Travere Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Travere is a commercial-stage biopharmaceutical company focused on rare diseases, with marketed products Chenodal, Cholbam, Thiola and Thiola EC, and development programs including sparsentan, pegtibatinase (TVT-058) and Chenodal for CTX.
Financial performance and liquidity
Amounts below are in U.S. dollars; financial statement figures have been converted from thousands to millions.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $68.2M | $51.1M | $170.2M | $147.3M |
| Net product sales | $54.2M | $51.1M | $156.2M | $147.3M |
| Operating loss | $(31.7)M | $(19.4)M | $(114.6)M | $(57.6)M |
| Net loss | $(35.6)M | $(22.5)M | $(128.5)M | $(47.8)M |
| Basic and diluted loss per share | $(0.59) | $(0.44) | $(2.17) | $(1.03) |
| Operating cash flow | Not separately reported for the quarter | $12.1M | $(28.9)M |
- Q3 product sales rose 5.9%; nine-month product sales rose 6.0%. Management attributed growth to increased patient counts. Bile acid products and tiopronin products both contributed to the increase.
- Q3 revenue included $14.0M of Vifor collaboration and license revenue; without it, total revenue growth would have reflected product sales alone. The filing records $14.0M of license revenue and reports $40.2M of related deferred revenue at quarter-end.
- Research and development expense increased to $48.4M in Q3 and $148.2M for nine months, primarily reflecting clinical-trial spending, TVT-058 and Orphan Technologies acquisition-related costs, and increased headcount. Q3 selling, general and administrative expense was $36.1M.
- Contingent-consideration remeasurement expense was $13.9M in Q3 and $24.0M for nine months, versus $5.1M and $7.4M, respectively, in 2020. The liability was $81.4M at September 30, 2021.
- Approximate product gross margin, calculated as product sales less cost of goods sold, was 97.1% for Q3 and 96.9% for nine months. The company remained loss-making; operating loss was approximately 46.5% of Q3 revenue and 67.3% of nine-month revenue.
- Cash and cash equivalents were $150.3M and available-for-sale securities were $400.9M, totaling $551.2M at September 30, 2021. Working capital was $465.9M and the current ratio was 5.12. Management said available cash and short-term investments should fund anticipated operations beyond 12 months.
- Nine-month operating cash flow was positive $12.1M, compared with cash use of $28.9M in 2020. Management cited working-capital movements, including reduced tax receivable and the Vifor upfront payment recorded partly as deferred revenue. Investing cash flow was $(145.0)M, mainly from net purchases of securities; financing cash flow was $198.5M, chiefly reflecting the February 2021 stock offering.
- Convertible notes had $276.0M principal outstanding, a $223.7M net carrying value and a 2.50% coupon, due September 2025. Their reported fair value was $280.1M. Total liabilities were $467.7M and stockholders’ equity was $307.4M.
Material changes and notable developments
- Revenue increased year over year, but operating and net losses widened, chiefly as R&D and contingent-consideration expenses grew. Nine-month net loss also reflects the absence of the $18.9M income-tax benefit recognized in 2020 under CARES Act NOL carryback provisions; 2021 recorded $0.4M of tax expense.
- In September, Travere licensed sparsentan commercialization rights in Europe, Australia and New Zealand to Vifor Pharma. It received $55.0M upfront and may receive up to $135.0M in regulatory and market-access milestones, up to $655.0M in sales milestones, and tiered royalties of up to 40% of annual net sales. Travere retains U.S. and other territory rights and remains responsible for worldwide development through approval.
- The February 2021 public offering generated $189.3M net proceeds. Common shares outstanding increased to 61.0M from 52.2M at December 31, 2020. The company also had $71.4M remaining available under its at-the-market program at quarter-end.
- A generic option for the 100 mg original-formulation Thiola became available in May 2021; the company said the business impact was not yet estimable.
Outlook, risks and contingencies
- Sparsentan: The Phase 3 DUPLEX FSGS trial met its 36-week interim proteinuria endpoint; sparsentan achieved the defined partial-remission endpoint in 42% of patients versus 26% with irbesartan. The FDA had said the interim data then available were insufficient for U.S. accelerated approval, but the company reported alignment on a potential submission pathway subject to additional supportive eGFR data. Travere planned to provide that data in the first half of 2022 and, if supportive, seek U.S. accelerated approval in mid-2022. Confirmatory DUPLEX results were expected in the first half of 2023.
- The Phase 3 PROTECT IgAN trial met its 36-week interim proteinuria endpoint: mean reduction was 49.8% with sparsentan versus 15.1% with irbesartan. The company planned an IgAN U.S. NDA submission for accelerated approval in the first quarter of 2022. Confirmatory results were expected in the second half of 2023. These were management plans, not guaranteed outcomes; longer-term eGFR results and regulatory review remained important uncertainties.
- The Phase 1/2 TVT-058 study was ongoing, with preliminary data expected in 2021 at the time of filing; COVID-19, enrollment and supply constraints could delay results. Chenodal’s Phase 3 RESTORE study for CTX remained open to enrollment.
- In October 2021, the company disclosed that French authorities were seeking reimbursement for a portion of Kolbam sales in France from 2015–2020. Travere could not estimate any potential liability. The filing separately states that French Kolbam sales over that period were approximately $8M in aggregate.
- The company reported no legal proceedings expected to have a material adverse effect. It also disclosed an ongoing FTC investigation relating to product marketing, sales, distribution and pricing, with no claim or proceeding initiated by the FTC at the time of filing.
- COVID-19 had not materially adversely affected reported financial position or results through September 30, 2021, but could affect clinical-trial enrollment, workforce productivity, supply, patient access and financing. Other key risks include trial failure or delay, regulatory uncertainty, generic competition, reimbursement and pricing pressure, reliance on third-party manufacturers and distributors, and dependence on Vifor for sparsentan commercialization in licensed territories.
- Interest-rate sensitivity was identified as a market risk. The filing estimated that a 100-basis-point rate change would affect investments by approximately $1.6M. The report also stated that disclosure controls were effective and that there were no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether upcoming eGFR data support the planned sparsentan regulatory submissions and whether regulators accept the interim endpoints and proposed approval pathways.
- Final and confirmatory DUPLEX and PROTECT data, including longer-term efficacy, safety and patient retention; interim results may change as data mature and are verified.
- The effect of generic competition on Thiola sales, and the ultimate amount, if any, sought by French authorities for Kolbam reimbursement.
- Cash runway against clinical-development and operating costs, the terms and potential dilution of future equity issuance, and the cash or share settlement exposure under the 2025 Notes.
- The filing’s market-risk section cites approximately $417.2M of cash equivalents and marketable securities, while the balance sheet and liquidity discussion show $150.3M of cash and cash equivalents plus $400.9M of securities, or $551.2M total. Investors should verify the basis for this apparent difference.