Travere Therapeutics Inc (TVTX) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Retrophin, Inc. Second Quarter 2015 Financial Results and Corporate Update Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce the host for today's conference, Director of Investor Relations, Chris Cline. Sir, you may begin your conference.

Thank you, Teena. Good afternoon, everyone and thank you for joining Retrophin's second quarter 2015 financial results and corporate update call. Here with me today are Steve Aselage, Chief Executive Officer; Laura Clague, Chief Financial Officer and Dr. Alvin Shih, Executive Vice President and Global Head of R&D.

Before we begin, I have to caution that comments made during this conference call will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Retrophin. I encourage you to review the Company's filings with the Securities and Exchange Commission, which identify specific risk factors that may cause actual results or events to materially differ from those described in the forward-looking statements. The content of this conference call contains time sensitive information that is accurate only as of today's date, August 04, 2015. The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that, I'll now turn the call over to Steve. Steve?

Thank you, Chris. Good afternoon, everyone and thank you for joining us today.

We continued to make progress on all fronts during the second quarter. We grew our top line significantly, we made an important stride in pipeline development with the initiation of a Phase 1 trial for RE-024 and we gained further operational flexibility with the agreement to sell our Rare Pediatric Disease Priority Review Voucher for $245 million.

I'll begin with the commercial update, where I'm happy to report that Thiola revenues continued to grow significantly, Chenodal saw a small increase in the number of patients on therapy and Cholbam contributed its first revenues to the commercial portfolio. At the end of the quarter, we spent time educating and preparing the newest additions to our sales force as part of the expansion from 16 to 24 members which we previously announced in May. We deployed the full team on July 1, and they are currently targeting approximately 1,500 physicians for Thiola and 700 physicians for Cholbam.

Moving specifically to Thiola, by leveraging the original sales force expansion that was announced at end of last year, we're able to reach more nephrologists and urologists during the first half of the year that contributed to Thiola's continued strength. The trajectory of patients initiating therapy in the second quarter was similar to what we described on our last update in May and we continue to add new patients on a weekly basis with the expectation that the expanded sales force should keep the trajectory stable into next year. This reinforces our belief that the product remains sensitive to promotional support and we should be able to continue expanding the prescriber base as we target the approximately 4,000 to 5,000 potential candidates for Thiola. I can also report that our commitment to superior patient service continues to keep compliance levels in the 80% to 85% range.

Switching to Cholbam, our newly acquired treatment for bile acid synthesis disorders. By the end of the second quarter, we had successfully transitioned the approximately 30 extension study patients on to commercial therapy. We have also been able to identify several new patients and start them on therapy. We are working through the results of some recently commissioned market research and triangulating those data with early sales force feedback and academic literature to better define the number of patients that might benefit from therapy of Cholbam. Bile acid synthesis disorders include two subtypes, primarily due to single enzyme defects and secondary due to peroxisomal disorders. We still estimate the incentives for single enzyme defect patients is roughly 1 to 9 per million live births and the incidence of peroxisomal patients is approximately one in 50,000 live births.

I want to remind everyone that for both sets of diseases, this is a patient population that if left untreated may develop life threatening liver injury, which can lead to transplant or death. Within the single enzyme defect subset of the population, we continue to anticipate the majority of successfully treated patients will remain on chronic therapy over the period of a normal life span. For the peroxisomal disorder patients, Cholbam is considered an adjunctive therapy that can address the liver dysfunction of this multi-organ disease.

As we stated last quarter, we originally assign little value to the international opportunity for Cholbam, revenues from Cholbam outside the United States represented less than 1% of our second quarter top line results. In June, the General Court of the European Union decided to resent the Cholbam's marketing authorization in Europe. This decision was attributed to overlapping language with the competitor's product having orphan exclusivity for a subset of single enzyme disorder indications. We are currently assessing options to have the marketing authorization reinstated, but it should be noted that this ruling has no effect on US commercial potential, nor does it affect the potential of commercializing in Asia or Latin America. We continue to work through the various international agreements previously set up by Asklepion and we'll update you as we make progress.

Moving on to Chenodal, the patient base has shown some modest growth and we continue to work diligently on creating an acceptable submission to the FDA for the addition of CTX to the label. We have rolled out our prevalent study plan, which is focusing on approximately 50 centers in the United States and the protocol is being reviewed by respective institutional review boards as we speak. We are still targeting to reach 500 juvenile bilateral cataract patients to be referred in for screening, we believe the efforts put forth in this study will help raise awareness of CTX and eventually provide us with better insights to the affected population that will hopefully enable us to reach patients suffering from this devastating disease much earlier.

Operationally, we were pleased with our agreement to sell the priority review voucher that came with the Cholbam acquisition by adding $245 million to our balance sheet, we gained greater flexibility to devote resources to the development of our pipeline and to pursue other orphan disease assets. We continue to be very aggressive on our search for late-stage clinical and commercial assets that would be near-term accretive and require little additional infrastructure. Our business development team has identified some exciting opportunities, we hope to be able to execute another transaction in the second half of this year.

Before I hand the call to Alvin, I do want to highlight the progress made on the pipeline during the second quarter. The R&D team continues to be focused on moving our lead assets forward as quickly as possible. Most notably in the quarter, we initiated a Phase 1 study for RE-024, a major step in validating it as a treatment for PKAN patients in the United States. We remain very optimistic that both sparsentan for FSGS and RE-024 will drive significant long-term value for Retrophin.

With that, I will now turn the call over to Alvin to give you an update on our research and development efforts. Alvin?

Thanks, Steve. I'm happy to report that we've made great progress in the second quarter both on the development of pipeline as well as on our portfolio of marketed products.

In terms of our development efforts, our top priority remains enrolling patients into the DUET trial of sparsentan. Sparsentan is our dual endothelin receptor antagonist plus angiotensin receptor blocker that's in development for the treatment of focal segmental glomerulosclerosis or FSGS. As you might recall, our target is to have full enrollment of 100 FSGS patients by the end of 2015, and we remain on track to accomplish that. Our clinical operations group is working closely with the main advocacy group in FSGS, NephCure as well as the NEPTUNE consortium of academic centers to make sure as many patients and physicians as possible to know about that DUET trial and have the opportunity to participate. Approximately 40 sites are active across the US and Europe. Our team is focused on executing the DUET trial and enabling a robust data read out as soon as possible.

Next in the pipeline is RE-024, which is our novel phosphopantothenate replacement therapy for the treatment of pantothenate kinase-associated neuro degeneration or PKAN. We had a very active second quarter in which RE-024 was granted both orphan drug status and fast-track designation by the FDA. Also our Investigational New Drug Application or IND was cleared by the FDA, allowing us to initiate a Phase 1 study to assess safety and tolerability of RE-024 in healthy adult volunteers. We remain on track to have data in hand by the end of the year. Our plan is to engage in discussion with the FDA once we have the Phase 1 data available, and we will agree to the next phase of clinical development, which will involve treating PKAN patients. We look forward to engaging with the agency and working together to ensure PKAN patients have access to RE-024 as soon as possible in the context of a controlled clinical trial. Meanwhile, all four ex-US patients who have been on RE-024 through physician-initiated studies remain on therapy. Further data on these patients may be submitted for publication at the discretion of the treating physicians.

In the early stage portfolio, the settlement of the Questcor litigation gives us added flexibility in determining the next steps in the RE-034 program. RE-034 is our novel formulation of the first 24-amino acids of ACTH. The program remains in early pre-clinical stage and may move to IND enabling studies within the next 12 months. Our team continues to evaluate clinical development options that would unlock value for the program either in our own hands or potentially in partnership with an external collaborator.

Moving to our portfolio of marketed products, the R&D team is constantly looking to further develop our commercial products and ensure that they are delivering optimal value for patients. First, with regard to Chenodal, we continue to work with the FDA to request that the label be changed to reflect the true nature of Chenodal's current use which is the treatment of patients with cerebrotendinous xanthomatosis or CTX. Our medical team is working with treating physicians to gather data and enable a submission to the agency to support this label change. The team is also preparing to launch the CTX prevalence study in approximately 50 sites spending IRB approvals. We're enlisting investigators to identify patients with a history of juvenile bilateral cataract to be reviewed and screened for CTX. Bilateral cataracts are often first discernible manifestation of CTX, and we think that this study will lend insight into the true prevalence of CTX as well as be an important step in changing the way physicians think about diagnosing CTX. We expect the first subject in this screening study will be enrolled later this year. We hope that our efforts will lead to earlier diagnosis and treatment of CTX patients and prevent the progression of irreparable cognitive decline.

Regarding Cholbam, the medical team has been very active in supporting the launch of the product, which as Steve mentioned, has been going according to plan. We continue to work with the leading specialists in the field to develop next-generation diagnostics, which will improve the efficiency with which bile acid synthesis disorder patients are identified. We believe these efforts will ultimately lead to a better diagnostic paradigm for these stations.

The Thiola, our medical education initiatives, continue in an effort to raise awareness of cystinuria and the role of Thiola in preventing cystine kidney stones. We've undertaken outreach to nearly all key opinion leaders in the United States. Publications and K-series are also in progress that will augment the medical literature supporting the use of Thiola in cystinuria.

Lastly, I wanted to share that we've convened a scientific advisory board to provide valuable guidance and direction for the R&D team. This group consists of five outstanding and experienced individuals; Dr. Alan Beggs, Dr. Randall Carpenter, Dr. Tim Cote, Dr. Brendan Lee and Dr. Stuart Swiedler. Together they bring significant scientific, clinical and regulatory expertise to bear on the entire Retrophin portfolio. We are privileged to have these distinguished members of the rare disease community to serve on our scientific advisory board on an ongoing basis.

With that, I'll turn it over to Laura to walk through the financials.

Thank you, Alvin.

Net sales from our three products, Thiola, Cholbam and Chenodal were $24.1 million in the second quarter. The marked increase over the same period in 2014 is due to the addition of Thiola and Cholbam to the commercial platform. 39% increase over the first quarter is attributable to the continued strength in Thiola uptake, the Cholbam launch and modest growth in new patients starting Chenodal.

We reported a GAAP net loss of $25.5 million for the second quarter of 2015. Adjusting for extraordinary and one-time expenses, we ended the quarter with net income of $13.9 million. Significant adjustments and one-time events for the quarter included a $29.4 million expense for the change in fair value of the Company's derivative instruments, a one-time $2.3 million expense for the prepayment of our $45 million credit facility which we paid in full at the beginning of the third quarter and a one-time gain of $15.5 million as a result of our legal settlement with Questcor.

Research and development expenses on a GAAP basis were $10.6 million for the second quarter compared to $13.3 million in the same period last year. The decrease is a result of a more concentrated focus on our key assets, saparsentan for SSGS, RE-024 for PKAN and RE-034 after divesting non-core assets at the beginning of the year. On an adjusted basis, R&D expense for the second quarter was $8.6 million. Relevant non-cash expenses for the second quarter included $1.7 million of stock-based compensation.

Selling, general and administrative expenses were $19.7 million on a GAAP basis in the second quarter. This is an increase from the $9.6 million incurred in the same quarter last year. The increase is largely due to the necessary build out of our infrastructure to support two additional commercial products. The increase in SG&A expense compared to the first quarter of this year can be largely attributed to the support of Cholbam launch activities and the addition of new members to our sales force. On an adjusted basis, SG&A expense for the second quarter was $11.6 million. Significant one-time and non-cash adjustments for the quarter consisted of $6.7 million related to stock compensation and depreciation and amortization and $1.4 million of legal expenses.

Generally speaking, we expect OpEx to fluctuate slightly through the balance of 2015, as we make investments to ensure the ongoing success of Cholbam and continue to progress Sparsentan and RE-024. As of June 30, 2015, we had approximately $133.6 million in cash and cash equivalents and marketable securities. Our cash balance was slightly increased this quarter by the previously mentioned settlement of our litigation with Questcor, which netted the Company $15.5 million. Please note that while we reached the agreement to sell our priority review voucher for $245 million in the second quarter, the deal did not close until July 2. So you should expect to see the first payment of [$150 million] on the balance sheet next quarter.

Overall, our execution led to a strong second quarter from a financial perspective and enables us to continue our progress through the second half of the year. I will now turn the call back over to Steve for his closing comments. Steve?

Thanks, Laura.

By now, I'm sure you've all had a chance to review our press release and take a look at our top line guidance. We've had enough time since our management transition to establish an operating model, consistent controls and insights that allows us to transition to a more traditional guidance measure. We believe this will enable a longer-term focus on our business. Going forward, we intend to provide annual revenue guidance with updates as needed during our quarterly calls. We're expecting total revenues for 2015 to be in the range of $95 million to $100 million.

Additionally, we plan to supply 2016 top line guidance on our 2015 year-end call. With a strong start to the year, we're poised to carry that momentum into the balance of 2015. We will continue to work on significantly growing revenues, progressing the pipeline rapidly, and seeking additional rare disease assets to strengthen our financial foundation and drive substantial long-term shareholder value.

I will now turn the call back over to Chris to open up the lines for questions. Chris?

Thanks, Steve. Teena, can we please open up the lines?

Thank you. (Operator Instructions) Robyn Karnauskas, Deutsche bank.

This is Evan on for Robin. Thank you for taking my few questions. I noticed you left a little number out of the press release, but I'm assuming that for competitive reasons, so I'll accept that. But when we look at sale over the past quarter, would you -- how should I think about, or is this the low hanging fruit that we're still getting or has -- are we getting new patients who are really new to drug coming on? And then in terms of revenues, are we looking at lower discounts and higher compliance than expected because I noticed that it's essentially more difficult to get to the top line revenue when using some of the older patient numbers.

Let me start with a question as to whether or not we are getting new patients or previously treated patients, which is what I'm assuming you're referring to as low hanging fruit.

Exactly.

And we are definitely getting new patients. I think there are probably a few patients trickling in there before, but for the most part, previously treated patients have been on it and we're getting new patients at this point. In my mind at least, it goes back to the fact that physicians are having a good experience if they've treated one or two patients, but have more patients in their practice, they are more inclined to treat additional patients because of the positive experience they've had in their first exposure since the re-launch. Additionally, we've expanded our reach with the larger size of the sales force. So we're getting the centers that did not have previously experienced with Thiola.

In terms of lower discounts, I'm not aware of any meaningful change in either Medicaid discounts and we don't discount into the commercial sector and also there wouldn't be any [catch] there.

What about compliance rates? Are we seeing higher compliance than expected?

We've gradually pushed compliance up, but compliance -- last numbers we have is still in the 80% to 85% range. So if there's a change there, it's not a meaningful change.

Okay, excellent. And then in terms -- so you're comfortable with this trajectory going forward from what we saw, I guess at the beginning of the year to about 7.25 and that 30 net patients per month. Is that something you're comfortable with going into next year?

Yes, we said that in the script. I think we're pretty conservative, wanted to be careful about what we projected out, but we're in start of August now. We've seen very steady patient growth over the first eight months of the year. We've thrown additional resources into market in the form of a increased size of our sales force. And I think our marketing messages have been refined over the course of the year too. So we feel very good going forward.

Then one question on Cholbam, in terms of the ex-US market when can we start to expect meaningful contribution or is that something we really shouldn't be thinking about at this point?

I wouldn't worry about it at this point. I think we've said in the beginning we've been inherited some agreements probably need to be re-done. We knew that we are in process of working on that right now. Europe in particular is a bit of a mess. Very unique situation from what I have seen before and if you want a little more color there, I could probably give that to you. There are two products were approved, but the indications -- unlike the US where all single enzyme defects were part of the label, in Europe, they split the single enzyme defects, gave some to Asklepion's product Cholbam and some to a product called Orphacol that came from a company called CTRS. And there has been a variety of kind of tangled wrangling through both European regulatory and legal systems.

Recently, European Court heard a complaint from CTRS claiming that the Cholbam label contained language that was more appropriate for the vertical indications and instead of doing what would seem to be a reasonable outcome of requesting that label be changed, they resented the marketing authorization. We are working with our partner over there on a number of changes which would include taming the marketing authorization for Cholbam reinstated and in the course of digging through the applications for both products and we've found some fairly interesting information about the CTRS application and we're taking a hard look to see whether [to at least] possible with their own product and its marketing authorization withdrawn.

Joseph Schwartz, Leerink Partners.

Congratulations on all the progress. I was wondering if you could tell us a little bit more about where the new Thiola patients are coming from in terms of prior therapy, if any, or how many patients were treated with d-penicillamine versus just large volume fluid intake?

Most of the patients have been treated with fluid. I don't think there is a meaningful number of d-penicillamine patients that have come over. We tend to get sprinkling of those, but those patients that are still on d-penicillamine at this point are still a small number, and if they're still on its because they had good experience with d-penicillamine when they are on the physicians don't want to break the board and things are going well. Fluid intake is a standard first up in therapy for these patients, so almost all of them have fluid intake increases to try to minimize stone formation before they went on Thiola.

And then how is the number of Thiola prescribers been trending? Have you noticed that the increased size of the sales forces is driving more prescribers, how elastic does the prescribing pattern seem to be relative to the attention that the physicians are receiving?

Yes, it's a great question and we are seeing some increase in the number of prescribers. I can't give you details on exact numbers of prescribers, but we're seeing scripts coming from people who have not had patients on therapy before and we find that very encouraging.

Okay. And last question before I turn it over to someone else. I was wondering if you could talk a little bit more about your market development for Cholbam and the program for screening of patients set up at pediatric ophthalmologists. Will we get an update at some point to learn how successful that effort has been?

Let me address the Cholbam and then I'm going to ask Alvin to talk about the ophthalmology screening program.

With Cholbam, we are still obviously in the very early stages of launch, our focus in the first month or so is to make sure we had a successful transition of the patients who were in the extension study from Cincinnati Children's Hospital, we said we wanted to get that done by the end of Q2, we were successful in having that happen, and we've found at least a handful of new patients that have gone on commercial therapy as well. I think it's still too early to do meaningful assessment of how big that market is, we're getting information from a variety of sources, want to put that side by side, sort of make sure if we give some estimates on market size beyond what we've said so far that we're accurate in those estimates and hopefully we will be able to do that by the next time we have a call.

I'm going to, maybe, take a pause there, see if Alvin would want to comment on the ophthalmology program.

Yes, absolutely. So this is a very important study that we think is going to raise awareness for CTX in general in the therapeutic options that are available right now, which a lot of practitioners do not know about. So I want to shy away from giving discrete timelines, because we're still very early in the processes of taking off the study and getting it going. Once we get further along, we'll have better visibility on the pace of enrollment and how we expect that to go. Regardless, we expect that the output of

that study is going to be high quality publication or other dissemination through scientific channels about what we've learned through the process. So the planning period for that will be once we get moving with the study.

Do Kim, Nomura Securities.

My first question is on your guidance. I was wondering if you can provide maybe a little more detail, just to speak generally on the contribution by each product? Nothing specific, I understand that Thiola, you're looking to keep stable, is there any assumption from growth for Chenodal in that guidance? And can you talk about moderate growth for Chenodal? Are you talking about more than two to five patients? I know that before you said you only expect Chenodal to grow by single digits per year at most. What is the moderate growth? What can we expect that to be exactly?

Yes. I think qualitatively, I can say we expect Thiola to be the largest contributor to growth, but we are seeing added patients on Chenodal, not dramatic increases in patient numbers. We've tried to again qualitatively set expectations to be modest running kind of Chenodal growth, but we are doing disease awareness and education. We think that may have resulted in some of the referrals that have come in, hard to know for sure. Certainly, the prevalence study that Alvin's group is undertaking, we think, substantially increased awareness and improved diagnosis.

So, we are trying to kind of move away from breaking out of focus on each individual product because as a company, I think we've evolved to a point where the value isn't exactly what happens with any one product but rather what we can do with our commercial portfolio and drive overall top line revenue. So, that's the reason why we moved from patient numbers to actual revenue guidance if our business is stable. We've got our arms around and well enough to be able to give you the type of broader guidance that we hope will be more helpful for you.

Okay, great. My next question is on SG&A, I was hoping to get a little more -- maybe a better understanding of the volatility and the lumpiness that we could see. In this quarter's SG&A, how much of the new sales force additions were reflected in the expense and are you expecting SG&A to go up materially once those sales reps start marketing and/or is there an offset because certain launch expenses will come out of the expense?

Hello, this is Laura Clague. Let me take that. So first of all, we hired some of the new reps that they aren't in the numbers for the full quarter. They were brought in partly through the quarter. And yes, there will be a partial offset because we have some launch expenses for Cholbam that would not be reoccurring in subsequent quarters. That said I think that as I mentioned on the call, we do expect our expenses to vary slightly as we continue to determine the appropriate investments in our Cholbam launch. So there will be some variability across the quarters and we'll continue to report on that as we go.

Okay, thank you, very helpful. And for my last question on the pipeline for your screening study for CTX, I just want to gauge your confidence and that you'll find on CTX patients in the 500 subjects that you're enrolling, I understand that patients with bilateral cataract would give you a better chance of finding CTX patients because of the association. But if you look at the general population, I think the prevalence estimated at 1 to 50,000. Does the cataract improve that the rate enough that you will be able to find CTX patients in just 500 patients?

The reason we're doing this study is, so we can answer that question, right? The literature is pretty sparse, we do know from talking with key opinion leaders in the space that if you look at juvenile bilateral cataract population, we expect that that population will be somewhat enriched for CTX because that is one of the few things that can actually cause juvenile bilateral cataracts. So we are attempting to put enough patients and enough power into the study such that we have some success at finding CTX patients, but the number and the probability of success, I can't really give it to you because that's exactly what we're trying to answer.

Okay. So the 500 number that you're using for the study is based on some historical literature that you could set an association to?

And our discussion with those who are in the field and treating and seeing these patients.

And I'm showing no other questions at this time, I'd like to turn the call back over to Mr. Chris Cline.

Great, thanks, Teena. So that will bring the call to an end now. Thank you all for joining us and we look forward to updating you next quarter.

Ladies and gentlemen, this concludes the conference call. You may now disconnect.