Travere Therapeutics Inc (TVTX) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to Retrophin Inc. third quarter 2016 financial results and corporate update conference.

(Operator Instructions)

I would now like to introduce your first speaker for today, Senior Director, Investor Relations, Mr. Chris Cline. Please go ahead, sir.

Thank you, Andrew. Good afternoon, everyone. Thank you for joining Retrophin's third quarter 2016 financial results and corporate update call. With me today are Steve Aselage, Chief Executive Officer; and Laura Clague, Chief Financial Officer.

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, November 3, 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 it over to Steve.

Thanks, Chris. Good afternoon, everyone and thank you for joining us. The third quarter was a pivotal one for Retrophin. In September we announced positive top line results from our Phase 2 DUET of sparsentan and focal segmental glomerulosclerosis, or FSGS.

In the study of the overall sparsentan treatment group due to primary efficacy endpoint measuring proteinuria reduction versus an active competitor, irbesartan. The results showed that after an 8 week double-blind period, treatment with sparsentan resulted in a greater than two fold reduction of proteinuria compared to irbesartan. Additionally, the data showed a statistically significant reduction of proteinuria in the combined 400 and 800 milligram dose cohorts. The data also suggests that sparsentan was safe and generally well tolerated. These preliminary finding service proof-of-concept for sparsentan's novel approach to FSGS treatment.

More recently, we were very pleased to learn that additional data from DUET has been accepted for presentation in a late breaking oral solution at the ASM Kidney Week later this month. We look forward to making more data from the study available to the nephrology community and giving a broader sense for sparsentan's potential.

Additional supportive data from the sparsentan program and research from our academic collaborators will also be presented at the meeting. For example, in an oral session, our collaborators from the Neptune Consortium will present a clinical outcome assessment with proteinuria in FSGS patients. As outlined in the abstract, these data support the use of proteinuria as a surrogate endpoint in FSGS and we look forward to the reception of those findings within the community. We believe their data, along with the presentation of other relevant data from the program, will help raise awareness of sparsentan's potential in FSGS among the world's foremost nephrology experts in attendance.

Following Kidney Week, the next step for the sparsentan program will be a meeting with the FDA to discuss the DUET results that has been scheduled for January. Our clinical and regulatory team submitted and we're preparing for what we believe will be a constructive dialogue to determine the regulatory pathway for sparsentan. Once we receive written feedback from the agency, we will update everyone on the outcome.

Looking ahead to progress with our other advanced pipeline candidate, RE-024. We are excited about getting closer to our second key clinical milestone in 2016 with the initiation of an efficacy trial evaluating RE-024 in patients with pantothenate kinase-associated neurodegeneration, or PKAN. Importantly, our regulatory and clinical ops teams are making good headway and remain on-track to initiate the trial before year-end. We look forward to sharing more detail in the design specifics soon.

Last on RE-024, I'm pleased to say that all four patients receiving therapy and physician initiation, initiated protocols outside the U.S. continue to remain stable on RE-024.

I'm going to round out to development discussion with our liquid formulation of ursodeoxycholic acid, which is being developed for the subset of PBC patients who have difficulty swallowing. We remain on-track to file our NDA in 2017 via the 505(b)(2) regulatory pathway. If approved, we believe liquid urso could represent a $20 million to $30 million opportunity, and we look forward to providing more detail on that as we get closer to submission.

It was clearly a busy quarter for R&D organization; I'm very pleased with the team's progress. Moving forward there will be a continued focus on execution as we strive to reach our next milestone and advance the development of our assets as quickly responsible. We look forward to sharing our achievements with all of you over the coming months.

I'll now shift over to our commercial performance for the quarter. Net product sales reached $33.3 million, a 21% growth over the same period in 2015. Importantly, we were able to show this growth despite a shifting pair mix which resulted in increased Medicaid rebate exposure, both year-over-year and sequentially. Specifically, Thiola continued to add new patients and performed as expected with some seasonality in the quarter, similar to what we saw last year. Looking forward, we expect Thiola will continue to grow for the foreseeable future. We are also pleased the compliance with Thiola remained strong in the 85% range; this is great evidence of the value our total care hub and what it delivers for the patients. The hub's continued dedication is ultimately helping ensure that patients receive the optimal therapeutic benefit from Thiola.

Turning to the bile acid therapies; Cholbam, and Chenodal. Both products experienced meaningful growth compared to last year and had new patients initiate therapy during the quarter. However, we experienced some level of patient attrition during the quarter which resulted in the patient's basis for both products remaining stable. That said, we are confident that our commercial and educational initiatives will spur further growth moving forward.

With Cholbam, we're encouraged by the continued update of the Retrophin sponsored Neonatal and Adult Cholestasis Sequencing Panel. The panel represents an important first step for physicians to begin the path to diagnosis for bile acid synthesis and Zellweger Spectrum patients. We continue to expect that its uptake of the panel broadens, patient identification will expand.

Regarding Chenodal, our CTX prevalent study increased its footprint and now has more than 30 sites active in enrolling patients. As we grow this effort and continue our education, we expect to identify more patients who may benefit from Chenodal treatment. And we recently had our first confirmed CTX patient identified in the study. Overall, I'm pleased that we continue to grow topline revenues in the third quarter, remain optimistic that our commercial and education efforts result in solid growth to end this year and follow into next year.

Lastly, we remained focused on our business development initiatives to diversify the commercial portfolio and layering additional development assets to the pipeline. As many of you know, it is a competitive landscape and we will remain disciplined in our approach. I'm very encouraged that we continue to find interesting opportunities to explore and we anticipate being able to drive significant value with these initiatives over the coming quarters.

Let me now turn it over to Laura, to walk through the financials. Laura?

Thank you, Steve. Net product sales from our commercial portfolio were $33.9 million in the third quarter of 2016, and as Steve mentioned, a 21% increase over the same period last year.

We reported a GAAP net loss of $37.1 million for the third quarter of 2016 compared to net income of $105.6 million for the same period in 2015. Adjusting for extraordinary in one-time expenses resulted in a net loss of $3.4 million for the quarter compared to a net loss of $1.9 million in the same period last year. Significant non-cash adjustments for the quarter included $17.1 million of non-GAAP operating loss adjustments, $10.1 million related to the Company's derivative liability resulting from share price fluctuation, and an income tax expense of $6.5 million due to an increase in valuation allowance against deferred tax assets.

Cost of goods sold during the third quarter of 2016 was $1.6 million compared to $0.5 million in the same period last year. This increase was due to a one-time charge related to supplier startup and yield variances for one of our commercial products and we expect COGS to return to normal levels next quarter. We recorded a non-recurring legal fee settlement charge of $5.2 million in the third quarter of 2016, which was related to the advancement of legal fees associated with our former CEO. We expect that at least some portion of the $5.2 million will be recovered to the Company's D&O insurance policy, but the specific value of that is not estimable at this time.

R&D expenses on a GAAP basis were $18.4 million for the third quarter of 2016 compared to $14.1 million for the same period in 2015. The increase over the same period last year is due to higher clinical expense related to sparsentan and RE-024. On an adjusted basis, R&D expense for the third quarter of 2016 was $15.4 million. Relevant non-cash expenses for the third quarter included $3 million of stock-based compensation and amortization. Selling, general and administrative expenses were $23.8 million on a GAAP basis in the third quarter of 2016, compared to $22.3 million in the same period last year. The increase over 2015 is largely attributable to further investment in sales and marketing programs to support our commercial products.

On an adjusted basis, SG&A expense for the third was $15 million. Significant onetime and non-cash adjustments consisted for the quarter consisted of $8.8 million related to stock-based compensation, and depreciation and amortization. As of September 30, 2016, we had approximately $320.8 million in cash and cash equivalents, marketable securities, and notes receivables from the sale of our PRB. This value includes the present value of the $147.5 million payments remaining from Sanofi. We received payment in full for the 2016 payment during the quarter and expect to receive the final payment in July of 2017.

Looking at the balance of the year and into 2017, advancing the pipeline will continue to be our focus, and as such we expect operating expenses, primarily in R&D to increase over current levels.

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

Thanks, Laura. As I mentioned at the beginning of the call, the third quarter was pivotal for Retrophin. I'm pleased with all of the progress made thus far, and with the Company's continued focus on key programs. That focus is enabling us to execute on our mission of delivering life-changing therapies to people living with rare diseases.

During the quarter we started to highlight the transformative potential or developmental assets with the positive topline read out from DUET. These findings firmly supports our belief that sparsentan can be safe, effective, and novel approach to treating FSGS. And we will continue that momentum as we close out the year with additional data from DUET in the initiation of the RE-024 efficacy study in PKAN patients. The future is clearly bright for Retrophin and we expect to deliver on these key milestones while growing topline revenues to create a greatest amount of value for our many stakeholders.

I'll now turn the call back to Chris and open up the line for Q&A. Chris?

Thanks, Steve. Andrew, can we please open up the line for Q&A?

(Operator Instructions) Joseph Schwartz with Leerink Partners.

We are looking forward to seeing your full DUET data for sparsentan and ASN. And meanwhile an abstract is available for the observational cohort study that will be presented there. And that highlights the value of achieving a complete remission in FSGS. So I was wondering if you will be presenting sparsentan data in this way for DUET or in future studies and if you think the FDA wants to see statistically significant improvements in complete remissions before approving a drug in FSGS?

I think there has been data published, including with FDA authorship that both complete remissions and partial remissions convey some patient benefit in nephritic syndromes, and I believe membranous nephropathy was a publication that's been reviewed most routinely.

We feel that both of those are important measurements. I think you're aware that the data being presented at ASN is completely embargoed; we can't even talk about what data is going to be presented much less of what it says, but we're looking forward to be unable to get all of that information out. We think it's going to answer a lot of the questions that we've gotten since the top line data was released a few weeks ago.

And also I was wondering if you can give us an update on the search for Alvin's replacement and what activities are you most focused on or are most critical that his replacement addressed?

Sure. We're making good progress on search for replacement. We've got an active search ongoing. We are interviewing candidates. Currently have been pleasantly surprised I guess by how many quality candidates have come into the queue.

So we're moving forward; we're going to take our time and make sure we get the absolute best person, the best fit both culturally and with technical skills and feel comfortable that we're on-track to do that in the fairly near-term. But again, it's not a situation where we want to rush into a hire or just to fill the position; we want to get the right person for the job.

Do Kim with BMO Capital Markets.

Could you tell us if the open labeled data will also be available? Is that something you could disclose to us without breaking the embargo rules?

Yes. Actually I can't get into the contents of what that presentation will entail. The only thing I can tell you is that we're going to include as much information as humanly possible to answer as many of the questions that we've gotten as we can.

Looking ahead, do you anticipate needing additional support for the commercial and launch for sparsentan, or will you be able to use the existing sales infrastructure you already have?

We would build on the existing sales infrastructure, it would require some with larger sales force to launch sparsentan.

Do you have a number of additional reps that you would need?

We have a ballpark number, but we haven't done a formal sales force sizing assessments yet, and without really doing a solid assessment I would be hesitant to throw out a guess.

This question may be a little premature, but now that the DUET trial was successful, and as you look at future development for sparsentan, have you thought about other rare kidney diseases where [participation] may be appropriate to those indications?

Yes. I think that's a great question and it's one we're taking a hard look at right now. Certainly some of the other nephritic syndromes, like IGA nephropathy or membranous nephropathy are things that we want to take a hard look at, make a decision as to whether or not it would be worthwhile investing in some sparsentan work in those areas.

(Operator Instructions) Liisa Bayko with JMP Securities.

As you've had time now review and contemplate the date a little bit more, has it -- to you is that clear that there's kind of one dose that emerges as one that makes the most sense based on a balancing of obviously safety and efficacy?

Yes, I don't think we're going to really be able to answer the question until we get all the details from the study. There's additional analysis being done, we're getting information, I guess I would characterize it as coming in waves. Until we get all of the information consort out details on of those space of both efficacy and safety. We also need to see how many patients that a dose change in the arm both for 800 milligram armed, so we still have some work to do before we can settle on a specific dose. And I would say also that it may well come out that we have a dose range that -- many products have a range from - you start at a low dose and titrated up to a taller ability or you start at a dose and titrate down until you get a patient's comfort level, and we still got some work to do. I gave you a long winded answer to a pretty simple question, that's long answer for simple question. Short answer is we're not sure yet.

If you were let out that the products you do have in the market today, I know you don't break down sales, but where did you see the most growth this quarter?

Yes. We actually saw all of our growth were virtually all of our growth on the Thiola side; as I mentioned, we did see new patients starts with Chenodal and with Cholbam, but we also lost some patients in both of those groups and it ended up with those products being relatively flat.

I think one of the things that we are saying is maybe worth commenting on is for these ultra-rare diseases, we're just not going to see steady quarter-over-quarter growth, is not going to be predictable. And it's really going to be the year-over-year, type of growth numbers, you can count on it I think they're going to be more predictive of the long term future of the products.

And that's not unusual and rare diseases. If you go back up in Q1 we're really excited we saw kind of a spike and starts in both, Chenodal and Cholbam. And we thought that might be a of future quarters in it turns out we've just seen some lumpiness where we've had some quarters later substantially larger, and then this quarter was probably the smallest net growth quarter since we launched the two products and we're going to continue to see some ups and downs would be my guess.

And at this time I'm showing no further questions. So with that said, I'd like to turn the conference back to Senior Director, Investor Relations, Chris Cline for any further remarks.

Thanks, Andrew. This concludes our update call. Thanks everyone for joining today. We look for up to updating you on our progress next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.