Business context and reporting period
The filing is Retrophin, Inc.’s transition report for March 1–December 31, 2012, following a change to a December 31 fiscal year-end. The audited statements also present the development-stage predecessor’s results from inception on March 11, 2011. The filing identifies the registrant as Retrophin, not Travere Therapeutics; verify the company and filing identity associated with the request.
Retrophin was a development-stage biopharmaceutical company focused on rare diseases. Its lead candidate, RE-021, was being developed for focal segmental glomerulosclerosis (FSGS); RE-024 for PKAN and RE-001 for Duchenne muscular dystrophy (DMD) remained preclinical. It had no product revenue or commercial infrastructure.
Financial and operating highlights
| Metric | 2012 / December 31, 2012 |
|---|---|
| Revenue | None reported |
| Operating expenses | $30.26 million |
| Net loss | $30.34 million; $8.29 per basic and diluted share |
| Cash used in operating activities | $2.74 million |
| Cash used in investing activities | $1.70 million |
| Cash provided by financing activities | $4.44 million |
| Cash | $11,388 |
| Total assets | $2.39 million |
| Total liabilities | $5.80 million |
| Stockholders’ deficit | $3.41 million |
| Working capital deficit | Approximately $5.77 million |
No meaningful operating margin comparison is available because the company had no revenue. The 2012 loss rose sharply from the $3.27 million loss reported for March 11–December 31, 2011, but those periods are not comparable in length. Share-based compensation was $22.41 million in 2012, a major component of expenses. Investing cash use included spending on the RE-021 license.
Balance-sheet obligations included an $884,764 related-party note payable, a $1.30 million technology-license liability, $1.02 million of accounts payable, and $2.47 million of accrued expenses. The related-party note principal was repaid after year-end, according to the filing.
Changes, outlook, risks and unusual items
- The December 2012 reverse merger made former Retrophin the operating business of the public registrant. The company also changed its fiscal year-end to December 31.
- Management planned a placebo-controlled Phase 2 FSGS study of RE-021 and an open-label Phase 2 study in other nephropathies. It expected RE-024 in vivo work to begin in early 2013 and targeted an IND by 2014; it planned RE-001 development work, with a possible Phase 1 study by the end of 2014. These were targets, not assurances.
- For 2013, management estimated approximately $5 million for clinical and research and development activities and $4 million for general and administrative expenses. It also estimated RE-021 development costs of $6–$8 million through year-end 2013 and $25–$35 million in aggregate before potential FDA approval; estimated RE-024 costs were $2–$4 million through year-end 2013 and $30–$50 million in aggregate if development continued. RE-001 costs through year-end 2013 were estimated at $2–$4 million.
- The company stated that year-end resources would not support operations beyond December 2013 without additional financing. It raised approximately $9.95 million in private placements in early 2013, including a February placement of $9.14 million plus warrants. The auditor nevertheless cited substantial doubt about the company’s ability to continue as a going concern.
- The RE-021 sublicense carries potential milestone payments of up to $106.9 million and sales royalties of 15% or 17%, depending on sales levels, as well as possible payments tied to sublicensing. No product sales were yet generating cash to fund these obligations.
- Management reported ineffective disclosure controls and internal control over financial reporting, including material weaknesses related to financial-reporting data, complex accounting rules, and limited segregation of duties. Remediation was incomplete.
- Other notable risks include clinical and regulatory failure, dependence on outside manufacturers and research organizations, limited patent protection for some candidates, competition, and the need for additional capital. The filing reported no material pending legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm that this Retrophin transition report, rather than a filing by Travere Therapeutics, is the intended company and period.
- Review subsequent financing proceeds, warrant terms, registration-rights obligations, dilution, and cash runway after the 2013 private placements.
- Check the detailed audited financial statements and notes for the status and classification of related-party debt, accrued liabilities, and RE-021 license commitments.
- Verify actual progress, trial initiation, regulatory interactions, and spending against management’s candidate-development timelines and cost estimates.
- Assess whether the identified control weaknesses were remediated and whether later filings continued to disclose going-concern uncertainty.