Business context and reporting period
This is Retrophin, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2019, comparing results with Q1 2018. The request identifies Travere Therapeutics, Inc., but the filing names Retrophin, Inc.; verify that this is the intended filing. Retrophin was a rare-disease biopharmaceutical company with marketed products Chenodal, Cholbam and Thiola, and pipeline programs including fosmetpantotenate, sparsentan and CNSA-001.
Financial results and position
| Metric | Q1 2019 / March 31, 2019 | Comparable period / prior year-end |
|---|---|---|
| Net product sales | $39.6 million | $38.4 million in Q1 2018 |
| Operating loss | $38.2 million | $17.9 million in Q1 2018 |
| Net loss | $41.0 million; $0.99 per diluted share | $18.4 million; $0.46 per diluted share in Q1 2018 |
| Operating cash used | $20.5 million | $14.7 million in Q1 2018 |
| Cash and cash equivalents | $69.8 million | $102.9 million at December 31, 2018 |
| Marketable securities | $377.8 million | $368.7 million at December 31, 2018 |
| Current assets / current liabilities | $475.5 million / $104.1 million | Net working capital $371.4 million; ratio 4.57 |
| Total liabilities / stockholders’ equity | $382.0 million / $285.7 million | $390.9 million / $318.3 million at December 31, 2018 |
Thiola sales rose to $21.2 million from $19.9 million; bile acid product sales were $18.4 million versus $18.5 million. Cost of goods sold was $1.0 million. Research and development expense increased to $33.4 million from $24.6 million, and selling, general and administrative expense rose to $32.7 million from $26.5 million. The filing attributes the R&D increase to ongoing Phase 3 trials and the SG&A increase primarily to higher compensation and legal expense.
Net cash used in investing activities was $11.4 million and in financing activities was $1.1 million. Cash and cash equivalents declined by $33.0 million during the quarter. Including marketable securities, reported cash and investments totaled $447.6 million at quarter-end.
Debt principal outstanding was approximately $298.6 million: $22.6 million of 4.5% convertible notes due May 30, 2019, and $276.0 million of 2.5% convertible notes due 2025. The balance-sheet carrying amount was $220.0 million, net of debt discounts and issuance costs. The 2025 notes generated $4.1 million of Q1 interest expense, including non-cash amortization.
Material changes and unusual items
- Revenue increased $1.1 million, or about 3%, year over year, primarily reflecting higher patient counts and the timing of patient starts and refills.
- Net loss increased substantially. Retrophin discontinued L-UDCA development, recording a $25.5 million impairment and reversing $18.0 million of associated contingent consideration, for a net $7.5 million non-cash charge.
- Quarter-end contingent consideration was $76.0 million, down from $93.0 million at year-end, principally reflecting the L-UDCA reversal; other fair-value changes added $3.2 million of expense.
- The company adopted the lease accounting standard in 2019. At March 31, it reported $11.9 million of lease liabilities and an $8.6 million right-of-use asset.
Outlook, commentary and risks
Management said available cash and short-term investments were expected to fund anticipated operations for at least the next 12 months. This is not financial guidance; the filing notes that funding needs depend on product revenue, clinical-trial costs, debt service and other factors. The imminent May 30, 2019 maturity of the remaining 2019 notes is a significant near-term financing consideration.
- Management expected top-line data from the fosmetpantotenate Phase 3 FORT study in Q3 2019; sparsentan FSGS interim data in the second half of 2020; and sparsentan IgAN primary-endpoint data in the first half of 2022.
- CNSA-001 Phase 2 proof-of-concept data were expected in Q2 2019, with a decision on the option to acquire Censa expected in Q3 2019. Exercising the option could require $65 million, subject to specified adjustments, plus up to $25 million in milestone payments.
- An FDA action date of June 30, 2019 was set for the new Thiola formulation.
- Key risks include clinical-trial failure or delay, uncertainty around accelerated approval based on proteinuria endpoints, generic competition and the Thiola sample-access lawsuit, reimbursement and pricing pressure, and reliance on third-party manufacturers and distributors.
- Spring Pharmaceuticals’ antitrust and unfair-competition lawsuit seeks injunctive relief and damages; the court stayed the company’s motion to dismiss for 90 days for limited discovery. No amount was accrued, and the outcome was not determinable. The filing also describes ongoing Shkreli-related litigation and advancement of legal fees.
- After quarter-end, Retrophin signed a lease for expected new headquarters space beginning October 2020, with approximately $36.5 million of base rent over the initial term.
Important facts for investors to verify
- Confirm the filing’s registrant: the supplied document is for Retrophin, Inc., not Travere Therapeutics, Inc.
- Confirm the repayment, refinancing or other disposition of the $22.6 million 2019 notes due May 30, 2019; this 10-Q predates maturity.
- Track cash burn against management’s stated 12-month liquidity expectation, including continued Phase 3 spending and any Censa option decision.
- Review clinical-trial outcomes and regulatory feedback against the dates and endpoints described in the filing.
- Monitor the Thiola lawsuit, generic-entry exposure and the legal-fee reimbursement uncertainty related to former CEO Martin Shkreli.