Business context and reporting period
Retrophin, Inc. (the company identified in this 2018 filing; the request metadata uses Travere Therapeutics) filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2018. Retrophin marketed Chenodal, Cholbam and Thiola and was advancing rare-disease programs including fosmetpantotenate, sparsentan and CNSA-001.
Financial performance
Amounts are in millions of dollars except per-share data. Quarterly and six-month comparisons are against the corresponding 2017 periods.
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Net product sales | $41.3 | $38.8 | $79.8 | $72.4 |
| Operating loss | $(21.6) | $(13.6) | $(39.5) | $(28.0) |
| Net loss | $(22.3) | $(13.2) | $(40.7) | $(24.3) |
| Loss per share, basic and diluted | $(0.56) | $(0.34) | $(1.03) | $(0.63) |
| Operating cash flow | Not separately provided | Not separately provided | $(17.5) | $2.1 |
Q2 sales increased 6.5%; six-month sales rose 10.1%. Q2 bile acid product sales were $18.6 million and Thiola sales were $22.7 million. Gross margin, calculated from reported sales less cost of goods sold, was approximately 97.1% in Q2 2018 versus 97.9% in Q2 2017.
Liquidity, debt and balance sheet
At June 30, cash and cash equivalents were $89.3 million and marketable securities were $166.4 million, totaling $255.7 million, versus $300.6 million at year-end 2017. Net working capital was $175.4 million, down from $240.1 million; the current ratio was 2.69 versus 3.80. Total assets were $491.1 million and stockholders’ equity was $288.0 million.
The balance sheet reports $45.4 million of convertible debt as a current liability. The notes carry 4.5% interest, have a $46.0 million original principal amount, and mature May 30, 2019; the filing’s MD&A also describes the debt as long term, a classification inconsistency to verify. Management said available cash and short-term investments were expected to fund anticipated operations for at least 12 months. The company used $17.5 million in operating cash during the first half.
Changes, outlook and significant items
- Research and development expense rose to $34.5 million in Q2 and $59.1 million for the first half, primarily due to ongoing Phase 3 trials of fosmetpantotenate and sparsentan, IgAN trial start-up, and CNSA-001 funding.
- SG&A declined 13% year over year in Q2 to $25.1 million, reflecting lower legal, stock-based compensation and recruiting costs; first-half SG&A was broadly flat.
- Retrophin initiated the Phase 3 DUPLEX study of sparsentan in FSGS in April 2018; enrollment was ongoing. Management expected to start a Phase 3 sparsentan IgAN study in Q4 2018 and said CNSA-001’s Phase 2 PKU proof-of-concept study was expected to begin in Q3 2018. These are forward-looking plans, not assured outcomes.
- The Censa agreement included approximately $17 million of expected development funding through proof of concept and an option to acquire Censa for $65 million upfront, subject to terms, plus up to $25 million in milestone payments. The company had paid $24.6 million through June 30, including development funding, and carried a $15.0 million investment.
- Acquisition-related contingent consideration was $91.5 million at quarter-end; revaluation charges were $5.8 million for the first half. The company adopted new warrant accounting effective January 1, 2018, reclassifying a $15.7 million warrant liability to equity.
- Key risks include clinical-trial outcomes and enrollment, regulatory approval, reimbursement and drug-pricing pressure, generic or compounded competition for Chenodal and Thiola, and dependence on third-party manufacturers and distributors. The company also described ongoing disputes and advancement/reimbursement matters involving former CEO Martin Shkreli; final insurance reimbursement remained uncertain.
Important facts for investors to verify
- Progress, enrollment, safety and endpoint results in the fosmetpantotenate and sparsentan Phase 3 studies, and whether the planned IgAN study began on schedule.
- Debt presentation and the company’s repayment, conversion or refinancing plan ahead of the May 2019 note maturity.
- Cash burn, trial spending and the assumptions behind management’s assertion that liquidity would cover at least 12 months.
- Whether the Censa development program met milestones, actual funding requirements, and any decision to exercise the acquisition option.
- Contingent consideration estimates, generic competition and supply/distribution continuity; also the eventual outcome of Shkreli-related legal and insurance matters.