EX-99.3

Exhibit 99.3

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

Combined Financial Statements as of and for the six months ended June 30, 2023

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

INDEX TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS


	Page
Unaudited Combined Balance Sheet at June 30, 2023		2
Unaudited Combined Statement of Operations for the six months ended June 30, 2023		3
Unaudited Combined Statement of Net Parent Investment for the six months ended June 30, 2023		4
Unaudited Combined Statement of Cash Flows for the six months ended June 30, 2023		5
Notes to Unaudited Combined Financial Statements		6

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

COMBINED BALANCE SHEET

(unaudited, in thousands)


	June 30, 2023
Assets
Current assets:
Accounts receivable, net	$	6,342
Inventory		2,552
Prepaid expenses		197

Total current assets		9,091
Intangible assets, net		42,835
Deferred tax assets		31,999
Other assets		308

Total assets	$	84,233

Liabilities and Net Parent Investment
Current liabilities:
Accounts payable	$	242
Accrued expenses		8,042
Business combination-related contingent consideration, current portion		6,900

Total current liabilities		15,184

Business combination-related contingent consideration, less current portion		67,200

Total liabilities		82,384

Commitments and contingencies (See Note 7)
Net parent investment		1,849

Total liabilities and net parent investment	$	84,233

The accompanying notes are an integral part of these Combined Financial Statements.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

COMBINED STATEMENT OF OPERATIONS

(unaudited, in thousands)


	Six Months Ended June 30,
	2023
Net product sales	$	53,606
Operating expenses:
Cost of goods sold		1,518
Research and development		7,572
Selling, general and administrative		17,831
Change in fair value of contingent consideration		8,596

Total operating expenses		35,517

Operating income		18,089
Total other expense		(159	)

Income before income tax provision		17,930
Income tax provision		(4,380	)

Net income	$	13,550

The accompanying notes are an integral part of these Combined Financial Statements.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

COMBINED STATEMENT OF NET PARENT INVESTMENT

(unaudited, in thousands)


	Net Parent Investment
Balance as of December 31, 2022	$	10,496
Net income		13,550
Share based compensation		2,323
Net transfers to parent		(24,520	)

Balance as of June 30, 2023	$	1,849

The accompanying notes are an integral part of these Combined Financial Statements.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

COMBINED STATEMENT OF CASH FLOWS

(unaudited, in thousands)


	For the Six Months Ended June 30,
	2023
Cash Flows From Operating Activities:
Net income	$	13,550
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,882
Deferred income taxes		488
Share based compensation		2,323
Change in estimated fair value of contingent consideration		8,596
Payments from change in fair value of contingent consideration		(4,890	)
Loss on allowance for inventory		608
Other		159
Changes in operating assets and liabilities:
Accounts receivable		345
Inventory		(761	)
Prepaid expenses		412
Other assets		69
Accounts payable		(799	)
Accrued expenses		(599	)

Net cash provided by operating activities		25,383

Cash Flows From Financing Activities:
Net transfers to Parent		(24,520	)
Payment of business combination-related contingent consideration		(863	)

Net cash used in financing activities		(25,383	)

Net change in cash and cash equivalents		—
Cash and cash equivalents, beginning of year		—

Cash and cash equivalents, end of year	$	—

The accompanying notes are an integral part of these Combined Financial Statements.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

On July 16, 2023, Travere Therapeutics, Inc. (“Travere” or the “Company” or the “Parent”) executed an Asset Purchase Agreement (the “Purchase Agreement”) with Mirum Pharmaceuticals, Inc. (“Mirum” or the “Buyer”) for the sale of its business of development, manufacture (including synthesis, formulation, finishing or packaging) and commercialization of its bile acid product lines, Chenodal and Cholbam (the “Business”, “we”, “us” or “our”) for an aggregate purchase price, subject to certain adjustments pursuant to the terms of the Purchase Agreement, of up to $445 million in cash, with $210 million due at the closing and up to $235 million after the closing, upon the achievement of certain milestones based on specified amounts of annual net sales. The transaction closed on August 31, 2023. Per the Purchase Agreement, Travere is transferring all rights, title, interest and specified assets related to the Business products as part of the transaction. The Company and Mirum have also entered into a transition services agreement (“TSA”) pursuant to which the Company has agreed to perform certain services for a period of time following the closing, with respect to Mirum’s use and operation of the assets purchased in the transaction.

The Business’s product Cholbam^® (cholic acid capsules) is for the treatment of bile acid synthesis disorders due to single enzyme defects and is further indicated for adjunctive treatment of patients with peroxisomal disorders. Chenodal (chenodiol tablets) is for the treatment of patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age. Cholbam and Chenodal are both approved for use in the United States.

Interim Financial Statements

The accompanying unaudited interim carve-out financial statements of the Business (“Combined Financial Statements”) should be read in conjunction with the audited annual Combined Financial Statements and notes thereto for the year ended December 31, 2022. The Business operated as part of Travere and consisted of acquired businesses. Separate financial statements have not historically been prepared for the Business. The interim Combined Financial Statements have been derived from Travere’s historical accounting records as if the Business’s operations had been conducted independently from Travere and were prepared on a stand-alone basis in accordance with U.S. generally accepted accounting principles (“GAAP”). Accordingly, since they are interim statements, the accompanying Combined Financial Statements do not include all of the information and notes required by GAAP for annual Combined Financial Statements, but reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for any future periods.

Basis of Presentation

The Combined Financial Statements include all revenues and costs directly attributable to the Business and an allocation of expenses related to certain Travere corporate functions (refer to Note 10 Corporate Allocations). These expenses have been allocated to the Business based on direct usage or benefit where specifically identifiable, with the remainder allocated using the most meaningful respective allocation methodologies, which were primarily based on proportionate direct research and development expenses, headcount, or other relevant measures. The Business considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. However, the allocations may not be indicative of the actual expense that would have been incurred had the Business operated as an independent, stand-alone entity, nor are they indicative of the Business’s future expenses. Actual costs that may have been incurred if the Business had been a standalone company would depend on a number of factors, including the chosen organization structure and functions outsourced or performed by employees.

The Combined Financial Statements include assets and liabilities specifically attributable to the Business, including any corporate or centrally held assets and liabilities that relate specifically to the Business. The historical results of operations, financial position and cash flows of the Business presented in these Combined Financial Statements may not be indicative of what they would have been had the Business been an independent stand-alone entity, nor are they necessarily indicative of the Business’s future results of operations, financial position and cash flows.

As the attributable assets, liabilities and operations of the Business were not historically held by a single legal entity, net parent investment is shown in lieu of shareholder’s equity in the Combined Financial Statements. This represents Travere’s interest in the recorded assets of the Business and represents the cumulative investment by Travere in the Business through the dates presented, inclusive of operating results.

Travere’s cash and marketable debt securities have not been assigned to the Business for any of the periods presented because those balances are not legally held by the Business. Travere uses a centralized approach to cash management and financing of its operations. The net results of these transactions between the Business and Travere are reflected in net parent investment on the combined balance sheet. These arrangements are not reflective of the manner in which the Business would have financed its operations had it been a stand-alone business separate from Travere during the periods presented.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

Travere’s long-term debt and related interest expense have not been attributed to the Business for any of the period presented.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Combination

The Combined Financial Statements have been prepared on a standalone basis and include the results of certain components of legal entities in which the Business operates in conjunction with other Parent businesses, as well as corporate allocations.

Use of Estimates

The Combined Financial Statements are prepared in accordance with U.S. GAAP. These accounting principles require management to make certain estimates, judgments and assumptions. The Business believes the estimates, judgments and assumptions made when accounting for specific items and matters are reasonable, based on the information available at the time they are made. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Business evaluates its estimates and assumptions. These estimates and assumptions include revenue recognition, forecasting probability-weighted cash flows based upon estimates of forecasted revenues, estimating reserves for inventory, estimating the useful lives of depreciable and amortizable assets, estimating the fair value of contingent consideration, estimating corporate allocations, and estimating of valuation allowances and uncertain tax positions.

Revenue Recognition

The Business recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Business only applies the five-step model to contracts when it is probable that the entity will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer. See Note 3 for further discussion.

Research and Development Expenses

The Business expenses all research and development costs as they are incurred. The Business’s research and development costs are composed of salaries and bonuses, benefits, share based compensation, license fees, costs paid to third-party contractors to perform research, conduct clinical trials, develop drug materials, manufacture drug product supplies to support clinical development, and associated overhead expenses and facilities costs. The Business charges direct internal and external program costs to the respective development programs. The Business also incurs indirect costs that are not allocated to specific programs because such costs benefit multiple development programs and allow us to increase our pharmaceutical development capabilities. These consist of internal shared resources related to the development and maintenance of systems and processes applicable to all of our programs.

Nonrefundable advance payments for goods and services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered.

Share Based Compensation

The Parent maintains share based compensation plans under which it receives services from employees as consideration for equity instruments of the Parent. These Combined Financial Statements include both the expense of employees within the Business as well as expenses of the Parent that were allocated to the Business for share based compensation. These share based compensation costs are measured at fair value. The fair value of stock option awards under the employee stock purchase plan is generally determined using a Black-Scholes option-pricing model that incorporates assumptions about expected volatility, risk-free rate, dividend yield, and expected life. The fair value of restricted stock units and performance stock units is generally based on the closing market price of the Parent’s common stock on the grant date. Forfeitures are recognized as they occur. Expense is generally recognized on a straight-line basis over the requisite service period during which awards are expected to vest. We present share based compensation expense within research and development expenses and selling, general, and administrative expenses on the combined statement of operations.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

Supplier Concentration Risk

The Business has no manufacturing capabilities and relies on third party manufacturers who are sole source suppliers for manufacturing of its products. The Business expects the manufacturers of each product to be single source suppliers to the Business.

Accounts Receivables, Net

Trade accounts receivable are recorded net of reserves for prompt pay discounts and expected credit losses. The allowance for credit losses was zero at June 30, 2023. For the six months ended June 30, 2023, bad debt expense recorded in the combined statement of operations was immaterial.

Inventory, Related Reserves and Cost of Goods Sold

Inventory, which is recorded at the lower of cost or net realizable value, includes materials, and other direct and indirect costs and is valued using the first-in, first-out method. The Business periodically analyzes its inventory levels to identify inventory that may expire prior to expected sale or has a cost basis in excess of its estimated realizable value, and writes down such inventory as appropriate. In addition, the Business’s products are subject to strict quality control and monitoring which the Business’s manufacturers perform throughout their manufacturing process. The Business does not directly manufacture any product. The Business has a single supplier for Chenodal, and prospectively arranges for manufacture from contract service providers for its product Cholbam. The inventory reserve was $3.7 million at June 30, 2023.

Cost of goods sold includes the cost of inventory sold, third party manufacturing and supply chain costs, product shipping and handling costs, and provisions for excess and obsolete inventory.

Intangible Assets, Net

The Business’s intangible assets consist of licenses and purchased technology. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives and are reviewed periodically for impairment.

Goodwill

Goodwill represents the excess of purchase price over fair value of net assets acquired in a business combination and is not amortized. Goodwill is subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. Goodwill is presented within intangible assets, net on the combined balance sheets. For the six months ended June 30, 2023, there was no impairment to goodwill.

Impairment of Long-Lived Assets

The Business’s long-lived assets are comprised of intangible assets. The Business evaluates its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the use and eventual disposition of the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There was no impairment related to finite-lived intangible assets in the six months ended June 30, 2023.

Contingent Consideration

The Business records contingent consideration resulting from a business combination at its fair value on the acquisition date. On a quarterly basis, the Business revalues these obligations and records increases or decreases from their fair value as an adjustment to the combined statement of operations. Changes to contingent consideration obligations can result from changes to discount rates, accretion of the liability due to the passage of time, changes in revenue forecasts and changes in our estimates of the likelihood or timing of achieving commercial revenue milestones.

Income Taxes

Income taxes as presented in the Combined Financial Statements of the Business attribute current and deferred income taxes of Travere to the Business stand-alone financial statements in a manner that is systematic, rational and consistent with the asset and liability method prescribed by FASB ASC Topic 740: Income Taxes (“ASC 740”). Accordingly, the Business’s income tax provision was prepared following the separate return method. The separate return method applies ASC 740 to the stand-alone

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

financial statements of each member of the consolidated group as if the group members were a separate taxpayer and a stand-alone enterprise. The calculation of the Business’s income taxes on a separate return basis requires a considerable amount of judgment and use of both estimates and allocations. As a result, actual transactions included in the consolidated financial statements of Travere may not be included in the separate Combined Financial Statements of the Business. Similarly, the tax treatment of certain items reflected in the Combined Financial Statements of the Business may not be reflected in the consolidated financial statements and tax returns of Travere. Therefore, such items as net operating losses, credit carryforwards and valuation allowances may exist in Travere’s consolidated financial statements that may or may not exist in the stand-alone Combined Financial Statements. As such, the income taxes of the Business as presented in the Combined Financial Statements may not be indicative of the income taxes that the Business will generate in the future.

Operations of the Business are included in the consolidated U.S. federal and certain state and local income tax returns filed by Travere, where applicable. In jurisdictions where the Business has been included in the tax returns filed by Travere, any income taxes payable resulting from the related income tax provisions have been reflected in the balance sheet within net parent investment.

Deferred income taxes arise from temporary differences between amounts recorded in the Combined Financial Statements and the tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to affect taxable income. Deferred tax assets are evaluated based on the guidelines for realization and are reduced by a valuation allowance if deemed necessary. The Business establishes valuation allowances when necessary to reduce deferred income tax assets to the amounts that it believes are more likely than not to be recovered. Each quarter the Business evaluates the need to retain all or a portion of the valuation allowance on the Business’s deferred tax assets.

ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under the standard, the Business may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Business’s policy is to record estimated interest and penalty related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision.

See Note 9 - Income Taxes for additional information.

Legal Contingencies

The Business may, from time to time, be involved in various claims and legal actions that arise in the ordinary course of business. The Business accrues for legal contingencies when it is determined probable that a liability has been incurred and the amount of the loss can be reasonably estimated. See Note 7 for further discussion.

Transaction Costs

Approximately $0.9 million of costs related to the separation of the Business have been incurred by Travere for the six months ended June 30, 2023. These costs include legal, consulting and advisory fees. Travere has assumed these separation costs incurred to date and none of these separation costs were allocated to the Business’s Combined Financial Statements. To the extent separation costs are incurred that will directly benefit the Business as a stand-alone company, or for which the Business is the legal obligor, such costs will be allocated to the Business.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies. Unless otherwise discussed, the Business believes that the impact of recently issued standards that are not yet effective will not have a material impact on its combined financial position or results of operations upon adoption.

NOTE 3. REVENUE RECOGNITION

Net Product Sales

Product sales consist of bile acid products (Chenodal and Cholbam). The Business sells its products through direct-to-patient distributors worldwide, with the United States and Canada representing 96% and 2% of net product sales, respectively, and rest of world representing 2% of net product sales, based on the product shipment destination.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

The Business’s revenues have been derived from the sale of bile acid products, which primarily treat bile acid disorders and enzyme defects. Revenues are recognized in satisfaction of a single performance obligation when the customer obtains control of the Business’s product, which occurs upon delivery to the customer. The Business receives payments from its product sales, primarily through third party payers, based on terms that generally are within 30 days of delivery of product to the patient. Contracts do not contain significant financing components based on the typical period of time between performance of services and collection of consideration.

Deductions from Revenue

Revenues from product sales are recorded at the net sales price, which includes provisions resulting from discounts, rebates and co-pay assistance that are offered to customers, health care providers, payers and other indirect customers relating to the Business’s sales of its products. These provisions are based on the estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, and are classified as a reduction of accounts receivable (if the amount is payable to a customer) or as a current liability (if the amount is payable to a party other than a customer). The Business includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transactions will not occur. Where appropriate, these reserves take into consideration the Business’s historical experience, current contractual and statutory requirements and specific known market events and trends. Overall, these reserves reflect the Business’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. If actual results in the future vary from the Business’s provisions, the Business will adjust the estimate, which would affect net product sales and earnings in the period such variances become known. For the six months ended June 30, 2023, the Business recorded an immaterial net product sales increase, related to performance obligations satisfied in previous periods.

Government Rebates: The Business calculates the rebates that it will be obligated to provide to government programs and deducts these estimated amounts from its gross product sales at the time the revenues are recognized. Allowances for government rebates and discounts are established based on actual payer information, which is reasonably estimated at the time of delivery, and the government-mandated discounts applicable to government-funded programs. Rebate discounts are included in other current liabilities in the accompanying combined balance sheets.

Prompt Pay Discounts: The Business offers discounts to certain customers for prompt payments. The Business accrues for the calculated prompt pay discount based on the gross amount of each invoice for those customers at the time of sale.

Product Returns: Consistent with industry practice, the Business offers its customers a limited right to return product purchased directly from the Business, which is principally based upon the product’s expiration date. Generally, shipments are only made upon a patient prescription, thus returns are minimal. For the six months ended June 30, 2023, product returns were immaterial.

Co-pay Assistance: The Business offers a co-pay assistance program, which is intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an identification of claims and the cost per claim associated with product that has been recognized as revenue.

NOTE 4. INVENTORY

Inventory, net of reserves, consisted of the following at June 30, 2023 (in thousands):


	June 30, 2023
Raw materials	$	1,403
Finished goods		1,149

Total inventory	$	2,552

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

NOTE 5. INTANGIBLE ASSETS, NET

Amortizable Intangible Assets

Manchester Pharmaceuticals LLC

In 2014, the Company acquired intangible assets with finite lives related to the Chenodal product rights, trade names, and customer relationships with fair values of $67.8 million $0.2 million, and $0.4 million, respectively. The useful lives related to the acquired product rights, trade names, and customer relationships are expected to be approximately 16, 1 and, 10 years, respectively. Amortization of product rights, trade names and customer relationships are being recorded in selling, general and administrative expense over their respective lives.

Cholbam Asset Purchase

In 2015, the Company completed its acquisition from Asklepion of all worldwide rights, titles and ownership of Cholbam, including all related contracts, data assets, intellectual property, regulatory assets and the pediatric priority review voucher. The Business capitalized $75.9 million and $7.3 million for the U.S. and international economic interest, respectively. The useful lives related to the economic interest is expected to be approximately 10 years. As of December 31, 2022, the international economic interest had been fully amortized. Amortization of economic interest are being recorded in selling, general and administrative expense.

Amortizable intangible assets as of June 30, 2023 (in thousands):


	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Chenodal product rights	16	$	67,849	$	(39,277	)	$	28,572
Economic interest - Cholbam revenue	10		75,900		(62,603	)		13,297
Manchester customer relationships	10		403		(373	)		30

Total amortizable intangible assets		$	144,152	$	(102,253	)	$	41,899

Amortization expense for the six months ended June 30, 2023 was $5.9 million.

Goodwill

As of June 30, 2023, the Business had goodwill of $0.9 million.

NOTE 6. ACCRUED EXPENSES

Accrued expenses consist of the following at June 30, 2023 (in thousands):


	June 30, 2023
Accrued royalties	$	3,025
Sales discounts, rebates, and allowances		2,864
Research and development		957
Compensation related costs		558
Miscellaneous accrued		638

Total accrued expenses	$	8,042

NOTE 7. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time in the normal course of business, the Business is subject to various legal matters such as threatened or pending claims or litigation. Although the results of claims and litigation cannot be predicted with certainty, the Business does not believe it is a party to any claim or litigation the outcome of which, if determined adversely to it, would individually or in the aggregate be reasonably expected to have a material adverse effect on its results of operations or financial condition.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

NOTE 8. FAIR VALUE MEASUREMENTS

The Business utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

Financial instruments with carrying values approximating fair value accounts receivable and accounts payable, due to their short-term nature.

The following table presents the Business’ assets and liabilities, measured and recognized at fair value on a recurring basis, classified under the appropriate level of the fair value hierarchy as of June 30, 2023 (in thousands):


	As of June 30, 2023		Fair Value Hierarchy at June 30, 2023
	Total carrying and estimated fair value		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Liabilities:
Business combination-related contingent consideration	$	74,100	$	—	$	—	$	74,100

Total	$	74,100	$	—	$	—	$	74,100

The Company acquired two businesses, related to the Cholbam and Chenodal products, whose purchase price included potential future payments that are contingent on the achievement of certain milestones and percentages of future net sales derived from the products acquired. The Business recorded contingent consideration liabilities at their fair value on the acquisition date and revalues them at the end of each reporting period. In estimating the fair value of the Business’s contingent consideration, the Business uses a Monte Carlo Simulation. The determination of the contingent consideration liabilities requires significant judgements including the reasonableness of estimates and assumptions included in the forecasts of future net sales, long term growth rates and the discount rates applied to such forecasts. Changes in these estimates and assumptions could have a significant impact on the fair value of the contingent consideration liabilities.

Discount rates used to determine the fair value at June 30, 2023 are as follows:


	Revenue Discount						Payment Discount
	Cholbam			Chenodal
June 30, 2023		7.50	%		7.50	%		6.90	%

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

Based on the fair value hierarchy, the Business classified the fair value of contingent consideration within Level 3 because valuation inputs are based on projected revenues discounted to a present value.

The following table sets forth a summary of changes in the estimated fair value of the Business’s Level 3 business combination-related contingent consideration for the six months ended June 30, 2023 (in thousands):


	Fair Value Measurements of Acquisition-Related Contingent Consideration (Level 3)
	2023
Balance at January 1	$	71,200
Changes in the fair value of contingent consideration		8,596
Contractual payments		(2,756	)
Contractual payments included in accrued liabilities at June 30		(2,940	)

Balance at June 30	$	74,100

NOTE 9. INCOME TAXES

The Business has not filed separate tax returns as it has been included in the consolidated income tax returns of Travere. Accordingly, the income tax provision included in these Combined Financial Statements was calculated using a method consistent with a separate return basis, as if the Business filed a stand-alone tax return and was not considered part of a consolidated tax return. The amounts allocated for income taxes are not necessarily indicative of the actual amounts that would have been recorded had Business been held within a separate stand-alone entity.

Our effective tax rate is 24.4% during the six months ended June 30, 2023. The income tax expense of $4.4 million for the six months ended June 30, 2023 was primarily related to book income taxed at the statutory tax rate and state taxes in the United States.

NOTE 10. CORPORATE ALLOCATIONS

The Business has historically operated as part of Travere and not as a stand-alone company. Accordingly, Travere has allocated certain shared costs to the Business that are reflected as expenses in these Combined Financial Statements including, but not limited to, general corporate expenses such as senior management, legal, human resources, finance, accounting, treasury, tax, IT, benefits, communications, ethics and compliance, corporate employee benefits, incentives and share based compensation, lease expense, shared services processing and administration and depreciation for corporate fixed assets. Management considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to it. The allocation methods used include a pro rata basis of direct research and development expenses, headcount, or other measures. The following table summarizes allocations for corporate expenses, as well as respective financial statement line item where the costs were classified, for the six months ended June 30, 2023 (in thousands):


	Six Months Ended June 30,
	2023
Research and development	$	2,902
Selling, general and administrative		6,615

Total	$	9,517

NOTE 11. SHARE BASED COMPENSATION

Certain of the Business’s employees participate in share based compensation plans sponsored by the Parent. The Parent’s share based compensation plans include stock options, restricted stock units, and performance stock units. All awards granted under the plans are based on the Parent’s common shares and, as such, are reflected in the Parent’s Consolidated Statements of Stockholders’ Equity and not in the Business’s combined statement of net parent investment. Share based compensation expense includes expense attributable to the Business based on the awards and terms previously granted to the Business’s employees and an allocation of Parent’s corporate and shared functional employee expenses.

BILE ACID BUSINESS OF TRAVERE THERAPEUTICS, INC.

The Business recognized share based compensation expense consisted of the following for the six months ended June 30, 2023 (in thousands):


	Six Months Ended June 30,
	2023
Research and development	$	583
Selling, general and administrative		1,740

Total share based compensation expense	$	2,323

Share based compensation expense includes an allocation of Parent’s corporate and shared functional employee expenses and consisted of the following for the six months ended June 30, 2023 (in thousands):


	Six Months Ended June 30,
	2023
Research and development	$	487
Selling, general and administrative		1,250

Total share based compensation expense	$	1,737

NOTE 12. SUBSEQUENT EVENTS

In July 2023, the Business renewed its contract with an existing CMO and committed to purchase $6.8 million over the next three years for a minimum purchase of $2.3 million per year in active pharmaceutical ingredients, which is planned to support commercial sales of Cholbam.

In October 2023, the Company received notification from the French authorities requesting reimbursement based upon reference discount rates applied to total Kolbam sales during 2016 through 2020. The Combined Financial Statements do not reflect the resulting sales reserve of $5.4 million in net product sales that will be recorded in subsequent periods given the Company has concluded it is probable that a payment will occur. The Company plans to appeal the reimbursement decision.

These Combined Financial Statements are derived from the Consolidated Financial Statements of Travere Therapeutics, Inc. The Business has evaluated transactions or other events that occurred through November 2, 2023, the date these combined financial statements were available for issuance, noting no additional events which would affect the Combined Financial Statements as of June 30, 2023.