Travere Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Travere is a biopharmaceutical company focused on rare kidney and metabolic diseases. Unless noted, operating results below are from continuing operations; the bile acid product portfolio was reported as discontinued operations following its sale.
Financial performance and liquidity
| Metric | Q3 2023 | Nine months 2023 |
|---|---|---|
| Total revenue | $37.1 million, up from $28.1 million | $100.2 million, up from $80.1 million |
| Net product sales | $33.9 million | $87.6 million |
| Operating expenses | $129.7 million | $394.1 million |
| Operating loss | $92.6 million | $293.9 million |
| Loss from continuing operations, net | $89.2 million | $287.7 million |
| Net income (loss), including discontinued operations | $150.7 million | $(21.2) million |
Q3 net income included $240.0 million of income from discontinued operations, including a $225.9 million after-tax gain on the bile acid portfolio sale. Nine-month discontinued-operation income was $266.5 million. These items more than offset part of the continuing-operations loss; reported net income is therefore not a measure of recurring operating profitability.
- Revenue and margins: Q3 net product sales rose $8.6 million year over year, primarily from FILSPARI, launched in February 2023. FILSPARI sales were $8.0 million in Q3 and $14.5 million year to date; tiopronin sales were $25.9 million and $73.1 million, respectively. Sales of previously expensed FILSPARI inventory boosted gross margin, and the company expects that benefit to continue through at least 2024. The filing does not provide a clear reported gross-margin percentage.
- Cash flow: Continuing-operations operating cash use was $261.0 million for the nine months, versus $184.1 million in 2022; total operating cash use, including discontinued operations, was $209.5 million. Total investing cash provided was $72.7 million and financing cash provided was $218.6 million. Cash and cash equivalents increased to $144.2 million.
- Liquidity: Cash and marketable debt securities totaled $634.6 million at September 30, 2023. Net working capital was $546.8 million and the current ratio was 4.92. Management said available cash and short-term investments, together with anticipated operating cash, should fund operations beyond the next 12 months.
- Debt: Convertible notes had $385.2 million principal outstanding, with a $376.8 million net carrying value: $68.9 million of 2.50% notes due 2025 and $316.3 million of 2.25% notes due 2029. The company reported no defaults.
Material changes and unusual items
- On August 31, 2023, Travere sold substantially all assets of its bile acid business to Mirum for $210.0 million upfront and may receive up to $235.0 million in sales-based milestones. The contingent payments are not assured and are recognized only when the specified sales milestones are achieved.
- February’s equity offering generated approximately $215.8 million net proceeds and increased shares outstanding. Common shares outstanding were 75.1 million at September 30, versus 64.3 million at year-end 2022.
- Q3 revenue growth reflected FILSPARI’s launch; higher spending also continued. Nine-month R&D rose $16.0 million, mainly from pegtibatinase development and personnel costs. SG&A rose $61.5 million, primarily due to FILSPARI launch and commercial activities, with additional impact from accelerated Thiola intangible amortization and FILSPARI-related amortization.
- Interest income increased as rates and average investment balances rose. Nine-month 2022 results included a $7.6 million debt-extinguishment loss that did not recur in 2023.
Outlook, commentary, and key risks
- FILSPARI / IgAN: FDA accelerated approval remains contingent on confirmation of clinical benefit. In the PROTECT study, two-year results favored FILSPARI; eGFR chronic slope was statistically significant for EU regulatory review, while eGFR total slope narrowly missed statistical significance. Travere planned to engage regulators and expected to submit a U.S. supplemental application for full approval in the first half of 2024. Full approval and continuation of accelerated approval are not assured. FILSPARI also carries liver-monitoring and embryo-fetal-toxicity warnings and is subject to a REMS.
- FSGS: The Phase 3 DUPLEX study did not meet its two-year primary eGFR-slope endpoint with statistical significance. The company was analyzing results and discussing possible regulatory paths; approval or a viable submission path is uncertain.
- Pegtibatinase: The company reported positive topline results from cohort 6 of the Phase 1/2 COMPOSE study and was preparing for a possible pivotal Phase 3 trial by year-end 2023, subject to FDA feedback and program assessments.
- Funding and obligations: Management expects expenses to remain elevated as it commercializes FILSPARI and funds development programs. Near-term obligations include $22.1 million in committed active pharmaceutical ingredient purchases for FILSPARI, debt interest, lease payments, and R&D and launch costs. Future financing or refinancing may be needed; access and terms could be affected by market conditions.
- Other risks and contingencies: The company relies on third-party manufacturers and distributors, faces generic competition for tiopronin products, and may not receive the bile acid sale milestones. It disclosed a material weakness in internal control over financial reporting related to accounting for a pre-launch inventory contract; remediation was underway but incomplete, and disclosure controls were deemed ineffective. Management said no pending legal matter was expected to have a material adverse effect. A previously disclosed French pricing reassessment for Kolbam could require an estimated repayment of about $5 million, subject to review and potential appeal.
- Market risk: A 100-basis-point interest-rate change was estimated to affect investment values by approximately $4.5 million. The company does not currently hedge foreign-currency risk.
Important facts for investors to verify
- Regulatory feedback and the eventual U.S. filing and decision on FILSPARI full approval, particularly in light of the PROTECT eGFR total-slope result.
- FILSPARI launch trajectory, payer access, patient uptake, and how quickly the favorable zero-cost inventory effect on margins diminishes.
- Whether regulators identify a viable FSGS pathway after the DUPLEX primary endpoint miss, and the timing and cost of any pegtibatinase Phase 3 program.
- Cash burn from continuing operations, available liquidity, and the company’s ability to meet or refinance the 2025 and 2029 note obligations.
- Progress in remediating the internal-control material weakness and any changes to the accounting estimates or reported results.
- Whether Mirum’s sales milestones are achieved, and the effect of generic competition and the possible French repayment on future cash flows.