Travere Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparative period is Q1 2020. Travere is a rare-disease biopharmaceutical company with marketed products and clinical-stage programs. Amounts below are in U.S. dollars; financial statement figures are generally in millions unless noted.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Net product sales | $47.4 | $47.8 |
| Operating expenses | $95.0 | $62.8 |
| Operating loss | $47.5 | $15.1 |
| Net income (loss) | $(53.9) | $0.8 |
| Net loss per share | $(0.96) | Net income per share of $0.02 |
| Cash used in operating activities | $26.5 | $29.2 |
| Cash and cash equivalents | $148.2 | $84.8 at Dec. 31, 2020 |
| Available-for-sale debt securities | $372.6 | $276.8 at Dec. 31, 2020 |
| Current assets / current liabilities | $565.0 / $85.0 | $410.4 / $92.7 at Dec. 31, 2020 |
| Convertible notes, net carrying value | $218.1 | $215.3 at Dec. 31, 2020 |
Product sales were nearly flat year over year. Bile acid product sales were $22.0 million (down $0.3 million); tiopronin product sales were $25.4 million (down $0.05 million). Management attributed the decline to elevated demand at the onset of COVID-19 in Q1 2020. Gross profit was approximately $45.8 million, or about 96.5% of sales, based on reported net sales less cost of goods sold.
Research and development expense increased $17.7 million to $47.9 million, primarily from clinical-trial activity and higher headcount. Selling, general and administrative expense rose $3.6 million to $36.8 million, mainly from personnel and professional fees. A $8.6 million fair-value charge for contingent consideration, versus $1.9 million of income in Q1 2020, also increased operating expenses. Interest expense was $5.3 million. The prior-year period included a $19.0 million income tax benefit related primarily to CARES Act NOL carrybacks; Q1 2021 recorded $0.3 million of tax expense.
Net cash used in investing activities was $105.7 million, largely reflecting purchases of marketable securities net of maturities; financing activities provided $195.8 million, principally from a February public stock offering. The offering generated $189.4 million net proceeds from 7.5 million shares. At quarter-end, cash and available-for-sale securities totaled $520.9 million; management said available liquidity was expected to fund operations for at least the next 12 months. Net working capital was $480.0 million. The company had $276.0 million principal amount of 2.50% convertible notes due 2025; their fair value was reported at $281.9 million.
Business developments and outlook
- Sparsentan in FSGS: The Phase 3 DUPLEX interim analysis met its prespecified proteinuria endpoint at 36 weeks: 42% of sparsentan patients achieved FPRE versus 26% on irbesartan (p=0.0094). The company intended to pursue U.S. accelerated approval and European conditional marketing authorization, subject to regulatory discussions. The confirmatory eGFR endpoint continues through 108 weeks; topline results were expected in the first half of 2023.
- Sparsentan in IgAN: The Phase 3 PROTECT trial remained enrolling. Topline results for the 36-week proteinuria analysis were expected in Q3 2021, with timing subject to enrollment and COVID-19 effects.
- Peg tibatinase (TVT-058) in classical HCU: The Phase 1/2 study was ongoing; preliminary data were expected in 2021. The filing notes possible supply constraints for a membrane used in manufacturing, though the company believed existing clinical supply could support the ongoing study.
- Chenodal in CTX: The Phase 3 RESTORE study remained open for enrollment; it is intended to support an FDA application for this indication. Chenodal was not labeled for CTX at the time of filing.
- Management reported no material adverse effect of COVID-19 on Q1 2021 financial results, but warned that the pandemic could affect trial enrollment, operations, supply chains, commercial demand, patient access and financing conditions. The company had no off-balance-sheet arrangements.
Material risks and unusual items
- Interim DUPLEX results may not support accelerated approval; regulators may require additional evidence, and the ongoing confirmatory trial must establish longer-term eGFR benefit. The filing also notes possible patient attrition after public release of interim data.
- COVID-19, trial enrollment and execution, clinical safety or efficacy outcomes, and third-party manufacturing and distribution could delay programs or disrupt product supply.
- Commercial products face generic or compounded competition, reimbursement and pricing pressure, and dependence on third-party manufacturers and a U.S. distributor. The company disclosed that it does not have patent protection for its marketed products.
- The $8.6 million contingent-consideration revaluation charge was noncash in the period’s operating cash-flow reconciliation and reflected timing of future payments and market discount-rate changes. The Orphan Technologies acquisition also carries potential contingent payments of up to $427 million, plus royalties; none had been accrued as of March 31, 2021.
- The 2025 notes are senior unsecured obligations. Conversion or a fundamental change could require cash settlement or repurchase, potentially alongside dilution; the company cautioned that it might not have sufficient funds in such circumstances.
- Management concluded disclosure controls and procedures were effective at the reasonable assurance level and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Regulatory feedback and the ultimate evidentiary requirements for any sparsentan FSGS accelerated-approval submission; confirmatory DUPLEX follow-up and attrition.
- PROTECT enrollment and timing of its IgAN data, and the 2021 timing and findings for TVT-058 preliminary data.
- Whether marketed-product sales stabilize or are affected by generic competition, payer access, or COVID-related demand changes.
- Quarterly cash burn and liquidity relative to clinical-development spending, the $276 million notes, lease commitments, and acquisition-related contingent payments.
- Potential manufacturing or trial delays, including the TVT-058 membrane supply issue, and any material changes to the company’s stated 12-month funding outlook.