Travere Therapeutics, Inc. (then Retrophin, Inc.) — 2019 Form 10-K
Business context and period: This annual report covers the fiscal year ended December 31, 2019; it is not a standalone quarterly filing. The company was a rare-disease biopharmaceutical business with marketed products Chenodal, Cholbam, Thiola and Thiola EC, and late-stage candidate sparsentan. It reported two Phase 3 sparsentan studies underway, for FSGS and IgAN. The fourth-quarter figures below are unaudited.
Financial performance and liquidity
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Net product sales | $175.3 million | $164.2 million |
| Operating expenses | $312.7 million | $244.3 million |
| Operating loss | $137.4 million | $80.0 million |
| Net loss | $146.4 million | $102.7 million |
| Net loss per share, basic and diluted | $3.46 | $2.54 |
| Operating cash flow | $(58.2) million | $(25.0) million |
| Cash and marketable securities | $398.5 million | $471.5 million |
| Working capital | $333.6 million | $391.1 million |
Sales increased 6.8%, while operating expenses rose 28.0% and net loss widened. Sales growth reflected increased patient counts across products. Research and development expense rose to $141.0 million from $123.8 million; selling, general and administrative expense increased to $129.0 million from $103.7 million. Approximate gross margin was 97.0%; operating loss and net loss were approximately 78.3% and 83.5% of sales, respectively.
At December 31, cash and cash equivalents were $62.4 million and short-term marketable securities were $336.1 million. Cash used in operations increased to $58.2 million. The company reported a 4.50 working-capital ratio. It had $276.0 million principal outstanding on 2.50% convertible notes due 2025, carried at $204.9 million net of unamortized discount and issuance costs; FY 2019 interest expense was $18.8 million. Management said available cash and short-term investments were expected to fund operations for more than 12 months. No off-balance-sheet arrangements were reported.
Fourth quarter: Net sales were $46.7 million versus $43.8 million in Q4 2018. Operating expenses were $74.9 million versus $48.8 million, and net loss was $30.3 million versus $7.5 million.
Material changes, outlook and notable items
- Thiola EC was FDA-approved in June 2019 and became available to patients in July.
- The Phase 3 FORT study of fosmetpantotenate for PKAN missed its primary and secondary endpoints; development was discontinued.
- The company declined to acquire Censa Pharmaceuticals and stopped the CNSA-001 program, impairing its $15.0 million investment.
- Development of L-UDCA was discontinued, producing a net $7.5 million non-cash charge after a $25.5 million asset impairment and reversal of an $18.0 million contingent liability.
- Management expected interim DUPLEX data for sparsentan in FSGS in the first half of 2021 and primary-endpoint data from PROTECT in IgAN in the first half of 2022. These are anticipated milestones, not revenue or earnings guidance. Chenodal’s Phase 3 RESTORE study for CTX began enrolling in January 2020.
- On February 24, 2020, the company entered an at-the-market sales agreement allowing up to $100 million of common stock sales; it was not obligated to sell shares.
Risks, contingencies and unusual items
- Clinical and regulatory risk is substantial: trial outcomes are uncertain, accelerated approval based on proteinuria endpoints is not assured, and confirmatory studies may be required. The company remains loss-making and relies on product revenue and access to capital.
- Generic competition is a risk for Thiola and Chenodal. The company disclosed a Spring Pharmaceuticals lawsuit alleging refusal to provide Thiola samples for generic bioequivalence testing; the court dismissed the initial complaint but permitted amendment, and Spring filed an amended complaint in February 2020. The company reported no accrual and said the outcome could not be determined.
- The company was responding to an FTC civil investigative demand concerning marketing, sales, distribution and pricing of its products; as of the filing, the FTC had not initiated a claim or proceeding on those matters.
- Third-party manufacturing and distribution dependencies, reimbursement and drug-pricing changes, contingent consideration valuations, and litigation could affect results. The $70.9 million contingent-consideration liability is based on Level 3 estimates.
- The company reported an effective valuation allowance against deferred tax assets and $113.6 million of federal net operating loss carryforwards. Its auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor verification priorities
- Confirm sparsentan trial enrollment, endpoint results, regulatory feedback and timing against subsequent disclosures.
- Track product sales, patient counts, generic-entry developments and the commercial contribution of Thiola EC.
- Review operating cash burn, the use of the $398.5 million liquidity balance, and any ATM share sales or resulting dilution.
- Check the terms, cash servicing and conversion or repayment exposure of the 2025 Notes, alongside contingent payments and royalty obligations.
- Follow the Spring litigation and FTC inquiry, including any material updates to claims, costs or potential outcomes.