Travere Therapeutics, Inc. quarterly report, Q2 FY2013

Business context and reporting period

This is Retrophin, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2013. The filing describes a development-stage biotechnology company focused on treatments for rare diseases, including focal segmental glomerulosclerosis (FSGS), pantothenate kinase-associated neurodegeneration (PKAN), and Duchenne muscular dystrophy (DMD). It reports no product revenue. The filing identifies the registrant as Retrophin, Inc.; the request metadata names Travere Therapeutics, Inc., so the entity relationship should be verified.

Financial highlights

Margins are not meaningful because the company had no revenue. At June 30, cash was $286,514, current assets were $404,409, current liabilities were $11.13 million, and working capital deficit was approximately $10.7 million. Total assets were $2.67 million and stockholders’ deficit was $8.46 million. The balance sheet reports $6.90 million of warrant derivative liabilities and $1.69 million of settlement payable; the related-party note payable was fully repaid in the first quarter. Six-month investing cash outflow was $1.32 million and financing cash inflow was $8.38 million.

Changes, outlook, and risks

• Quarterly operating expenses increased $360,210 year over year, primarily because SG&A increased $2.76 million, including settlement charges; compensation and professional fees declined. Six-month operating expenses decreased $947,760, but net loss rose by approximately $1.46 million, principally reflecting a $2.40 million noncash warrant fair-value loss.
• Management planned to initiate a Phase 2 RE-021 study for FSGS in 2013; it estimated $5–6 million of RE-021 development spending over the next 12 months and $25–35 million in aggregate before potential FDA approval. It anticipated a human study for RE-024 in Q1 2014, subject to development decisions, and estimated $3–4 million of RE-024 spending over the next 12 months. RE-001 remained preclinical. These are plans and estimates, not assured milestones.
• Management forecast approximately $14–16 million for clinical development and R&D and $5–6 million for G&A over the next 12 months. The company expected continued losses and depended on further financing; the filing states that financing was not committed and might not be available on acceptable terms.
• The filing concludes that conditions raise substantial doubt about the company’s ability to continue as a going concern. Subsequent to quarter-end, the company raised approximately $25 million gross in an August 15 private placement, but also incurred substantial investor-related fees and issued additional shares and warrants.
• A $1.69 million settlement liability was past due as of the filing date, and counterparties could demand payment. Management believed the related party was primarily responsible, but disclosed uncertainty about its ability to reimburse or indemnify the company. The company also disclosed a further $300,000 settlement paid after quarter-end.
• The February financing’s registration statement was not effective by the contractual deadline, triggering liquidated damages. An August amendment waived those damages in exchange for consideration and investor participation in the subsequent financing. The filing also describes an exclusive 120-day negotiation period for a potential U.S. license involving a product for autism and schizophrenia; no definitive license was reported.
• Disclosure controls and procedures were reported ineffective as of June 30, 2013. The company reported no material change in internal control over financial reporting during the six-month period and no material pending legal proceedings.

Important facts for investors to verify

1. Confirm that this Retrophin filing is the intended filing for the Travere Therapeutics metadata.
2. Review post-quarter-end cash proceeds net of financing, registration-rights, and settlement payments, as well as the company’s current liquidity and runway.
3. Confirm the status and payment terms of the $1.69 million past-due settlement obligation and the related party’s reimbursement capacity.
4. Check subsequent registration-rights compliance, dilution from shares and warrants, and any warrant-liability remeasurement.
5. Verify clinical-development progress, spending against stated estimates, and whether the proposed product-license negotiation resulted in a definitive agreement.
6. Review remediation of ineffective disclosure controls. Also reconcile the settlement expense: the filing gives $2,286,511 in notes but cites $2,284,511 in parts of MD&A.