Business context and reporting period
Retrophin, Inc. (the registrant in this filing; the request identifies Travere Therapeutics) filed this Form 10-Q for the quarter ended September 30, 2016. It sells Chenodal, Cholbam and Thiola and is developing rare-disease candidates, including sparsentan, RE-024 and L-UDCA. Financial amounts below are in U.S. dollars; statements present three- and nine-month comparisons with 2015.
Key financial metrics
| Metric | Q3 2016 | Nine months 2016 |
|---|---|---|
| Net product sales | $33.9 million | $96.3 million |
| Operating loss | $20.4 million | $40.0 million |
| Net loss | $37.1 million | $39.3 million |
| Basic and diluted loss per share | $1.00 | $1.07 |
| Cash provided by operating activities | Not separately presented for the quarter | $5.2 million |
At September 30, cash and cash equivalents were $23.9 million and marketable securities were $250.4 million, totaling $274.3 million. Current assets were $342.6 million, current liabilities $86.0 million, and reported net working capital $256.6 million (current ratio 3.98). Convertible notes had a carrying value of $44.3 million; the $46.0 million principal notes bear 4.5% interest and mature in 2019. The filing estimates their fair value at $74.7 million.
Material changes versus prior comparable periods
- Sales rose 21% in Q3 to $33.9 million and 39% for nine months to $96.3 million. Management attributed growth to higher Chenodal and Thiola patient counts and the inclusion of Cholbam, acquired in March 2015.
- Q3 operating loss was broadly flat versus $20.5 million in Q3 2015; nine-month operating loss widened to $40.0 million from $35.5 million. Higher research and development spending, selling and administrative costs, and a $5.2 million legal-fee settlement contributed.
- Net results shifted from 2015 income to 2016 losses. Comparisons are significantly affected by 2015’s $140.0 million gain on the sale of a Pediatric Priority Review Voucher, $49.1 million bargain-purchase gain, and other litigation-related gains. In Q3 2016, a $10.1 million noncash loss from revaluing warrant derivatives also affected results.
- Cash and cash equivalents fell $13.9 million from year-end 2015, while marketable securities increased $58.6 million. Nine-month operating cash flow was $5.2 million, compared with $2.2 million in 2015; investing activities used $20.2 million, and financing activities provided $1.2 million.
Outlook, commentary, risks and unusual items
- Management said cash and short-term investments were expected to fund anticipated operations for at least 12 months. It cautioned that future funding needs depend on product revenue, clinical-development costs, regulatory timing and other factors; additional financing or partnerships could be needed.
- Retrophin reported positive top-line Phase 2 DUET results for sparsentan in FSGS: proteinuria fell a mean 44.8% across the tested doses versus 18.5% with irbesartan after eight weeks (p=0.006). The filing says individual dose-cohort comparisons did not reach statistical significance. Management planned to consult the FDA on the development path.
- The company expected to file an NDA for L-UDCA for primary biliary cholangitis in 2017. Its $25.5 million acquisition consideration included $25.0 million of present-value contingent consideration. Contingent-consideration remeasurement generated a $10.7 million nine-month operating expense.
- A settlement concerning former CEO Martin Shkreli’s legal-fee advancement claims was under negotiation at quarter-end. The company recorded $5.2 million of expense, including approximately $3.2 million cash; it also described a possible additional $2.0 million of future legal-fee advances if the criminal and SEC matters proceed to trial. The settlement was signed November 1, 2016, after quarter-end, and insurance recovery was not estimable.
- Key risks include clinical-trial and regulatory uncertainty, reimbursement and pricing pressures, competition and generic entry, reliance on single-source manufacturers and a third-party distributor, intellectual-property challenges, and litigation and indemnification obligations. The filing reported no material changes to risk factors other than identified revisions. Disclosure controls were concluded effective.
Important facts for investors to verify
- Confirm the registrant’s identity and continuity: this 2016 filing is for Retrophin, Inc., despite the request’s Travere Therapeutics label.
- Review product-level sales trends, patient counts, reimbursement and any concentration or supply issues; the filing gives total product sales but not a clear product-by-product revenue breakdown in the provided text.
- Assess the durability and regulatory relevance of the DUET results, including the endpoint, dose-cohort findings and subsequent FDA discussions.
- Track cash burn and research spending against management’s 12-month liquidity statement, as well as contingent milestone and royalty obligations.
- Verify the final terms and insurance recoveries, if any, related to the former CEO settlement and the associated legal proceedings.