Travere Therapeutics, Inc. quarterly report, Q3 FY2013

Full document

Filing identity and period

The supplied filing is Retrophin, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2013—not a filing identified as Travere Therapeutics, Inc. Investors should verify the issuer and ticker before relying on this summary. Retrophin described itself as a development-stage biotechnology company focused on rare diseases.

Financial performance and position

  • Revenue: None in the three- or nine-month periods ended September 30, 2013 or 2012.
  • Quarterly results: Operating expenses were $5.15 million, down from $8.46 million; net loss was $10.90 million, compared with $8.48 million. The quarter’s loss included a $5.80 million noncash loss from revaluing warrants.
  • Nine-month results: Operating expenses were $12.50 million, down from $16.76 million; net loss was $20.69 million, up from $16.81 million. Basic and diluted loss per share was $1.62 versus $5.55, with weighted-average shares increasing to 12.80 million from 3.03 million.
  • Cash flow: Net cash used in operations was $9.44 million for the first nine months of 2013, versus $2.09 million a year earlier. Investing used $6.67 million; financing provided $29.51 million, mainly from equity offerings.
  • Liquidity and liabilities: September 30 cash was $13.41 million and available-for-sale marketable securities were $2.96 million. The company reported an approximately $10 million working-capital deficit, which included a roughly $22.2 million warrant derivative liability. The filing reports no note payable at quarter-end; accounts payable and accrued expenses were $1.72 million and $1.51 million, respectively. Accumulated deficit was $54.30 million.
  • Margins: Not meaningful because the company had no revenue.

Changes versus the prior comparable period

Operating expenses declined year over year in both the quarter and nine-month period, principally as share-based compensation and professional fees fell. Research and development and selling, general and administrative costs rose. Despite lower operating expenses, nine-month net loss increased, primarily due to the warrant revaluation charge. Operating cash use also rose substantially. Equity financing increased cash and shares outstanding: the company raised approximately $24.9 million gross in an August private placement, in addition to earlier 2013 placements.

Outlook, developments and risks

  • Management stated that losses would continue and that the company did not have sufficient capital to cover operating costs for the next 12 months. The filing says these conditions raise substantial doubt about the company’s ability to continue as a going concern; additional financing was not committed or assured.
  • Management estimated next-12-month spending of approximately $15–20 million on clinical development and R&D and $5–6 million on general and administrative costs. For RE-021, it estimated $5–6 million of additional development spending over 12 months and $25–35 million in aggregate before potential FDA approval. RE-024 spending was estimated at $2–3 million over 12 months and $30–50 million in aggregate if development continued. These are estimates, not assured outcomes.
  • RE-021 was planned for a Phase 2 FSGS trial in 2013; RE-024 remained preclinical, with a human study expected in the first quarter of 2014; RE-001 for Duchenne muscular dystrophy was also preclinical. Development, regulatory approval and commercialization were uncertain.
  • The company paid $2.25 million in nonrefundable exclusivity fees to negotiate licenses for potential autism/schizophrenia and CNS products. If definitive licenses were not completed, the fees could be expensed. It also entered a post-quarter research agreement with St. Jude requiring total payments of $780,674.
  • A proposed acquisition of Transcept was rejected by Transcept’s board. Retrophin held approximately 4.96% of Transcept and said an acquisition would require additional financing.
  • Retrophin recorded $2.28 million in settlement-related charges associated with a related party. It noted uncertainty about the related party’s ability to reimburse or indemnify it; the remaining $1.69 million settlement payable at quarter-end was paid after quarter-end.
  • Warrants with price-adjustment provisions were classified as derivative liabilities and remeasured through earnings, creating potentially significant noncash volatility. The filing also states that disclosure controls and procedures were not effective as of September 30, 2013.

Key facts for investors to verify

  1. Confirm the filing’s issuer: the document identifies Retrophin, Inc., while the request identifies Travere Therapeutics, Inc.
  2. Assess cash runway against management’s stated spending plans and the lack of committed financing; verify any financing completed after the filing.
  3. Review warrant terms, derivative-liability valuation and the related noncash losses; the filing presents warrant liability figures of $22.234 million and $22.248 million in different places.
  4. Track clinical-trial progress, spending and regulatory milestones for RE-021, RE-024 and RE-001, and the outcomes of the proposed licensing arrangements.
  5. Check related-party settlement recoverability, post-quarter payments, registration-rights obligations, and remediation of the ineffective disclosure controls.