Filing summary
Entity and period: The supplied filing is Retrophin, Inc.’s Form 10-Q for the quarter ended September 30, 2015—not a filing under the name Travere Therapeutics, Inc. Retrophin is a biopharmaceutical company selling Chenodal, Thiola and Cholbam and developing investigational therapies. Financial amounts below are in U.S. dollars.
Financial performance
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Net product sales | $28.0 million | $8.3 million | $69.4 million | $14.1 million |
| Operating loss | $20.5 million | $21.9 million | $35.5 million | $61.1 million |
| Net income (loss) | $105.6 million | $(18.0) million | $119.7 million | $(81.9) million |
| Operating cash flow | Quarterly figure is unclear in the filing text | — | $2.0 million provided | $36.8 million used |
- Sales growth reflected higher patient counts for Chenodal and Thiola and the March 2015 acquisition of Cholbam. Q3 gross margin was approximately 98% based on reported sales and cost of goods sold.
- Reported Q3 net income was dominated by a $140.0 million gain from selling the Pediatric Priority Review Voucher (PRV); it does not represent recurring operating profitability. The nine-month results also include a $49.1 million bargain-purchase gain on the Cholbam acquisition and noncash warrant fair-value losses.
- Operating expenses were $48.5 million in Q3, up from $30.2 million, including $6.9 million of increased contingent consideration and a $4.7 million Carbetocin intangible-asset impairment. Nine-month expenses rose to $105.0 million, including those items and higher commercial and development costs.
Financial position and liquidity
- At September 30, cash and cash equivalents were $140.6 million and marketable securities were $94.7 million. Working capital was approximately $198 million.
- The PRV sale generated $150.0 million at closing; two further payments of $47.5 million each are due on the first and second anniversaries. Their recorded present values were $46.5 million current and $45.3 million long term at quarter-end.
- The company repaid its $45.0 million credit facility in July, paying a $2.3 million prepayment premium and recording a further $4.2 million debt-extinguishment charge. Remaining debt was $43.7 million carrying value of 4.5% convertible notes, with $46.0 million principal due in 2019.
- Nine-month cash flows were $2.0 million provided by operations, $19.9 million provided by investing activities and $100.5 million provided by financing activities. Financing included the $140.0 million net public-offering proceeds, partly offset by repayment of the credit facility. Ending cash was $140.6 million.
Material changes, outlook and risks
- Retrophin completed the Cholbam acquisition and sold the associated Pediatric PRV to Sanofi for $245 million in total consideration. The company said existing capital and projected revenue should fund current and projected needs for at least 12 months, while cautioning that funding might not support all programs and that future financing could be needed.
- Development priorities included enrollment of approximately 100 patients in the Phase 2 DUET sparsentan study for FSGS and clinical development of RE-024 for PKAN. The filing gives no financial earnings or revenue guidance.
- Kolbam’s European marketing authorization had been annulled by an EU court on market-exclusivity grounds, not safety or efficacy. A European committee recommended a new authorization with revised labeling; a Commission decision was anticipated by year-end 2015.
- On November 4, 2015, the company reported receiving a U.S. Senate committee request for information about Thiola pricing, distribution and financial matters and said it intended to cooperate.
- Legal matters included a shareholder securities class action, a dispute with former CEO Martin Shkreli and cooperation with U.S. Attorney and SEC investigations. The company said it was not a target of the criminal investigation; it recorded no litigation contingency accrual because losses were not considered probable or reasonably estimable.
- Management concluded disclosure controls were not effective as of September 30, 2015 and described ongoing remediation of previously identified material weaknesses involving the control environment, contracts and equity awards. Prior-period financial statements were corrected for errors related to equity grants and consulting agreements.
- Key business risks include dependence on third-party manufacturers and a specialty distributor, generic competition for Chenodal and Thiola, uncertain reimbursement and pricing, clinical and regulatory uncertainty, and potential dilution or financing constraints. The company reported no off-balance-sheet transactions.
Investor verification checklist
- Confirm the issuer identity: the filing is for Retrophin, Inc., notwithstanding the Travere Therapeutics metadata.
- Verify the timing, collection and accounting for the two remaining Sanofi PRV payments and related tax effects.
- Assess recurring product revenue and cash generation separately from the PRV gain, bargain-purchase gain and warrant remeasurement.
- Check progress on sparsentan enrollment, RE-024 development and the European Kolbam authorization.
- Monitor the Thiola pricing inquiry, shareholder litigation, investigations and control-remediation progress.
- Review convertible-note terms, potential dilution, and whether liquidity remains adequate as development and commercialization spending grows.