Travere Therapeutics Inc (TVTX) 2017 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Retrophin, Inc.

Fourth Quarter and Full Year 2017 Financial Results and Corporate Update Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Cline, Vice President of Investor Relations.

You may begin your conference.

Great.

Thank you, Giles.

Good afternoon, everyone, and thank you for joining Retrophin's Fourth Quarter and Full Year 2017 Financial Results and Corporate Update Call.

Joining me on the call today are Steve Aselage, Chief Executive Officer; Neil McFarlane, Chief Operating Officer; Laura Clague, Chief Financial Officer; and Dr. Bill Rote, Senior Vice President and Head of Research and Development.

Before we begin, I'd like to remind everyone that statements made during this call regarding matters that are not historical facts are forward-looking statements within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of performance.

They involve known and unknown risks, uncertainties and assumptions that may cause actual results, performance and achievements to differ materially from those expressed or implied by the statement.

Please see the forward-looking statement disclaimer on the company's press release issued earlier today as well as the Risk Factor section on our Form 10-K filed with the SEC.

In addition, any forward-looking statements represent our views only as of the date such statements are made, February 27, 2018, and Retrophin specifically disclaims any obligation to update such statements to reflect future information, events or circumstances.

With that, let me turn now turn the call over to Steve.

Steve?

Thanks, Chris.

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

2017 was a remarkable year for Retrophin.

Through expansion of our pipeline and further execution of our strategic initiatives, we positioned the organization to become a preeminent member in the rare disease community.

Most notably, in 2017, we added seasoned team members, which strengthened our ability to execute on our clinical and commercial priorities; we grew our base business with efficiency; and we advanced each product candidate in our development pipeline closer to commercialization.

First, regarding our pipeline.

I'm very pleased to update you on our most recent progress with sparsentan.

Last week, we met with the FDA to review the protocol for our planned Phase III trial of sparsentan in FSGS.

Several important items were clarified in the agency's written response prior to the meeting and confirmed in our live discussion.

Specifically, the FDA concurred that our statistical model supporting the length between modified partial remission of proteinuria and the change in the slope of eGFR in our study population is supportive of proceeding with our planned Phase III pivotal trial on the Subpart H pathway.

Bill will go into a bit more detail shortly, but this is, obviously, a key achievement for our FSGS program.

We are rapidly finalizing our Phase III FSGS study initiation activities with the expectation of having the first patient dosed in the second quarter of this year.

Sparsentan is also moving ahead in IgA nephropathy.

During the fourth quarter, we continued our preparations to enter the clinic, and we will continue to engage regulators to establish our path for initiating a clinical trial later in 2018.

The prospect of studies running in parallel for these 2 rare kidney disorders significantly increases sparsentan's value proposition, and we look forward to sharing more detail about them later this year.

During the quarter, we also advanced our fosmetpantotenate program, which is in Phase III development for PKAN.

The pivotal FORT study continues to enroll adult patients.

We expect to open the study to pediatric enrollment in the second quarter, with the target of completing enrollment of all patients around the year-end 2018.

The last development program I would like to highlight is our collaboration with Censa Pharmaceuticals to develop CNSA-001 for PKU.

This was announced at the beginning of the year.

We are extremely pleased with this arrangement, as it has the potential to materially strengthen Retrophin's pipeline.

The collaboration gives us exclusive access to a development candidate with promising preclinical data, the prospect of advancing quickly through the clinic, and the potential to fill a significant unmet need for PKU patients.

Coordination with the Censa team has been exceptional, as they work to complete the dosing studies before moving into a Phase II proof-of-concept study around midyear.

By early 2019, when the proof-of-concept study reads out, we should have a good understanding of how efficacious CNSA-001 can be and if our hypothesis is correct, we'll look to advance very quickly into a pivotal study.

Operationally, we ended the year with a strong performance across the whole commercial portfolio, and we look forward to those products continuing to grow organically and reach our guided range of $170 million to $180 million in 2018.

Let me now turn the call over to Bill to go over our pipeline progress in more detail.

Bill?

Thanks, Steve.

Our number one priority remains advancing our pipeline of promising lead programs for PKAN, FSGS, IgA nephropathy and PKU.

All rare diseases with significant unmet needs with few or no FDA-approved therapies.

During the fourth quarter of 2017 and at the outset of this year, we continue to make progress across all of our candidates, which sets us up very well for an impactful 2018 in the clinic.

Let me start with sparsentan, our dual mechanism development candidate advancing for the treatment of both FSGS and IgA nephropathy.

Together, these rare kidney disorders affect at least 200,000 people in the United States and greater numbers in Europe and Asia.

As Steve mentioned, we're very pleased with our recent meeting with the agency, where we gained alignment with the FDA on our proposed Phase III trial design to support a Subpart H accelerated approval pathway in FSGS.

Specifically, the FDA concurred that the statistical modeling for our proposed study population supports the link between proteinuria and estimated glomerular filtration rate or eGFR.

As a result, we're moving ahead with our perceived, previously discussed trial design, which has an interim assessment of modified partial remission of proteinuria and a confirmatory endpoint, evaluating changes in slope of eGFR over time.

We have minor alterations to make to our protocol per our meeting with the agency before discussing the trial design in more depth.

But we are moving full speed ahead with trial initiation activities and anticipate having the first patient dosed in the study during the second quarter.

We believe this is a great outcome.

We're also very eager to begin clinical development with sparsentan in IgA nephropathy.

The data we filed today are (inaudible) for both sparsentan's potential intervention in the disease cascade and its differentiation compared to current treatment practices, which is similar to FSGS.

Most importantly, the data showed very clear association between early change in proteinuria and improved clinical outcomes across multiple interventions.

As a result, we've been able to put together a strong package for discussion with regulators on our path forward.

We are currently in the process of finalizing our proposed protocol for IgA nephropathy and expect to gain final feedback from regulatory agencies around midyear 2018.

In anticipation of successful regulatory discussions, we've initiated trial preparation activities in parallel.

Our CRO has been selected, and we are building enthusiasm amongst investigators to participate in our study with the expectation of beginning our IgA nephropathy study in the second half of 2018.

We look forward to providing more information on both of these programs, as they progress throughout the year.

I'll now move to our fosmetpantotenate program.

We continue to be very excited about fosmetpantotenate's potential to be a first-in-class therapy for PKAN patients who are currently living without effective treatment options.

In the fourth quarter, we furthered our efforts to boost enrollment in our pivotal FORT study.

We initiated additional U.S. sites in key areas central to PKAN families, and we recently commenced our U.K. and first European sites.

As many of you know, our study protocol calls for us to enroll a small number of adult patients and follow them for a short period of time to enable data safety monitoring board readout prior to initiation of pediatric enrollment.

We expect to have that component of adult PKAN patients enrolled by the end of this quarter, which will enable pediatric enrollment sometime in the second quarter of this year.

We do anticipate enrollment accelerating once we open the pediatric cohort, given the larger proportion of PKAN patients under the age of 18.

As such, we expect the FORT study to complete enrollment around year-end, which would enable top line data readout in the second half of 2019.

In parallel to the FORT study, 4 patients continue to receive fosmetpantotenate in physician-initiated studies outside the United States.

All 4 patients have been receiving open, non-controlled treatment for more than 3 years, and their findings continue to be helpful in evolving our knowledge of fosmetpantotenate's potential in PKAN.

Looking ahead, our focus for fosmetpantotenate will be getting additional study sites opened and reaching our enrollment goal of 82 adults and pediatric patients.

Finally, I'd like to touch on our collaboration around CNSA-001 for the treatment of phenylketonuria or PKU.

PKU is a rare genetic metabolic condition in which the body can't break down phenylalanine due to a missing or defective phenylalanine hydroxylase enzyme.

High levels of phenylalanine caused by PKU can lead to neurological and behavioral impairment.

It's estimated that there are up to 50,000 people in the addressable PKU population, and a large proportion of patients who have initiated treatment with the current standard of care have failed to respond to therapy.

There's clearly a significant unmet need in this population.

That is where we believe CNSA-001 can offer a potential benefit to PKU patients.

CNSA-001 is an orally bioavailable proprietary form of sepiapterin, a natural precursor to tetrahydrobiopterin, or BH4 that is converted by endogenous enzymatic pathway to BH4.

Preclinical data generated to-date by our partners leads us to believe that CNSA-001 can be more effective in increasing intracellular BH4, including in the liver and brain, and therefore, induce greater reduction of phenylalanine compared to the current standard of care.

The data also suggests CNSA-001 crosses the blood-brain barrier, which could offer greater potential, given the cognitive decline these patients experience.

These early data combined with a well-defined regulatory pathway that should enable us to advance CNSA-001 quickly fuel our excitement about the opportunity to make a difference for PKU patients in the not-too-distant future.

Censa is currently conducting single and multiple ascending dose studies, with a Phase II proof-of-concept study in PKU patients expected to begin midyear 2018.

We expect the results from the proof-of-concept study to become available in early 2019.

As Steve mentioned earlier, if the data are positive, we will then look to advance CNSA-001 into a pivotal study in 2019.

Based on this outline, you can see that we have a very busy and exciting year ahead for our product candidates in development.

We expect to progress these 4 programs, including multiple Phase III studies with first-in-class potential, by remaining focused on reaching our key development milestones as quickly as possible to meet the significant unmet needs in the rare disease community.

Now let me turn the call over to Neil for his operational update.

Neil?

Thanks, Bill.

I'd like to start by reiterating Steve's introductory comments and saying that 2007 (sic) [2017] was a tremendous year for Retrophin in terms of executing our strategies and advancing our leadership in delivering life-changing therapies to people living with rare diseases.

We continue to operate efficiently, while simultaneously progressing our pipeline and growing our current commercial portfolio.

From a commercial perspective, we posted another strong quarter with gross -- with growth across all 3 products.

Our $42 million of net product sales in the fourth quarter marks the 10th consecutive quarter of year-over-year double-digit growth.

Our strong fourth quarter resulted in $155 million in net sales for the full year, which achieved our 2017 guidance of $150 million to $160 million.

Thiola demand remained steady in the fourth quarter, as we saw patients continuing to initiate therapy.

We remain focused on our strategy of utilizing multiple data sources to identify physicians and patients who continue to treat and pass stones or require surgery due to suboptimal treatment.

Another part of the strategy is education on dose optimization.

Dose is dependent on each individual's cystine output.

We believe we can continue to make a difference by raising awareness that optimal cystine levels can lead to a reduction or elimination of cystine stones.

We are confident, our dedicated Thiola team will deliver on both components of our strategy to maintain growth of the brand in 2018.

I'm also pleased with the work being done with our partners on the new more patient-friendly formulation of Thiola.

Importantly, we remain on track to have an NDA filed in 2018.

Regarding Cholbam.

We saw encouraging momentum in the fourth quarter.

Our team's focused efforts appear to be making a meaningful difference in Cholbam's uptick.

Comprehensive use of the system-based -- symptom-based genetic screening panel and our sponsored atypical bile acid testing programs are core to our strategy for Cholbam, and use of both testing methodologies continues to grow and identify patients.

Use of these tools remains an efficient way for physicians treating people living with bile acid synthesis and Zellweger spectrum disorders to obtain and interpret diagnostic testing results in a timely manner, and more easily understand whether Cholbam can contribute to better therapeutic outcomes.

While we have seen some recent momentum, we are still in the early stages with efforts to raise awareness of these tools to identify patients, so we're eager to see further progress in our strategy over the course of 2018.

We also continue to see new patients initiate Chenodal therapy.

Perhaps most importantly, we remain encouraged by the evolving knowledge we have gained from our prevalent study and the increasing awareness of CTX.

Lastly, I'll touch on business development.

As Steve and Bill mentioned earlier, we are pleased about our latest transaction with Censa.

This type of structure with an upfront consideration and option to acquire the asset after key milestones are reached is very attractive, as it allows to materially derisk the program before committing additional financial and human capital.

We continue to be active in looking for both clinical and commercial assets that can add value to our organization.

I'll now turn the call over to Laura to walk through financials.

Laura?

Thanks, Neil.

Net product sales from our commercial portfolio were $42.2 million for the fourth quarter and $154.9 million for the full year 2017.

We reported a GAAP net loss of $17.6 million for the fourth quarter and a net loss of $59.7 million for the full year 2017.

After adjusting for noncash expenses, we reported a non-GAAP net income of $2.9 million for the fourth quarter and $10.2 million for the full year 2017, respectively.

Significant noncash adjustments for the fourth quarter included $18.4 million of non-GAAP operating loss adjustments and income tax expense of $6.6 million and a $4.4 million adjustment related to the company's warrant-derivative liability resulting from changes in our share price.

On a GAAP basis, R&D expenses were $19.6 million for the fourth quarter, a minimal change compared to the same period last year, and $78.2 million for the full year 2017.

The year-over-year increase for the full year 2017 is primarily due to higher expenses related to clinical and nonclinical activities associated with the company's development program.

On an adjusted basis, R&D expenses were $17.7 million for the fourth quarter and $68.9 million for the full year 2017.

Relevant noncash expenses for the fourth quarter included $1.9 million of stock-based compensation and amortization.

Selling, general and administrative expenses were $26.7 million in the fourth quarter, a minimal change compared to the same period last year, and $101.3 million for the full year 2017.

The year-over-year increase for the full year 2017 is primarily due to higher expenses related to operational growth and an increase in sales force headcount and marketing initiatives to support Cholbam and Thiola.

Also of note, SG&A incurred a $3 million benefit for the full year 2016 when compared to 2017 due to a legal settlement.

On an adjusted basis, non-GAAP SG&A expenses were $18.5 million for the fourth quarter and $65.9 million for the full year 2017.

Significant noncash adjustments for the quarter consisted of $8.1 million related to stock-based compensation and depreciation and amortization.

As of December 31, 2017, we had $300.6 million in cash and cash equivalents and marketable securities.

We enter 2018 with a strong balance sheet to fund our promising product candidates.

With 4 programs expected to advance in the clinic during 2018, we do expect our expenses to increase and result in a net use of cash from operations for the year.

We also anticipate some nonoperational uses of cash in early 2018, which include the $10 million upfront payment related to the Censa collaboration, a $9 million cumulative sales milestone for Cholbam, and a payment we anticipate making related to sparsentan's advancement.

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

Steve?

Thank you, Laura.

This is a very exciting time for Retrophin.

Thanks to the hard work of our team members, we made considerable progress in 2017.

And moved into the new year with a strengthened pipeline and the potential for the most robust clinical activity in our history.

We plan to leverage our deep expertise to further the growth of our commercial business while remaining focused on advancing our pipeline so that we make 2018 an exceptional year of value creation for both patients and our shareholders.

Let me now turn the call back over to Chris to open the line for questions.

Chris?

Thanks, Steve.

Giles, can we go ahead and open the lines up for Q&A, please?

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

I was wondering, if you can provide us with a broad strokes general description of your proposed Phase III trial design for sparsentan and FSGS, in terms of things like the number of patients, duration of treatment, when the primary endpoint will be evaluated.

Presumably, it's not 8 weeks, as it was before.

And the dose or doses that will be used in the study?

Hey, Joe, this is Bill.

I'll take a first crack at that.

We're making some final adjustments to the protocol, and when we get that finalized, we'll be out in public with greater detail on a lot of the things that you just asked about.

You're correct that the interim analysis is going to be at a point later than 8 weeks.

That's too short.

Size of the study is going to be larger than what we did with DUET.

But I don't want to be more specific now, and we'll clarify that as soon as we have a final protocol.

Okay.

And how did your latest statistical model compare to the data, which you presented recently around ASN?

And will you publish your statistical model or present it to us, illustrating the relationship between proteinuria and eGFR, so we can evaluate the probability of success here?

Certainly.

I think that it's in an ongoing internal discussion, but I do believe that eventually, that modeling work will be published.

The compared -- you asked about comparison to what was presented at ASN.

It's a little different than that.

What we modeled in that analysis was looking at longitudinal data from the NEPTUNE database and others, where we looked at patient histories with and without treatment, looking at changes in proteinuria over time, and how that was able to predict the change in eGFR in the future for those patients, both on an individual level and as a population.

And that model was then used by the agency to look at our protocol and assess the ability with a given reduction in proteinuria.

So if we saw, in the pivotal study, a similar treatment effect that we saw in DUET, then you could use the model to project what would be the difference in slopes in eGFR between the treatment and in control group.

That allowed the agency to assess: a, the robustness of the endpoint.

Is it a reliable predictor of future eGFR changes, which is really the confirmatory endpoint, and gave them the confidence that allowing us to go forward in this strategy doesn't put them at great risk of having a study where they've approved us on an interim, and then we'd fail on a confirmatory.

Okay.

And then so then when you buttress the model with some more data, did it merely confirm that relationship that you presented around ASN or did it strike them the actual predictability or the effect size, I guess, on eGFR?

I think it confirmed what we already felt we had seen.

We had put together a similar model and submitted it to the agency, and as you recall, we learned in -- we got correspondence back in November that they weren't happy with the way that one was constructed.

We revised it and put it together in a single model, as opposed to a multipart model.

The answer was the same that with the reduction like we see in DUET, in proteinuria, you do get a clinically relevant and clinically meaningful protection in the detriment in eGFR over time.

Your next question comes from the line of Tim Lugo from William Blair.

For CNSA-001, the proof-of-concept, is this going to be in Kuvan nonresponders or patients with some experience with Kuvan or are they going to be in naive patients?

Can you give us some idea around that PoC study?

I can give you some color around that.

And Tim, it's a good question.

This is Steve.

Censa will be doing the study, I think you're aware that they're responsible for operating the clinical trials until we pull the trigger on a -- on an acquisition, if that happens around the end of the year.

It will be a direct comparison to Kuvan.

It will be a crossover design at multiple doses.

It will not select for Kuvan nonresponders, with whether look for patients and assess the relative effectiveness of sepiapterin versus Kuvan in the same patients.

Interesting.

And that is -- that isn't for the single ascending dose study, this is for the proof-of-concepts, correct?

Correct.

Single ascending dose just completed.

We hope to see data from that within the next month or so.

Multiple ascending dose is just getting started now.

We anticipate the PoC study will start sometime around midyear and have results by the end of the year or sometime around the end of the year.

Okay, fantastic.

And for sparsentan and IgA nephropathy, are you expecting to do additional dose-finding work in that patient population, or maybe given the experience with the molecule, could you go into a Phase III?

Well, certainly, our intention is to make the argument that given 500-patient experience in the hypertension world, 100 patients in DUET, that the experience is adequate and sufficient, from a safety standpoint, for the drug across a range of doses.

The IgA nephropathy population is not that different than those that we're going to see that we've been working with in FSGS.

And the primary dose titration is based on blood pressure.

So I'm -- I struggle to see where there'd be great value gain in a dose-ranging study.

We still have to make that argument and convince regulators that that's, indeed, the case.

But that's our perspective.

And is it safe to say, if we fast forward to Q4 of this year, we're looking at, potentially, 3 Phase III studies ongoing at the company as well as the proof-of-concept from the Censa program?

That's absolutely correct.

Your next question comes from the line of Do Kim from BMO Capital Markets.

This is Alex on for Do.

I wanted to know for the RE-024 study, did the adult enrollment go as expected, and were there any hurdles that were seen for the enrollment?

And also, after the enrollment has opened up to the pediatric population, are there going to be additional adults enrolled, or is that just the adult population?

Yes.

Good question.

The adult population, frankly, is going a little bit slower than we anticipated.

There are several barriers with adults that don't exist with children.

Most of which, just is a very limited population of adults.

This is a brutal disease, and many patients do not live to adulthood.

So the ability to get adults in and get them in quickly has been a challenge for us.

We are making progress on that.

We do feel like we'll have the adults in by the end of the Q1 and open it up for pediatrics in Q2.

But it's going a little bit slower than we thought it would.

In terms of additional adult patients, yes, we will have additional adult patients coming in through the remainder of the trial.

And from the patient mapping we've done to-date, we feel like, as more of the European centers open up, there seem to be more adults in Europe.

And that should aid enrollment of the older patients as soon as we get Europe up and running.

And so on the novel formulation of Thiola, can you provide a little bit more detail on the formulation itself, and how it addresses shortcomings of Thiola or telling the truth on it, is it -- help us with pill burden or address dietary restriction?

Yes, we haven't gotten specific other than to say that when we took, kind of, an objective step back and looked at Thiola, what's good about Thiola, what could be improved about Thiola, we felt like there were 4 different aspects of the formulation that can be improved on.

Patients have a significant pill burden, they take a lot of pills.

They take them on an empty stomach.

It has, kind of, a funky relatively old-fashioned, sugarcoating that can crack.

And when it cracks, you get kind of a sulfur smell that isn't particularly appealing.

And then they also have to take it on an empty stomach.

So a lot of pills, 3 times a day, empty stomach, sugarcoating, we felt like any of those 4 that we can improve on would be a step in the right direction to make it a more patient-friendly formulation.

And we feel like, working with our partners at Mission who have done a great job working on this program that we have addressed 3 of those 4 issues.

And we'll be more specific on exactly what the formulation looks like after we file, which should happen later this year.

Your next question comes from the line of Liisa Bayko from JMP Securities.

Just a few on sparsentan specifically.

When do you anticipate taking a look at the confirmatory endpoint, the eGFR, how far out do you think you'll push that?

Well, I think that that's going to be dependent on a file trial design and final try design and enrollment rate.

So, it's difficult to say right now.

What I mean by that, actually is, are you planning on looking, evaluating that, let's say on an individual patient basis after year 1, year 2, year 3, kind of, how -- when is the best point in time after patient startup therapy to evaluate that.

I know, because you talked about the slope of it changing, are you going to be looking at multiple points?

I'm just trying to understand, when you'll be measuring that roughly?

Okay.

I think I understand a little better.

It will be measured throughout the study, at each visit you'll have an eGFR measurement, even at the interim, we'll be looking at that.

And it will be part of the overall readout that's submitted in the Subpart H application.

It's unlikely that you're going to have enough of a delta at the point in time of the interim, the reason the length of the trial is longer for the confirmatory.

But there's multiple spots along the way.

So you do have a summation of data along the way.

Okay.

When do you expect to start to see a difference there, I guess, or do you just keep going until you see that.

I mean, is there a point in time at which you anticipate the trial be over and that's when you're going to be doing the analysis on the eGFR?

No, there's a specific time where this study will end, and we -- there, we just haven't released that info.

Okay, got it.

And then you mentioned actually a payment due for sparsentan.

When -- can you just kind of quantitate that and that's my final question.

Thanks.

Yes, we expect that approximately in Q1.

We don't have a specific...

How much is it?

Oh, how much?

$4.6 million is the milestone payment that we'll owe Ligand on the initiation of a registration trial.

Liisa, maybe to your previous question too, it's worth just elaborating a little bit.

I think you know historically we've been very hesitant to talk about specifics on any of our programs after interaction with the agency until we get written minutes.

And that's one of the reasons why we aren't saying a lot of about the specifics, going back to the question you asked Bill about timing and looking at eGFR.

We made an exception on the communication we got relative to proteinuria as an acceptable endpoint and slope of eGFR as an acceptable confirmatory endpoint because we actually got that confirmation in writing from the agency prior to the meeting.

We submitted our briefing book, and the response we got to the briefing book confirmed that, so we felt like, with that written confirmation, we were comfortable sharing that information now.

Other details on the protocol, we're going to share with you after we get the minutes.

Where we have written confirmation that we are on board with the agency there too.

I am showing no further questions at this time.

I would now like to turn the call -- the conference back over to Mr. Cline for closing remarks.

Great.

Thank you, Giles.

And thank everybody for joining us today.

This concludes our call.

We look forward to updating you on our progress in the coming quarters.

This concludes today's conference call.

You may now disconnect.