Travere Therapeutics Inc (TVTX) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Retrophin, Incorporated Second Quarter 2016 Financial Results and Corporate Update Conference Call. (Operator Instructions) As a reminder, this conference may be recorded.

I would now like to turn the conference over to your host, Mr. Chris Cline. Sir, you may begin.

Thank you, [Valerie]. Good afternoon, everyone, and thank you for joining Retrophin's Second Quarter 2016 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, August 4, 2016, and the Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call.

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

Thanks, Chris. Good afternoon, everyone, and thank you for joining us to talk about our second quarter results and the outlook for the rest of the year. Our focus has been on execution, and we've made progress on a number of critical fronts. I'm particularly pleased with the progress in preparation for our key clinical milestones coming up in the second half of the year. Importantly, we remain on track to have top line data from the DUET trial of sparsentan available in the near term. We are eagerly awaiting that data and remain optimistic for a successful outcome. If the DUET data are robust, we will be in a position to make a strong case with the FDA for an accelerated approval.

Further on the pipeline, we had positive developments for RE-024 in the second quarter with the successful showing at the MDS meeting in Berlin at the end of June. New data presented there covered 47 weeks of physician-initiated treatment with RE-024 in two adult patients with PKAN. Most notably from the data, both patients showed sustained clinical benefit, including the regained ability to walk with no treatment-related adverse events.

To date, clinically meaningful responses have been seen in all three patients who have had their data published from their physician-initiated treatment with RE-024. The positive feedback we received from investigators and physicians attending the meeting was very encouraging, and we look forward to initiating our efficacy trial of RE-024 in PKAN patients before the end of this year.

From an operational perspective, we had a strong quarter with revenues reaching $33.3 million. The 38% year-over-year increase keeps us on track to meet our guidance of $130 million to $140 million in revenues for 2016.

Thiola, Cholbam and Chenodal all showed growth in the number of active patients on therapy in the second quarter. We are encouraged that is the second straight quarter which we have shown meaningful patient growth with all three products. This reflects the value of our ongoing commercial and medical education efforts. As expected, we also saw an easing of the gross to net headwinds that affected us in the first quarter.

I'll touch briefly on each of the products. Demand for Thiola remained strong, and new patients continued to initiate treatment during the quarter. The sales force continues to see a positive impact from the new marketing programs that we initiated in the first quarter, and we look forward to further growth through the rest of the year. We're also pleased with compliance with Thiola. It remains high in the range of 85% as a result of our total care hub providing comprehensive and personalized support to patients.

Turning to Cholbam, we saw an increase in the number of active patients on therapy during the second quarter, and we are encouraged by growth in the number of patients being tested with the neonatal and adult cholestasis sequencing panel that we sponsor. This free genetic screening panel has shown early benefit and should help further patient identification.

Finally, moving on to Chenodal, where physicians continue to become more aware and better educated regarding CTX, we saw new patients initiate therapy again this quarter, and we're hopeful that the impact of our prevalent study and the efforts of our MSLs will contribute to more diagnoses earlier in the progression of this underdiagnosed disease.

On the business development front, as you know, we acquired the rights to a liquid formulation of ursodeoxycholic acid in June. This was an opportunistic addition to strengthen our bile acid therapy portfolio and will further diversify revenues in the near future. With this product, we'll be looking to address the unmet need for a subset of PBC patients who have difficulty swallowing the solid forms of ursodeoxycholic acid that are currently available. Our plans are to file an NDA for liquid urso in 2017 and make it available through our current commercial infrastructure upon approval. We estimate that this product could represent a $20 million to $30 million peak opportunity.

We remain focused on executing our business development strategy of diversifying the commercial portfolio and adding to our late-stage pipeline with additional rare disease assets. In this regard, we are engaged on multiple fronts and are optimistic that we'll be able to make progress in the second half of this year.

Lastly, before turning it over to Alvin for the R&D update, I'm very pleased that we've recently been able to strengthen Retrophin's leadership with the addition of Dr. Roy Baynes to our Board of Directors. With his deep clinical experience, Roy will provide invaluable guidance to Alvin and his team as we move our pipeline forward.

With that, I'll now turn it over to Alvin to update you on our R&D efforts. Alvin?

Thank you, Steve. The Retrophin R&D team made some significant achievements in the second quarter that have kept us on track to meet our key clinical milestones in the second half of the year.

Let's start with our most advanced program, which is sparsentan for the treatment of focal segmental glomerulosclerosis or FSGS. We remain on track for a top line read-out of the data from Phase 2 DUET trial in the third quarter. Given the large number of sites across multiple geographies, we are in the process of working with our CRO partner to ensure the highest quality data readout. We've been making good progress and anticipate the earliest we will be in position to unblind the data would be early September.

We remain optimistic that sparsentan will represent a significant advancement in care for FSGS patients. And if the data from DUET are robust, we'll be in position to make the strongest possible case for accelerated approval of sparsentan. In addition, the data from the randomized eight-week period will also be able to include data from the open label extension, where we'll have longitudinal data with more than two years of treatment for some patients. Since the vast majority of patients have continued into the open label extension, we expect to have a fair amount of data to support sparsentan.

During the second quarter, we also furthered our efforts with academic collaborators and patient advocates to bolster the case for proteinuria as a surrogate end point in FSGS. We look forward to presenting the output of our joint efforts to the regulatory agencies and also at scientific conferences in the near future.

Shifting gears now. We also made further progress during the second quarter with our other clinical-stage candidate, which is RE-024 for PKAN. As Steve mentioned, at the MDS conference in June, our collaborators present a new data from two adults with PKAN who are receiving RE-024 via physician-initiated treatment. The data showed a benign safety profile with no treatment-related adverse events during the observation period, and that treatment with RE-024 was associated with clinically meaningful improvements followed by stabilization of disease symptoms over 47 weeks of treatment. These treatment effects were captured using the Movement Disorder Society Unified Parkinson's Disease Rating Scale or MDS UPDRS. Mean improvements on part two and three of the scale at 47 weeks were 41% and 27%, respectively. The treating physician noted that both patients observed multifaceted improvement in symptoms, including the regained ability to walk unassisted for short distances.

Our collaborators have now presented data from three patients receiving RE-024. Now with the important caveat that these findings are not in the context of a controlled clinical trial, we remain encouraged by the consistent and sustained responses seen to date. All told, four ex-U.S. PKAN patients receiving physician-initiated treatment remain on RE-024 and have now been receiving RE-024 for up to 26 months.

We continue to be optimistic about the potential for RE-024 to be the first disease-modifying therapy approved for PKAN. Preparations to initiate our efficacy trial of RE-024 are ongoing, and we remain on track to initiate this trial in the second half of this year. Constructive interactions with the FDA and EMA are ongoing as we work towards alignment of our protocol design to enable a global trial that could support registration in multiple geographies.

The newest addition to our pipeline, liquid ursodeoxycholic acid, represents a meaningful improvement on an existing therapy that can make a meaningful difference to PBC patients who have difficulty swallowing. Our team is integrating the program into our pipeline and preparing for a 505(b)(2) NDA filing in 2017. We'll provide periodic updates on liquid urso as we get closer to important milestones.

With regards to RE-034, which is our synthetic formulation of the first 24 amino acids of ACTH. Our internal efforts have produced a molecule that we think has the potential to move forward. Given the competitive landscape, we've decided to pursue this strategic alternatives for RE-034, including partnerships that may allow it to enter development for orphan or non-orphan indications.

Now shifting gears to our work on the marketed portfolio of products. We continue to work on fulfilling our post-marketing commitments as well as improving the overall patient experience.

Cholbam continues to be the focus of significant efforts by the R&D team. The development of a quantitative urinary bile acid assay is continuing on schedule, and when done, we'll provide an additional data point for clinicians to either diagnose patients or monitor treatment effects.

We're also making significant progress on finalizing regulatory approval on the structure of the patient registry that's going to systematically capture data on all Cholbam patients worldwide in one unified database.

Finally, we're supporting several investigator-sponsored initiatives, which may add to the existing literature on Cholbam use.

Regarding Chenodal, our efforts are focused on two fronts, the first is the enrollment of our CTX prevalence study. As you may recall, this prevalence study is a long-term effort to enroll subjects with bilateral juvenile cataracts, which are usually idiopathic in origin. Identified patients who have a high index of suspicion for CTX are then invited in for genetic testing. Our hope is to establish a better sense of the true prevalence of CTX in this enriched population and also to identify patients who may benefit from Chenodal treatment. More than 25 sites have been activated and are currently recruiting subjects for this study.

The second part of our effort on Chenodal is the effort to get CTX added to the Chenodal label. Our last interaction with the agency back in April left us with a sense that there's a viable path forward, which could include a clinical study in the CTX population. We're working with the key opinion leaders in CTX and also with patient advocacy groups to shape a study protocol that can effectively address the agency's requests while remaining sensitive to the needs and desires of the patient population. We'll provide further updates as we make progress towards this goal.

For Thiola, our work with Mission Pharmacal on an improved, more patient-friendly formulation is ongoing. We anticipate that this effort will take well into 2017 before a regulatory submission will be forthcoming.

Overall, I'm happy with the progress our team has made so far this year, and we remain very excited about the upcoming milestones for the pipeline coming up in the second half of this year.

I'll now turn it over to Laura to walk through the financials for the quarter. Laura?

Thank you, Alvin. Net product sales from our commercial portfolio were $33.3 million in the second quarter of 2016, a 38% increase over the same period last year. This increase was driven by growth in the number of new patients initiating treatment with all three products.

We reported GAAP net loss of $13.4 million for the second quarter 2016 compared to a net loss of $25.5 million for the same period in 2015. Adjusting for noncash expenses resulted in a net income of $2.5 million for the quarter.

Significant noncash adjustments for the quarter included $14.2 million of non-GAAP op loss adjustments and $9.1 million related to the Company's derivative liability due to share price fluctuation, offset in part by an income tax benefit of $7.4 million as a result of orphan drug and R&D tax credits.

R&D expenses on a GAAP basis were $17.7 million for the second quarter of 2016 compared to $10.6 million for the same period in 2015. The increase over the same period last year is due to higher clinical trial expense related to sparsentan and RE-024.

On an adjusted basis, R&D expense for the second quarter of 2016 was $15 million. Relevant noncash expenses for the second quarter included $2.7 million of stock-based compensation and amortization.

Selling, general and administrative expenses were $23.2 million on a GAAP basis in the second quarter of 2016 compared to $19.7 million in the same period last year. The increase over 2015 is largely attributable to a higher headcount as well as further investment in sales and marketing programs to support our commercial products. On an adjusted basis, SG&A expense for the second quarter was $14.5 million.

Significant noncash adjustments for the quarter consisted of $8.7 million related to stock-based compensation and depreciation and amortization.

As of June 30, 2016, we had approximately $315.2 million in cash and cash equivalents, marketable securities and notes receivable from the sale of our PRV. This value includes the present value of 2 $47.5 million payments due from Sanofi. We received payment in full for the 2016 payment last month, and we expect to receive the final payment in July of 2017.

Looking ahead, as we stated last quarter, we expect that operating expenses will likely increase slightly through the second half of the year as we continue to progress towards our clinical milestones and support our commercial efforts.

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

Thank you, Laura. In the second quarter, we made important progress in the support of our lead pipeline programs. We added a development candidate with the potential to fill an unmet need for PBC patients and to deliver near-term revenue diversification. In parallel, we grew our top line revenues and maintained strong fiscal control. We are primed to keep our positive momentum going into the second half of the year with key clinical milestones on the horizon that will help shape Retrophin's future. We are optimistic the top line data from the DUET trial will provide hope for patients suffering from FSGS and support our goal to deliver the first approved pharmacologic treatment to this community. And we are also looking forward to the first PKAN patients enrolling in the RE-024 efficacy trial before the end of the year. We aim to deliver the first approved treatment for this progressively debilitating disorder.

Let me now turn it back over to Chris and open up the lines for questions.

Thanks, Steve. Valerie, can we open up the line for questions, please?

(Operator Instructions) Our first question comes from Joseph Schwartz of Leerink Partners. Your line is open.

Thank you. Good afternoon, everyone. This is Brett Larson dialing in for Joe. Appreciate the update across your programs. First, a question on one of your commercial programs [build]. So we've been hearing for quite some time that the Chenodal label expansion is inching closer and closer to resolution. Wondering if you can speak a little bit more about the activities that have been going on since your last meeting in April and whether there's any time line that we can look towards for final resolution of this discussion.

Hi, Brett. Alvin here. I can take that question. As you know, we're continuing in dialogue with the agency and it's required multiple rounds of negotiation. Our last interaction back in April was -- we view it as being highly constructive and we're taking the agency's feedback to heart. We're working with clinicians and patient groups to make sure that the trial protocol that we come up with is feasible. And our plan is to go back to the agency once that protocol is finalized. We're targeting to have that discussion happen in the second half of this year.

Will we get an update that there's positive feedback on the path forward and sort of resolution with the FDA? Or should we just hang in tight for that toward maybe in the next quarterly update?

Yes, I think once we get agreement on it, we'll begin initiation of that trial. And that's something that we would be able to update you on.

Okay, great. And related to sparsentan, as we approach the data read-out there, can you speak again to what range of response rates you are prepared or expecting to see within the control arm ultimately? And I know you speak (inaudible) before to certain point estimate there, but what are sort of the outer -- lower and upper bounds for what would be your expectations for that response so we can think towards what a relative improvement might look like?

Sure. I think the right way to think of that is our expectations for the irbesartan arm are driven by the literature in chronic kidney disease. So we don't have specific data points in FSGS, but we can infer from the literature that the response rate on proteinuria by irbesartan will be in the 20% range. That's our expectation.

We need to see an effect of sparsentan over and above that 20%. We feel that what would have both clinical and statistical significance would be a relative 50% greater improvement on proteinuria. So if irbesartan gives you 20%, we would like to see a 30% reduction in sparsentan. And again, we think that will be both clinically and statistically meaningful.

Okay, great. And last questions are related to RE-024. Should we expect to see any data from the [fourth] patient that has been receiving RE-024 outside the U.S. through compassionate programs -- use programs anytime in the near future? As well as, are all four of these patients that were initiated previously on compassionate use of RE-024 still receiving therapy? And lastly, have any additional patients been initiated on RE-024 through similar programs?

So all four patients who were initiated on RE-024 continue to be on 024 treatment. And again, the length of treatment for those patients is upwards of two years now in the longest case. There have not been initiations of other patients on physician protocols.

And in terms of if and when the last patient would get published, that's really at the discretion of individual investigators. We have worked very closely with our collaborators to push for publication and dissemination of results. But ultimately, since these are physician-initiated treatments, it's not within the Company's control. And so I can't promise that publication will be forthcoming. We certainly would encourage it, but it's not something that I can promise.

Of course, understand. Thank you very much for taking my questions and looking forward to the upcoming (inaudible).

Thank you. Our next question comes from Do Kim of BMO Capital Markets. Your line is open.

Thank you for taking my questions. My first question is on the DUET study. I was hoping you could expand more on the data gathering process from having the clinical sites compile their data to you having completed data analysis on hand and potentially pointing to which are the rate-limiting steps? And who will be doing the analysis of the unblinded data? Are you doing it internally or will the CRO do it?

Yes, Do, thanks for your question. Let me just provide a little bit of context as well. As we mentioned, this is really the largest-ever industry-sponsored trial ever conducted in FSGS. And we enrolled patients across more than 40 sites in multiple continents. And as you may guess, the overall complexity of the data readout really goes up significantly with the number of sites, not to mention the geographies involved.

So our first priority is to ensure a high-quality readout. And so our data management team has been working overtime with our CRO partner to ensure that the data are reliable and that we can ensure integrity of that data. For those of you who have closed out a trial before, you know this often takes a large number of data queries, which take some time to resolve. So that really is the rate-limiting step at this point. We're working as quickly as possible to get a good data readout. And again, we're anticipating that early September would be the soonest time we'd be able to see the unblinded results.

And then you'll do the analysis internally?

The analysis is being done by the CRO.

Okay. And I also have a question on your decision to use proteinuria as the primary endpoint. We've been hearing that regulators are -- or have been considering GFR decline as a surrogate endpoint for kidney disease. And since we know there's a pretty close relationship between GFR and proteinuria, was there any advantage for choosing proteinuria over GFR decline?

We believe there is in the sense that proteinuria seems to be a leading indicator that you might expect to see dip even before you would expect to see a decline in GFR. Decline in GFR, whether you call it a 40% or a 50% decline in GFR, can still take quite a long time to achieve as an end point. And so the goal with pushing proteinuria is to find something that can translate and actually give you an earlier read on disease, even earlier than GFR decline.

Okay. That makes total sense. Thanks for taking my question.

Thanks, Do.

Our next question comes from Liisa Bayko of JMP Securities. Your line is open.

Hi, there. Thanks for taking my question. Can you give us a little color on the design you're thinking about for the RE-024 study?

Yes, that's something that's still up in the air. It's in discussion with the agency, both the FDA and the EMA. What I can tell you is that we expect that it will be a placebo-controlled study, two arms, randomized, and we'll be looking at a functional outcome. And so we fully anticipate that the endpoint and the functional outcome that we're measuring should support registration and we'll have a good readout on how PKAN patients feel, function and survive, which is what the agency wants to see.

So once we nail down those details, we'll be able to tell you more about the sizing and the duration of the trial, but that's where we're at right now.

Okay. And I just want to ask a little bit more about your primary efficacy end point for the DUET study. Can you talk about how you will be expressing that reduction in proteinuria? Is that a reduction, some sort of responder index? Are you trying to see what percentage of patients [get] to a particular level? Specifically how will you -- how should we expect to -- the data readout to be?

Sure. So the answer is that we'll be looking at both. The primary endpoint is a straight comparison of the percent reduction on sparsentan versus the percent reduction on irbesartan. And so it will be a standardized and [global] measurement there.

As part of the -- our secondary outcomes, we will be looking at responder analysis. So that's looking at how many meet the pre-specified criteria with sparsentan versus how many meet it with irbesartan. So we will be looking at data both ways.

Okay. Thank you.

Thank you. I'm showing no further questions in the queue at this time. I'd like to turn the conference back over to Mr. Cline for any closing remark.

Great. Thanks, Valerie. This concludes our call for the quarter. We thank you for listening in and look forward to updating you on our progress next quarter.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.