Travere Therapeutics, Inc. quarterly report, Q2 FY2023

Travere Therapeutics, Inc. — Q2 2023 Form 10-Q

Reporting period: Three and six months ended June 30, 2023. Travere is a biopharmaceutical company focused on rare kidney, liver and metabolic diseases. FILSPARI received U.S. accelerated approval in February 2023 for reducing proteinuria in certain adults with primary IgA nephropathy (IgAN).

Key financial results

Amounts below are in millions of dollars except per-share data. Year-over-year comparisons are with the corresponding 2022 period.

Metric	Q2 2023	Q2 2022	First half 2023	First half 2022
Total revenue	$59.7	$54.2	$116.7	$102.7
Net product sales	$57.0	$51.0	$107.3	$97.4
Operating loss	$(87.6)	$(65.5)	$(174.6)	$(131.6)
Net loss	$(85.6)	$(67.0)	$(172.0)	$(143.0)
Net loss per share, diluted	$(1.13)	$(1.05)	$(2.38)	$(2.26)
Cash used in operating activities	Not provided separately	Not provided separately	$(150.4)	$(92.1)

• Q2 product sales included $3.5 million of FILSPARI; first-half FILSPARI sales were $6.5 million. Legacy bile acid product sales were $27.5 million in Q2 and tiopronin product sales were $26.1 million.
• Operating expenses rose to $147.3 million in Q2 from $119.6 million, and to $291.3 million for the first half from $234.2 million. Higher R&D and SG&A were the main increases.
• Gross margin is not directly comparable across products: FILSPARI sales primarily used inventory whose manufacturing costs had previously been expensed as R&D, favorably affecting reported cost of goods sold. The company expects this benefit to continue at least through 2024.
• Interest income rose to $5.1 million in Q2 and $8.8 million for the first half, principally reflecting higher short-term interest rates. First-half 2022 also included a $7.6 million debt-extinguishment loss.

Financial position and liquidity

• At June 30, cash and cash equivalents were $70.9 million and marketable debt securities were $420.5 million, totaling $491.3 million. Current assets were $542.1 million and current liabilities $135.7 million; reported working capital was $406.3 million.
• Convertible debt, net of issuance costs, was $376.4 million; principal outstanding was approximately $385.2 million: $68.9 million of 2.50% notes due 2025 and $316.3 million of 2.25% notes due 2029. No events of default were reported.
• First-half operating cash use was $150.4 million; investing cash use was $60.6 million, including the $23.0 million FILSPARI approval milestone payment and net purchases of marketable securities. Financing provided $219.3 million, including $215.8 million net proceeds from a February equity and pre-funded warrant offering.
• Management stated available cash and short-term investments, together with anticipated operating cash, were expected to fund operations beyond the next 12 months. It also noted that future funding needs may require additional debt or equity financing or refinancing.

Material changes, outlook and significant items

• Revenue increased 10% in Q2 and 14% in the first half. Growth reflected FILSPARI’s launch and growth in legacy products. First-half license and collaboration revenue also included $3.3 million from active pharmaceutical ingredient sales to CSL Vifor.
• SG&A increased $21.1 million in Q2 and $46.5 million in the first half, reflecting FILSPARI launch and commercial support, added personnel and professional services, and $3.7 million of incremental Thiola intangible amortization after a useful-life estimate change. R&D rose $9.7 million in Q2 and $13.0 million in the first half, including increased pegtibatinase development activity.
• Clinical outlook: Topline two-year confirmatory results from the PROTECT IgAN study were expected in late Q3 or early Q4 2023 and are intended to support traditional approval. Continued approval of FILSPARI may depend on confirming clinical benefit; its accelerated approval is based on proteinuria reduction, and whether it slows kidney-function decline had not been established.
• FSGS setback: The Phase 3 DUPLEX study did not meet its two-year primary eGFR-slope endpoint with statistical significance. Proteinuria and exploratory results were described as favorable trends; management planned further analysis and regulatory discussions, but a submission or approval path was uncertain.
• Peg tibatinase: Management reported positive topline results from cohort 6 of the Phase 1/2 COMPOSE study and was preparing for a potential Phase 3 trial by year-end 2023, subject to FDA feedback and program assessments.
• Subsequent event: On July 16, 2023, Travere agreed to sell substantially all assets primarily related to Chenodal and Cholbam to Mirum for up to $445 million: $210 million at closing and up to $235 million tied to sales milestones. Closing was expected in Q3, subject to conditions; the agreement allowed termination in specified circumstances. The contingent amount is not assured.
• Travere had $22.1 million of commitments for active pharmaceutical ingredients scheduled for delivery in 2023. A potential French reimbursement repayment relating to historical Kolbam sales remained unquantified.

Risks and controls

• The FILSPARI launch, payer coverage and market acceptance remain uncertain. The drug is subject to a REMS and boxed warnings for liver injury and embryo-fetal toxicity, including required liver monitoring.
• Generic competition affects Thiola and Thiola EC; a generic version of Thiola EC was approved in February 2023. The company also relies on third parties for manufacturing and distribution and identified supply risks.
• The company reported a material weakness in internal control over financial reporting related to controls for accounting for a pre-launch inventory contract. It was not fully remediated as of the filing; management concluded disclosure controls and procedures were not effective at the reasonable assurance level. The filing said the weakness had not caused a restatement.
• Other material risks include ongoing operating losses and cash use, debt service and refinancing needs, regulatory and clinical uncertainty, pricing and reimbursement pressures, and volatility in investment values from interest-rate changes. The company estimated a 100-basis-point rate change would affect investment values by approximately $2.9 million.

Investor verification priorities

1. Review the PROTECT confirmatory results and resulting FDA actions, including any changes to FILSPARI’s approval status or label.
2. Assess the commercial uptake, reimbursement and net sales trajectory of FILSPARI, as well as the effect of generic competition on tiopronin products.
3. Confirm whether the Mirum transaction closed, the cash proceeds received, and the terms and likelihood of any sales-based milestone payments.
4. Track operating cash use, the company’s stated liquidity runway, and its ability to meet or refinance the 2025 and 2029 notes.
5. Monitor remediation and testing of the internal-control material weakness, and developments in the unquantified French Kolbam reimbursement matter.