Travere Therapeutics, Inc. (then Retrophin, Inc.) — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. The filing was submitted under the name Retrophin, Inc.; the company described itself as a rare-disease biopharmaceutical business with three marketed products and clinical-stage programs.
Financial performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Net product sales | $51.1 million | $44.4 million | $147.3 million | $128.7 million |
| Operating loss | $19.4 million | $34.4 million | $57.6 million | $109.2 million |
| Net loss | $22.5 million | $36.5 million | $47.8 million | $116.2 million |
| Net loss per share | $0.44 | $0.85 | $1.03 | $2.76 |
| Operating cash used | Not stated quarterly | $28.9 million | $53.7 million |
Sales grew 15% in Q3 and 15% for the nine-month period. Both bile acid and tiopronin product sales increased, which management attributed to higher patient counts and normal timing fluctuations in new patient starts and refills. Q3 operating expenses were $70.6 million, down from $78.8 million, including no repeat of the prior-year $15.0 million investment impairment. Nine-month expenses fell to $205.0 million from $237.8 million, largely reflecting the absence of 2019 L-UDCA write-offs and lower R&D spending after discontinuing the fosmetpantotenate program. Nine-month results included an $18.9 million tax benefit related primarily to CARES Act NOL carrybacks.
Liquidity and debt: At September 30, cash and cash equivalents were $200.5 million and available-for-sale securities were $255.8 million, totaling $456.3 million. Net working capital was $422.3 million. Nine-month cash used in operations was partly offset by $64.2 million of investing cash flow and $102.7 million of financing cash flow, including $108.7 million net proceeds from a June stock offering. Convertible notes due 2025 had $276.0 million principal outstanding and a $212.7 million net carrying value; they bear 2.5% interest. The company reported no off-balance-sheet arrangements.
Material changes and business developments
- Q3 net sales rose $6.8 million year over year; nine-month sales rose $18.7 million.
- R&D expense decreased $11.2 million for the nine months, primarily following discontinuation of the fosmetpantotenate PKAN program.
- Common shares outstanding increased to 51.0 million from 43.1 million at year-end 2019, including 7.5 million shares issued in the June offering.
- After quarter-end, on October 21, the company agreed to acquire Orphan Technologies and its OT-58 candidate for $90 million upfront, up to $427 million in contingent payments, tiered royalties, and a possible additional voucher-related payment. Closing remained subject to conditions.
Outlook, risks, and unusual items
- Management expected available cash and short-term investments to fund operations for at least 12 months. No revenue or earnings guidance was provided.
- Sparsentan Phase 3 DUPLEX (FSGS) topline 36-week proteinuria data were expected in Q1 2021; PROTECT (IgAN) data were expected in Q3 2021. Management cautioned that COVID-19 could delay enrollment, trial conduct, and timelines. FDA/EMA acceptance of proteinuria results for accelerated or conditional approval was not assured; confirmatory eGFR outcomes remain important.
- Chenodal’s Phase 3 RESTORE study for CTX began enrolling in January 2020. The filing also described two early research collaborations for NGLY1 deficiency and Alagille syndrome.
- COVID-19 had not materially adversely affected reported results through September 30, but the company cited potential clinical-trial delays, supply-chain disruption, remote-work impacts, reduced patient identification, increased assistance requests, and financing-market volatility.
- Key commercial risks include generic competition for Thiola and other products, pricing and reimbursement pressure, and dependence on third-party manufacturers and a distributor. The FTC investigation related to product marketing, sale, distribution, and pricing remained open, although the company said it had received no indication of further questions or a claim. Spring Pharmaceuticals voluntarily dismissed its amended Thiola-related lawsuit without prejudice; no amount was accrued.
- Fair-value changes in acquisition-related contingent consideration added $5.1 million of expense in Q3 and $7.4 million for the nine months. The new San Diego office leases created $28.7 million of lease liabilities at quarter-end.
Most important facts for investors to verify
- Whether growth in patient counts and product sales continues, and whether generic entry or reimbursement changes affect sales.
- Enrollment, data timing, results, and regulatory interpretation for sparsentan’s DUPLEX and PROTECT trials, including confirmatory eGFR requirements.
- Whether the Orphan Technologies acquisition closed and how its upfront, contingent, royalty, and other potential payments affect liquidity.
- Cash consumption relative to the $456.3 million cash-and-securities balance, the $276.0 million notes principal, and planned R&D and acquisition spending.
- Developments in the FTC inquiry, potential product-supply issues, and COVID-19 effects on trials and commercial operations.