Business context and reporting period
This is Retrophin, Inc.’s Form 10-Q for the quarter and six months ended June 30, 2020. The filing describes a rare-disease biopharmaceutical business with marketed products Chenodal, Cholbam, Thiola and Thiola EC, and development programs including sparsentan for FSGS and IgAN and Chenodal for CTX. The filing is under the name Retrophin; the supplied company metadata identifies Travere Therapeutics.
Financial results and liquidity
Unless otherwise noted, amounts are in U.S. dollars and millions. Comparative periods are the three or six months ended June 30, 2019.
| Metric | Q2 2020 | Q2 2019 | First half 2020 | First half 2019 |
|---|---|---|---|---|
| Net product sales | $48.4 | $44.7 | $96.2 | $84.3 |
| Operating loss | $(23.1) | $(36.5) | $(38.2) | $(74.8) |
| Net loss | $(26.1) | $(38.7) | $(25.3) | $(79.7) |
| Net loss per share | $(0.58) | $(0.92) | $(0.57) | $(1.91) |
- Q2 sales increased 8.3% year over year; first-half sales increased 14.1%. First-half bile-acid product sales were $43.9 million and tiopronin product sales were $52.3 million. Management attributed growth to increased patient counts and normal variation in new patient starts and refills.
- Q2 operating expenses were $71.5 million, down from $81.2 million. First-half expenses were $134.4 million, down from $159.0 million. Lower R&D spending, principally following discontinuation of the fosmetpantotenate program, and lower legal costs reduced expenses.
- The first-half 2020 net loss includes an $18.9 million income-tax benefit related primarily to CARES Act NOL carrybacks. The 2019 comparison includes L-UDCA write-off and contingent-consideration items; results are therefore not directly comparable.
- First-half operating cash use was $35.6 million versus $39.6 million. Investing activities provided $107.4 million, mainly reflecting debt-security maturities and sales not reinvested; financing activities provided $103.0 million, chiefly from the June equity offering.
- At June 30, cash and cash equivalents were $237.2 million and available-for-sale securities were $220.2 million, totaling $457.4 million. Working capital was $435.6 million; the current ratio was 7.23.
- Convertible notes had $276.0 million principal outstanding, carried at $210.0 million net of unamortized discount and issuance costs. The notes bear 2.5% interest and mature in 2025. The company reported $68.6 million of acquisition-related contingent consideration liabilities.
- June’s public offering of 7.475 million shares raised $108.6 million net. Shares outstanding were 50.9 million at June 30, versus 43.1 million at December 31, 2019. The separate $100 million ATM program had no sales through June 30.
Material changes, outlook and risks
- Management said available cash and short-term investments were expected to fund anticipated operations for at least the next 12 months. No specific revenue, earnings or cash-flow guidance was provided.
- Sparsentan’s DUPLEX FSGS trial continued enrollment; topline 36-week proteinuria results were expected in Q1 2021, subject to COVID-19 effects and sample-size reassessment. PROTECT in IgAN continued enrollment, with topline 36-week results expected in the second half of 2021. The PROTECT confirmatory sample size was increased from 280 to 380 patients.
- The RESTORE Phase 3 trial of Chenodal for CTX began enrolling in January 2020. Management stated that COVID-19 had not materially adversely affected reported-period financial results, but the filing describes slower trial enrollment and potential impacts on trial timelines, operations, product supply, patient access and revenue.
- Key risks include clinical-trial failure or delay, regulatory uncertainty around accelerated approval based on proteinuria, generic competition, reimbursement and pricing pressure, dependence on third-party manufacturers and distributors, and the company’s continuing losses and debt obligations. Management said the full effects of the pandemic remained uncertain.
- The FTC had issued a civil investigative demand concerning marketing, sales, distribution and pricing, including Thiola; no claim or proceeding had been initiated, and the outcome was not predictable. Spring Pharmaceuticals voluntarily dismissed its amended Thiola-related lawsuit without prejudice; no liability was accrued. Potential recovery by D&O insurers of certain advanced legal fees for former CEO Martin Shkreli remained unestimable.
- The company reported $13.4 million of minimum rental commitments for leases then reflected in its schedule; commitments were expected to increase by $34.0 million when the remaining new office space was delivered. The new office lease has an initial term of 7 years and 7 months.
- Disclosure controls and procedures were concluded to be effective as of quarter-end, and no significant change in internal control over financial reporting was identified.
Most important facts for investors to verify
- Whether clinical enrollment and announced topline-result timelines for DUPLEX, PROTECT and RESTORE remain achievable, particularly given COVID-19 disruption and trial-design changes.
- How much of reported first-half loss improvement reflects recurring operating progress versus the CARES Act tax benefit and prior-period L-UDCA items.
- Whether product-sales growth continues and how generic entry, patient access, payer coverage and pricing affect revenue.
- Cash burn, availability of the $457.4 million cash-and-securities balance, and ability to meet debt service and future lease commitments.
- Potential dilution from equity financing and convertible-note settlement, and developments in the FTC inquiry, legal matters and contingent consideration estimates.