Travere Therapeutics Inc (TVTX) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Retrophin Incorporated fourth quarter and full year 2015 financial and operational update call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Chris Cline. Sir, you may begin.

Thank you, Lauren. Good afternoon, everyone, and thank you for joining Retrophin's fourth quarter and full year 2015 financial results and corporate update call.

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 by management 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, February 25, 2016, and 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 to talk about the progress we made in 2015 and our outlook for 2016.

We close 2015 with fourth quarter performance that continued the momentum we built earlier in the year, and leaves us well positioned for what could be a transformational 2016 for Retrophin. From an operating perspective we grew top line revenues for the seventh consecutive quarter, and leveraged our cost controls to remain disciplined in our deployment of capital, which resulted in another quarter of positive operating cash flow generation.

The growth in total net product sales to $30.4 million for the quarter was driven by new patient additions to all three products. Thiola was the largest contributor to this growth in the fourth quarter, and continues to add patients on a weekly basis.

2015 was about expanding our knowledge of the cystinuria marketplace and understanding the true potential for the product. Specifically, we were focused on reaching the remaining portion of the cystinuria patients who had been treated with Thiola prior to the supply disruption in 2014, and those who were aware of the therapy, but had not let yet received it. 2016 will be about applying this knowledge to ensure we reach the maximum number of patients possible, within what we believe is a population of 4,000 to 5,000 cystine stone forming patients who could benefit from Thiola. We'll do that by primarily targeting diagnosed patients who may be on earlier lines of treatment, or even other therapies. Specifically we have already initiated several programs to improve our commercial efficiency and gain greater traction in the field.

One way we hope to spur further growth is through a new program we launched in late January. This effort gives us access to laboratory data which will direct us to more quickly to physicians who have diagnosed patients under their care. We anticipate this man, covering nephrologists or urologists that our sales force had not previously engaged, and I'm encouraged by some returns that we have already seen from the program. It is too early to determine the sustainable impact, but we should have a good handle on the value of this new program by mid year.

We will also be spending more time connecting with patients to gain an even better understanding of their treatment expectations and educate them on the importance of keeping cystine levels below the limit of solubility. We believe that patients should have higher expectations when it comes to therapeutic outcomes. For some it will be as simple as optimizing their dosing regimen, and with others it may be considering Thiola earlier in the treatment paradigm. In the field, our sales force and medical affairs teams will be educating physicians and thought leaders to build a better understanding of the utility of the 24 hour urine test and the importance of seeking optimal treatment regimens, all in an effort to help patients get closer to a state of complete stone remission.

Compliance rates with our patients continue to improve and are now up hovering around 85%. This is a gratifying result of the significant investments we continue to make in the many services we provide to support patients via the THIOLA Total Care Hub. Most importantly, it means people are generally seeing greater benefit than they were before we started distributing Thiola, as historical rates were closer to 50%. Last quarter we announced that we committed efforts toward a new, more patient-friendly formulation of Thiola. We are working closely with our manufacturing partner to begin development work on that formulation.

Switching to Cholbam, our treatment for bile acid synthesis and Zellweger spectrum disorders. In the fourth quarter we saw some new patients initiate therapy. The uptake thus far has been a bit slower than initially expected. But that is not uncommon when launching new treatments targeting rare diseases. We continue to believe that there are roughly 200 to 300 patients that would benefit from Cholbam therapy, and we are adjusting our strategy to accelerate uptake, and start reaching those patients more quickly.

Specifically, in order to fully capture the opportunity with Zellweger spectrum disorder patients, we've expanded our target audience to include clinical geneticists. We are focusing on about 70 centers of excellence as these appear to be where the specialist closest to diagnosis for many of these patients reside. We have also identified a way to simplify and accelerate the diagnostic pathway for specialists encountering cholestasis, which is usually a presenting symptom of bile acid synthesis and Zellweger spectrum disorders. We are partnering with a leading academic genetics laboratory to enable free access to a comprehensive genetic panel for any patient with cholestasis and other symptoms that could point to the possibility of these disorders.

We believe access to this [test] will enable higher diagnosis rates of the disorders where Cholbam can help, and most importantly allow for early intervention, which is critical to better outcomes for these vulnerable patients. If left untreated, many of these patients may develop life-threatening liver injury, which can lead to transplant or even death. So we will continue to expand our efforts in trying to reach as many of these patients as possible.

Turning to ex-US efforts where the landscape is evolving, and we continue to assess the overall potential of Cholbam. We are encouraged by the EMA's decision to reauthorize the marketing rights in November, as that decision allows us to take further steps toward launching in several countries in 2016. We still have a ways to go, and at this point we do not expect a significant top line revenue contribution from ex-US to be realized in 2016. But we do anticipate being able to get more clarity on the overall opportunity later this year.

Wrapping up commercial portfolio discussion with Chenodal, where the patient base grew a bit in the fourth quarter, efforts continue towards our goal of increasing awareness and enabling earlier diagnosis of CTX. With a severely degenerative condition and a median diagnosis age in the mid-30s, we know we can make a difference in patients' lives if we can get more physicians thinking about CTX earlier. To that end I'm happy with the progress we've been able to make with our prevalence study, which began enrolling patients in the fourth quarter. We expect that momentum to continue through 2016, and hope it will provide meaningful insights into the diagnostic patterns of the population, while also gaining a better sense of the true prevalence of CTX.

With regard to altering the label, preparations continue for engaging the FDA further this year, in the hopes of finding a mutually agreeable pathway for inclusion of CTX to the label.

From a business development standpoint, our focus has not shifted, we continue to be engaged on many opportunities. We are primarily focused on rare disease assets that fall into one of two buckets, commercial assets that have some IP or exclusivity, that we can bring in and execute without a significant buildout of our infrastructure; and later stage development assets that are either overlooked or not broadly understood. We are not planning on bringing in development stage assets that carry significant risk, or have an unclear path toward near term value creaton. The environment is certainly shifting, and we are seeing some more willingness to engage on some assets than we were last year. So we are hopeful to have additional opportunities to look at as we move through the year.

Touching on R&D, before I hand it off to Alvin to walk you through these updates, 2016 is a very important year for the pipeline. I continue to be hopeful about our chances for success for sparsentan and RE-024. We're getting closer to enrolling our last patient in the DUET trial, and look forward to hopefully confirming what we believe will be a robust reduction in proteinuria when we see the top line readout later this year.

In a few weeks, we'll get to showcase the RE-024 program with data at the American College of Medical Genetics. Alvin and his team have done an exceptional job in getting the package of data accepted for presentation, that will provide clarity into the potential of RE-024 as a viable treatment for people suffering from PKAN. The other key milestone will be the initiation of a next trial of RE-024, which will be evaluating efficacy in the PKAN patient population.

So with that, I will now turn the call over to Alvin to give you a more in-depth update. Alvin?

Thanks, Steve.

The R&D organization closed 2015 with a number of achievements that helped further lay the groundwork for a very important year ahead, and we anticipate in 2016 the pipeline will continue to come into focus with the potential successful achievement of several important milestones.

Specifically related to sparsentan, which is our lead development program, the clinical team made a big push in the fourth quarter of 2015, and was able to make up for some of the weakness we saw in enrollment due to the seasonality in the summer months of 2015. I'm happy to report that we are on track to have the 100-subject randomized in the DUET study by the end of the first quarter. And this would put us on track for a top line readout the third quarter of 2016.

The DUET trial was designed to detect the clinically meaningful reduction in proteinuria after eight weeks of treatment, compared to an active control. Based on the fact that angiotensin blockade is commonly used as a backbone of therapy in FSGS, we chose to use irbesartan as the active control in DUET. And we believe this reflects the real-life therapeutic decision making that patients and doctors will be faced with.

What gives us confidence in sparsentan is the emerging body of mechanistic evidence supported by clinical data and other chronic kidney diseases, that show endothelin antagonists have an additive effect on proteinuria over and above that of ARBs alone. In multiple studies using several agents, it's clear that the proteinuria-reducing effective endothelin receptor antagonists is quite significant.

From a safety perspective, the limitation of endothelin receptor antagonist used in chronic kidney diseases has traditionally been fluid retention, which can lead to significant complications for this patient population.

We hypothesize that the relative selectivity of sparsentan for endothelin type A receptors, over type B receptors, as well as the fact that sparsentan has a built-in angiotensin blockade, which has a diuretic or fluid-losing effect, should help mitigate the potential for fluid retention.

The fact that we've now gone through four data monitoring committee meetings, the last of which was just a week ago, gives us some comfort that the safety profile of sparsentan is generally in line with clinicians' expectations.

In terms of our regulatory strategy, we made progress in the fourth quarter of 2015 with the official granting sparsentan's orphan drug designation in the European Union for the treatment of FSGS. This designation provides good validation of our efforts, and will ultimately aid our discussion with regulators.

We also continue to push forward in our belief that proteinuria is an acceptable surrogate endpoint that's appropriate for Subpart H or accelerated approval. We've seen a lot of momentum, both from the academic community as well as the agency itself, to identify and validate a surrogate endpoint in renal disease that can be used in trials to assess the ability of therapeutics to prevent progression of ESRD.

Notable efforts in disease areas such as idiopathic membranous nephropathy, which resulted in an excellent publication last year in the Journal of the American Society of Nephrology, support the fact that proteinuria is coming into focus as a potential Subpart H endpoint. Our own discussions with the agency has solidified our belief that proteinuria will be considered for Subpart H approval, if the data are robust and supportive. We continue our efforts with key opinion leaders and patient advocacy groups to build a data set that will help us in our discussions with the agency at the appropriate time. We'll continue to provide further updates as we near the end of the enrollment period for DUET.

Moving to RE-024, which is our novel phosphopantothenate replacement therapy, for the treatment of pantothenate kinase-associated neurodegeneration, or PKAN, we continued to reach key milestones for the program's development during the fourth quarter. Most notably we had an end of Phase1 meeting with the FDA in December to discuss the next steps for an efficacy trial of RE-024 in PKAN patients. The agency's feedback was very clear and constructive. We plan to incorporate their guidance and move towards initiating an efficacy trial in PKAN patients later this year.

Perhaps equally as important, we submitted and gained acceptance for the presentation of a package of both pre-clinical and clinical data at the ACMG meeting in March. We are excited, as this is some of the first comprehensive data that we'll be able to get into the public domain, and it's very supportive of the program's development thus far.

The presentations coming up in a few weeks will cover first, the results of our Phase 1 healthy volunteer study of RE-024, showing how single oral doses ranging from 75 milligrams up to 1,800 milligrams were safe and well tolerated. Secondly, a case report of one ex-US PKAN patient receiving RE-024 therapy, who has been monitored for a 12-month period and has demonstrated the therapy is well tolerated. The patient also showed improvement in multiple outcome measures, including motor symptoms as measured by the Unified Parkinson's Disease Rating Scale.

Third, development of the first human cellular model, in which the silencing of PanK2 by shRNA leads to decreased coenzyme A levels, as well as decreased tubulin and histone acetylation, which are restored following treatment with 024. And fourth, mechanism of action studies using isotopically labeled RE-024, demonstrating incorporation of phosphopantothenic acid derived from RE-024, into CoA in mice. Microdialysis studies in primates also demonstrate the ability of RE-024 to distribute to the brain.

The four patients receiving RE-024 therapy through physician-initiated studies outside the United States, continue on therapy, and have now been receiving treatment with 024 for 19 to 25 months altogether.

We look forward to the one patient case report that will be presented at ACMG, which should provide data on that very first patient to initiate RE-024 treatment. We also continue to encourage the further dissemination of case reports for the remaining patients, who are being treated under physician-initiated studies, in order to contribute to the body of knowledge surrounding RE-024 and PKAN.

Last but not least in the pipeline is RE-034, which continued to move ahead in fourth quarter with manufacturing and scale-up activities which will enable further development. These efforts are ongoing and will enable us to reach a decision on the initiation of IND-enabling studies in the late spring or early summer.

Now shifting the focus to our support of the marketed portfolio, the R&D team continues to work very closely with the commercial organization to ensure we are combining our efforts to optimize the effectiveness and reach of our products.

Regarding Thiola, this means we continue our efforts to produce a novel, more patient-friendly formulation in conjunction with our partners at Mission Pharmcal.

For Chenodal, our team's focus has been on two distinct goals. The first is broadening our education in the disease awareness efforts through the CTX prevalence study that kicked off last year. And the second is the discussion with the agency to include CTX on the Chenodal label. So first, with regard to the prevalence study, we've continued to enroll and activate research sites in that study, with the goal of having subjects screened as soon as possible. As Steve mentioned, this long-term study will have the dual purposes of establishing the prevalence of CTX in this enriched population, as well as keeping CTX top of mind within the physician base, that can be the first to pick up bilateral cataracts, which is one of the early signs of CTX.

Our efforts to getting the Chenodal label adjusted to include CTX have been progressing. We continue in dialogue with the agency and hope to align on an acceptable pathway in the first half of this year. Our belief is that a label that reflects the true nature of usage of Chenodal in the best interest of the patient community. And we continue to enjoy the full support of the patient advocacy groups that are in this space.

On Cholbam, our team has been focusing on fulfilling our post-marketing commitments, which include the development of a disease registry, as well as the development of a quantitative diagnostic tool to measure urinary bile acids. Both efforts are proceeding according to plan, and we anticipate we'll be able to meet the FDA obligations on schedule.

In terms of earlier stage discovery work, our team announced in November the initiation of a research collaboration with the Grace Wilsey Foundation, as well as the University of Notre Dame, to do early stage discovery work towards a therapeutic for NGLY1 deficiency. This collaboration is very exciting, and focuses on a novel target for the disease. If we're successful in target validation and assay development, these efforts may lay the groundwork for the development of a novel small molecule therapy for this disease.

This model's collaboration between industry, academia, and patient advocates is beginning to become widespread in the rare disease community, and we look forward to working with our collaborators to move the field forward. Further updates will be forthcoming as we make progress.

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

Thank you, Alvin.

Net product sales from our commercial portfolio consisting of Thiola, Cholbam, and Chenodal were $30.4 million in the fourth quarter, and $99.9 million for the full year 2015.

The increase for the fourth quarter over the same period in 2014 is due to growth in the number of patients receiving Thiola and Chenodal treatments, and the addition of Cholbam to the commercial portfolio.

We reported a GAAP net loss of $2.5 million for the fourth quarter, and a net income of $117.2 million for the full year 2015. Adjusting for extraordinary and one-time expenses, net income was $2.6 million for the quarter, and $11.8 million for the full year 2015.

Significant adjustments for the quarter included $18.5 million of non-GAAP operating loss adjustments, offset by a $10.5 million income tax benefit, and a net benefit of $2.9 million related to the company's derivative instruments.

Research and development expenses on a GAAP basis were $15.5 million for the fourth quarter, and $15.4 million for the full year 2015. The increase in the fourth quarter is a result of increased compensation and clinical trial expense related to the advancement of our lead development candidate sparsentan, as it nears completion of enrollment of the DUET study.

On an adjusted basis, R&D expense for the fourth quarter was $12.6 million and $40.3 million for the full year 2015.

Relevant non-cash expenses for the fourth quarter included $2.8 million of stock based compensation and amortization.

Selling, general, and administrative expenses were $22.7 million on a GAAP basis in the fourth quarter and $79.5 million for the full year 2015. The increase in the fourth quarter is largely due to increased compensation and amortization related to the expansion of commercial effort and the addition of Cholbam to the commercial portfolio. On an adjusted basis, SG&A expense for the fourth quarter was $13.8 million and $46 million for the full year 2015.

Significant one time and non-cash adjustments for the quarter consisted of $8.5 million related to stock compensation and depreciation and amortization.

A quick note on taxes. We ended the year with an $11.8 million benefit. This benefit was a result of trueing up the release of a valuation allowance, and the utilization of net operating loss carried forward, related to the sale of PRV.

At year end, the company also recorded a corresponding deferred tax liability of $24.3 million on the balance sheet, primarily related to future taxes payable on the remaining two payments that we will receive as a result of the PRV sale. Prepaid taxes of $8.1 million will be applied against this deferred tax liability when it becomes due.

As of December 31, 2015 we had approximately $322 million in cash and cash equivalents, marketable securities, and notes receivable from the sale of our PRV. The market increase over the cash balance of $27.8 million on December 31, 2014 can be largely attributed to the company's follow-on equity offering in March, and the initial payment and remaining notes receivable from the sale of the PRV.

Briefly looking ahead, as mentioned earlier, in 2016 our emphasis will be in our development program, and as such we expect to allocate further investments in our lead pipeline assets, sparsentan and RE-024, to give them the best chance of reaching patients as quickly as possible. As a result, we expect operating expenses and cash flow from operations to vary throughout 2016.

I am proud of our progress in 2015. We significantly strengthened the balance sheet, implemented new cost control measures, and focused our spend in the areas that offer the greatest future return, and these achievements have put us in a position of financial strength heading into the new year.

I'll now turn the call back over to Steve for his closing remarks.

Thanks, Laura. I do want to take a step back and recognize the progress that was made in 2015 as a result of our employees' dedication and hard work, while executing on the strategic plan.

There were many significant achievements in the year, including but not limited to: top line growth each quarter, with broad expansion of access for patients to all of our commercial products; numerous regulatory milestones that will ensure additional value for our pipeline assets, including orphan drug and fast track designations; the acquisition and approval of Cholbam and the subsequent PRV sale; and the ramping up of enrollment in the DUET trial for sparsentan; and RE-024 moving into the clinic in the US, and completing its Phase 1 trial in healthy volunteers.

From a financial perspective, we entered 2015 with a $56 million top line run rate, and operating expenses that we're only just starting to benefit from the controls put in place at the end of 2014. Our balance sheet was limited to only $28 million in cash, alongside expensive, restrictive debt, and convertible notes.

We now move into 2016 with top line growth expected to reach $130 million to $140 million, and a fortified balance sheet consisting of more than $320 million in cash and receivables, with no restrictive debt.

This progress enables us to set our sights higher. We plan to leverage our advancements from last year to move through 2016 with the focus of moving our pipeline forward, and continuing commercial execution so that we can showcase the true value potential of the company for our shareholders.

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

Thanks, Steve. Lauren, can you open up the line for questions please?

(Operator Instructions)

Joseph Schwartz, Leerink Partners.

Hi everyone, this is Brett in for Joe, thanks for taking my question. I'm curious on Thiola, how much revenue growth do you feel is left, and what are the drivers in this direction, you specifically mentioned the patient-friendly formulation in development, I'm curious to hear any more thoughts and color around that and timing for that? And then conversely how much of a barrier to growth, if at all, is the action announced by Imprimis earlier this month? Thank you.

Sure, thanks. We see significant upside with Thiola, really through all of this year and into 2017. We feel like we've got a good start. We've seen good growth, but this is a product that takes time, takes education.

And one of the things that I mentioned during the script was, there are, we feel, patients in many centers scattered around the country that we just haven't been able to find yet. We feel that use of this laboratory data is going to allow us to direct our sales force really to become much more efficient, much more effective in finding those patients, and getting those patients onto therapy. So, significant upside to continue. We're going to grow that product for the foreseeable future.

With regard to the second part of your question related to the compounding pharmacy, we don't see any impact at all on our current or future business. It's a formulation that we don't think makes sense, and we don't think it should come to market. It's a product that, if it comes out as described, would be considered a new drug, not just a compounded version of Thiola. You can't launch a new drug in the United States without FDA approval. So we're not losing any sleep about that one.

Okay, great, thanks for the color. On the patient-friendly formulation that was mentioned, when can we expect some more details around what that would look like and when that could be launching?

I don't anticipate us really providing any details on that till we get pretty close to being able to roll it out for utilization, and that would be probably 2017 sometime. And as we get closer we'll give you a little tighter timeline. But we're still early on with that, and the only thing I'd be willing to certainly say right now is we won't get it out in 2016, it will be at least 2017 before it comes out.

Okay, great. Thanks for the answers, I appreciate it.

Sure.

(Operator Instructions)

And I'm showing no questions at this time.

Great, thank you, Lauren. With that we'll wrap up the call, and we look forward to giving you all of our progress next quarter. Thank you for joining.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.