Business context and reporting period
This is Retrophin, Inc.’s Form 10-Q for the quarter and six months ended June 30, 2017. The request identifies Travere Therapeutics, Inc., but the filing itself names Retrophin, Inc. The company commercialized Chenodal, Cholbam and Thiola and was developing fosmetpantotenate (RE-024), sparsentan and liquid ursodeoxycholic acid (L-UDCA).
Financial performance
| Metric | Q2 2017 | Six months 2017 |
|---|---|---|
| Net product sales | $38.8 million; up 16.5% year over year | $72.4 million; up 16.2% |
| Operating loss | $13.6 million, versus $11.4 million | $28.0 million, versus $19.6 million |
| Net loss | $13.2 million ($0.34 per share), versus $13.4 million ($0.37) | $24.3 million ($0.63 per share), versus $2.2 million ($0.06) |
| Operating cash flow | $2.6 million provided for the six months, versus $0.4 million |
Sales growth reflected increased patient counts for Chenodal, Cholbam and Thiola. Six-month R&D expense rose $8.0 million to $40.3 million, primarily from increased development activity and facilities consolidation; SG&A rose $9.6 million to $52.0 million. The six-month net-loss comparison was affected by lower income-tax benefits ($4.0 million versus $12.5 million) and a reversal in derivative fair-value effects: a $0.02 million loss in 2017 versus a $5.3 million gain in 2016.
Liquidity, debt and balance sheet
At June 30, cash and cash equivalents were $89.3 million and marketable securities were $206.7 million, totaling $296.0 million. Net working capital was $240.0 million and the current ratio was 4.01. Management said available cash and short-term investments were expected to fund anticipated operations for at least 12 months. Investing cash flow was $47.9 million provided, including receipt of the $47.5 million second anniversary payment on the Sanofi priority review voucher sale.
Convertible notes had a $44.7 million carrying value ($46.0 million principal), bear 4.5% interest and mature in 2019; estimated fair value was $61.2 million. Contingent consideration liabilities totaled $91.2 million, and warrant derivative liabilities were $22.5 million. Total assets were $507.1 million and total liabilities were $211.3 million.
Changes, outlook and key risks
- Revenue increased, but operating losses widened as R&D and SG&A spending grew. Cash rose from year-end, supported in part by the Sanofi note collection.
- Management expected to align with the FDA on the sparsentan Phase 3 protocol in the second half of 2017 and then initiate the trial. The first patient in the fosmetpantotenate FORT Phase 3 study was dosed in July 2017. No earnings or revenue guidance was provided.
- Development outcomes remain uncertain: Phase 3 efficacy and safety are not assured; FDA acceptance of sparsentan’s proposed proteinuria interim endpoint and any accelerated-approval pathway are not guaranteed. Rare-disease enrollment, regulatory review and manufacturing could delay programs.
- Commercial risks include payer coverage and pricing, competition and generic entry for Chenodal and Thiola, and reliance on single-source third-party manufacturers and an external distributor.
- The filing describes Shkreli-related legal-fee advances, including $2.8 million in pretrial fees and $2.0 million in trial fees, and an additional $0.4 million advance under separate proceedings. The company had received about $0.7 million from insurers; further recovery was not estimable. It disclosed that further advancement obligations or an appeal could arise.
- The filing reported no off-balance-sheet arrangements and no material change in disclosure controls. Management identified no significant change in internal control over financial reporting during the quarter.
Investor facts to verify
- Confirm the issuer identity: this filing is for Retrophin, Inc., not under the name stated in the request.
- Track product-level sales and patient growth, particularly whether sales growth can outpace rising operating costs.
- Verify FDA alignment, trial initiation and subsequent clinical results for sparsentan and fosmetpantotenate.
- Review cash use, financing needs, 2019 note maturity and the assumptions behind contingent-consideration valuations.
- Monitor generic competition, reimbursement, manufacturing and distribution continuity, and the eventual insurance recovery and legal-fee obligations.