s/ TIM M. MAYLEBEN

Tim M. Mayleben
President and Chief Executive Officer
(Principal Executive Officer and Principal Financial
Officer)

Exhibit 32.1

CERTIFICATIONS UNDER SECTION  906

Pursuant to section 906 of the Sarbanes-Oxley  Act of 2002 (subsections (a) and (b)  of

section 1350, chapter 63 of title 18, United States Code),  each of the undersigned officers of  Esperion
Therapeutics, Inc., a Delaware corporation (the ‘‘Company’’), does  hereby certify, to such officer’s
knowledge, that:

The Annual Report for the year ended December 31, 2013  (the  ‘‘Form  10-K’’)  of  the Company
fully complies with the requirements of  Section 13(a)  or 15(d) of the Securities Exchange  Act of 1934,
and the information contained in the Form 10-K fairly presents,  in all  material respects, the  financial
condition and results of operations of  the Company.

Dated: March 13, 2014

/s/ TIM M. MAYLEBEN

Tim M. Mayleben
President and Chief Executive Officer (Principal
Executive Officer and Principal Financial  Officer)

This page intentionally left blank

This page intentionally left blank

This page intentionally left blank

ESPERIon MAnAgEMEnT TEAM

TIM MAYlEBEn
PRESIDEnT AnD  
CHIEF EXECuTIVE oFFICER

MARIAnnE AnDREACH
VICE PRESIDEnT,  
STRATEgIC MARKETIng AnD 
PRoDuCT PlAnnIng

RogER nEWTon, PHD, FAHA
EXECuTIVE CHAIRMAn AnD  
CHIEF SCIEnTIFIC oFFICER

CARol KARP
SEnIoR VICE PRESIDEnT, 
REgulAToRY AFFAIRS  
AnD CoMPlIAnCE

BoARD oF DIRECToRS

TIM MAYLEBEN
PRESIDEnT AnD 
CHIEF EXECuTIVE oFFICER 

ROGER NEWTON, PHD, FAHA
EXECuTIVE CHAIRMAn AnD 
CHIEF SCIEnTIFIC oFFICER

DOV GOLDSTEIN, MD
PARTnER, AISlIng CAPITAl

ANTONIO GOTTO, JR., MD, DPHIL
DEAn EMERITuS AnD Co-CHAIR 
oF BoARD oF oVERSEERS, WEIll 
CoRnEll MEDICAl CollEgE

PATRICK ENRIGHT
MAnAgIng DIRECToR, longITuDE 
CAPITAl MAnAgEMEnT Co., llC

DAN JANNEY
MAnAgIng DIRECToR 
AlTA PARTnERS

LOU LANGE, MD, PHD
PARTnER 
ASSET MAnAgEMEnT CoMPAnY

MARK MCGOVERN, MD, FACC, FACP
FoRMER EXECuTIVE VICE 
PRESIDEnT, MEDICAl AFFAIRS 
AnD CHIEF MEDICAl oFFICER 
KoS PHARMACEuTICAlS

NICOLE VITULLO
DIRECToR 
DoMAIn ASSoCIATES, llC

general shareholder inquiries, including  
requests for the Company’s Annual 
Report on Form 10-K, should be 
directed to:

Investor Relations
Esperion Therapeutics, Inc.
3891 Ranchero Drive, Suite 150
Ann Arbor, MI 48108
Phone: (734) 862-4840
Email: investorrelations@esperion.com
investors.esperion.com

Independent Registered Public  
Accounting Firm
Ernst & Young
777 Woodward Ave
Detroit, MI 48226
Phone: (313) 628-7100

General Counsel
goodwin Procter llP
53 State Street
Boston, MA 02109
Phone: (617) 570-1000

Registrar and Transfer Agent
Computershare
250 Royall Street
Canton, MA 02021 
Phone:  (312) 360-5195

38 91  Ranchero Drive, Suite 150 ,  A nn  A rb or ,  MI  48 10 8  |  w ww .e spe rio n.co m