Travere Therapeutics Inc (TVTX) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Retrophin, Inc.

First Quarter 2018 Financial Results and Corporate Update Conference Call.

I would like to turn the conference over to your host, Mr. Chris Cline.

Sir, you may begin.

Great.

Thank you, Valerie.

Good afternoon, everyone, and thank you for joining Retrophin's First Quarter 2018 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 this afternoon as well as this Risk Factors section in 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 May 1, 2018, and Retrophin specifically disclaims any obligation to update such statements to reflect future information, events or circumstances.

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

Steve?

Thanks, Chris.

Good afternoon, everyone, and thank you for joining us on today's call.

I'm pleased to announce progress on multiple fronts and I'm extremely proud of the efforts of the team here to accomplish as much as they have to be in 2018.

Most recently, our research and development group returned from positive interactions with both the FDA and EMA that established the regulatory path forward for sparsentan in IgA nephropathy.

Bill will go into a bit more detail shortly, but the most important takeaway is that we obtained feedback that supports the ability to move directly into a single Phase III study to enable registration in the U.S., and Europe if successful.

This is an encouraging outcome, and we are already taking steps to initiate the trial later this year.

Additionally, we initiated the Phase III DUPLEX Study of sparsentan for FSGS in April.

Bill and his team deserve a great deal of credit for laying the early groundwork and moving quickly to get this pioneering study up and running.

Looking forward, we are focused on opening additional sites and reaching our enrollment targets to enable a readout of the DUPLEX study's registration-enabling interim endpoint in the second half of 2020.

Given these achievements, we are clearly pleased with sparsentan's progress to start the year.

The prospect of having 2 registrational studies enrolling in these rare nephrotic conditions is exciting not just for us, but also for FSGS and IgA nephropathy patients worldwide.

We also made good progress with fosmetpantotenate in our pivotal FORT study in PKAN.

We recently reached our interim enrollment target for adults to enable a planned data safety monitoring board review to open pediatric enrollment.

As a result, we anticipate pediatric enrollment will begin later this quarter as we previously guided.

Our teams working on the FORT study have made a positive impact, and we look forward to further accelerating enrollment through the balance of the year.

CNSA-001 development continues as planned, and we remain optimistic about its potential to improve the treatment paradigm for patients with PKU.

In the first quarter, the single-ascending dose portion of the CNSA-001 Phase I study completed, and the program has progressed into the multiple ascending dose phase.

We continue to expect the Phase II proof-of-concept study to initiate midyear with data becoming available by early 2019.

Our commercial portfolio also had a strong start to the year with solid growth in the first quarter, and I am pleased with the commercial team's efforts to find new patients that can benefit from our therapies.

We remain on track to meet our guided range of $170 million to $180 million in net product sales for 2018.

I will now turn the call over to Bill for our research and development update.

Bill?

Thanks, Steve.

Let me start by covering our most recent development milestone related to sparsentan.

As of last week, we completed positive interactions with both the FDA and EMA on our program for IgA nephropathy.

As Steve mentioned, the key conclusion from our meetings is that the feedback from both agencies supports moving sparsentan directly into a single Phase III study.

In broad strokes, we expect the trial in IgA nephropathy to be similar to the recently initiated DUPLEX study with endpoints evaluating proteinuria and eGFR.

We would also expect the patient numbers and study duration to be similar, but not exactly the same.

We are currently working to harmonize our protocol by incorporating all of the feedback to guide our clinical activity.

Alongside the efforts to finalize the protocol, our project team is working closely with our CRO and investigators to get this important study up and running.

On our current path, we would expect to initiate enrollment in the fourth quarter of this year.

At that time, we will be in a position to share more about the study protocol specifics and timelines.

We also recently increased momentum in our FSGS efforts with the initiation of our Phase III DUPLEX study last month.

DUPLEX is an innovative clinical trial that builds upon the promising results from our Phase II DUET study, and positions us to potentially gain approval in the U.S. and Europe.

We are excited to see new sites opening each week and taking steps to initiate enrollment of FSGS patients.

DUPLEX is expected to enroll a total of approximately 300 patients with FSGS across an estimated 150 sites around the globe.

All patients in the study will be randomized one-to-one to receive either sparsentan or the active-control irbesartan.

Most notably, the trial design provides for an interim assessment measuring modified partial remission of proteinuria in approximately 190 patients after they've received treatment for 36 weeks.

Achieving modified partial remission of proteinuria, is defined as obtaining a urine protein-to-creatinine ratio of less than or equal to 1.5 gram per gram and greater than 40% reduction in proteinuria from baseline.

As many of you recall, this is the same endpoint in which we saw a statistically significant difference between the sparsentan treatment group and the irbesartan group after 8 weeks of treatment in the DUET study.

We expect that the successful achievement of this proteinuria endpoint in the interim analysis of DUPLEX will serve as the basis for Subpart H accelerated approval of sparsentan in the United States and conditional marketing authorization consideration in Europe.

Based on our current enrollment estimates, top line data from our interim assessment is expected to be available in the second half of 2020.

The confirmatory portion of the study will evaluate the primary endpoint, which is the change in slope of estimated glomerular infiltration rate or eGFR, measured in approximately 300 patients after 108 weeks of treatment.

Given the promising results seen on the modified partial remission endpoint in our Phase II study and the similar patient population expected, we have a high degree of confidence in the outcome of the DUPLEX study, and we look forward to continuing to enroll towards our key milestones.

Overall, we are pleased by the progress made to advance sparsentan in 2 registration-enabling studies by the end of 2018, and we look forward to sharing more in the coming quarters.

Our lead program, fosmetpantotenate, for the treatment of PKAN, continues to progress in the pivotal FORT study.

As Steve mentioned earlier, we recently met the study's initial adult enrollment milestone to trigger the first data safety monitoring board review.

And reaching that milestone, we anticipate opening the study to pediatric enrollment shortly after the DSMB meeting later this month.

The great work for our clinical and medical teams, initiating additional sites and driving awareness of the study, is resulting in an uptick in patient enrollment.

During the first quarter, we also opened key European centers, which are already having an encouraging impact on study enrollment.

Importantly, we remain on track to complete enrollment of all patients in the study around year-end or early 2019, which would enable a top line readout sometime in the second half of 2019.

Finally, I will take a minute to touch on CNSA-001, an orally bioavailable proprietary form of sepiapterin for phenylketonuria or PKU.

This is being developed in conjunction with CNSA Pharmaceuticals through our option and joint development agreement that we announced in January.

I'm very pleased with the collaboration between our team and our partners to further advance this candidate, which has the opportunity to make a meaningful difference for PKU patients.

The single-ascending dose portion of the Phase I study is completed and the multiple ascending dose segment has initiated.

Importantly, the Phase II proof-of-concept study remains on track to initiate in the coming months, the envision study is a crossover design evaluating multiple doses of CNSA-001 versus the current standard of care in patients with PKU.

We continue to expect a data readout from the Phase II study by early 2019.

As we mentioned previously, if the results from the proof-of-concept study are positive, and we then choose to exercise our option to acquire CNSA, we would anticipate moving quickly into a pivotal Phase III study in 2019.

Overall, I'm delighted with the advancement across our development portfolio to start the year.

Our performance is put us on track for 3 Phase III programs, enrolling first in class molecules by the end of this year and potentially a fourth pivotal study starting in 2019.

Let me now turn the call over to Neil for his operational update.

Neil?

Thanks, Bill.

We started 2018 with operational progress across the pipeline and commercial portfolio, while continuing to focus on meeting the needs of the rare-disease patients we serve.

Our commercial team turned in another great quarter of execution, which resulted in more than $38 million in net product sales, a 14% growth over the first quarter of 2017.

We drove this organic growth through new patient additions to all 3 of our products.

Of note, for the first quarter, we experienced our usual beginning of the year impact from higher gross to net discounts.

This was in line with our expectations, and we anticipate moving back to typical levels over the next quarter, similar to what we've seen in the last few years.

Perhaps most importantly, the strong first quarter performance keeps us on track to meet our guided range of $170 million to $180 million in net product sales for the year.

Thiola continues to grow and remain a value contributor in our commercial portfolio.

Our ongoing efforts to help physicians identify newly diagnosed and under treated cystinuria patients continues to underpin product's growth.

Coupling the further identification of cystinuria patients with our efforts to improve dosing optimization gives us an opportunity to ultimately offer patients the best chance at being cystine stone free.

An important component for the future of the Thiola brand is the new more patient friendly formulation currently in development.

Working in conjunction with our partner, we have made steady progress and remain on track for an NDA filing later this year.

Once we reach that milestone, we should be able to provide more color on expectations for a potential approval and subsequent launch in 2019.

Overall, I'm pleased with our efforts to start the year and remain confident, we can continue to grow the Thiola franchise for the foreseeable future.

Regarding Cholbam, we remain encouraged by the use of the symptom-based genetic screening panel and our sponsored atypical bile acid testing programs.

As we have mentioned previously, these tools are integral to further diagnosis and understanding of when Cholbam can benefit patients with bile acid synthesis disorders, and Zellweger Spectrum Disorders.

We continue to expect these initiatives will support further growth throughout the year.

In regard to Chenodal, we continue to see the value for patients in our ongoing prevalent study, as we believe it helps educate physicians on diagnosis of CTX as well as provides important knowledge about this ultra-rare patient population.

Finally, we remain active in our business development initiatives and continue to utilize our disciplined approach to explore assets that could add value to our organization.

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

Laura?

Thanks, Neil.

During the first quarter, net product sales from our commercial portfolio grew to $38.4 million.

We reported a GAAP net loss of $18.4 million for the first quarter of 2018.

After adjusting for noncash expenses of $12.8 million, we reported a non-GAAP net loss of $5.6 million.

In accordance with new accounting rules, we made one notable change to our P&L to start the new year.

We will no longer recognize changes in the fair value of derivative instruments on the income statement.

On a GAAP basis, R&D expenses were $24.6 million for the first quarter of 2018.

The increase over the same period in 2017 is largely due to higher expenses related to clinical and nonclinical activities associated with the fosmetpantotenate and sparsentan programs as well as development funding for CNSA-001.

On an adjusted basis, R&D expenses were $23.1 million for the first quarter.

Relevant noncash expenses for the first quarter included $1.5 million of stock-based compensation and amortization.

Selling, general and administrative expenses were $26.5 million in the first quarter of 2018.

The increase compared to the same period last year is primarily due to higher expenses related to operational growth such as increases in headcount and marketing initiatives to support our commercial products.

In addition, SG&A incurred a one-time charge of approximately $2.5 million for the present value of our $3 million commitment over the next 6 years to create the Retrophin rare-disease network at the Children's National Rare Disease Institute.

On an adjusted basis, non-GAAP SG&A expenses were $19 million for the first quarter.

Significant noncash adjustments for the quarter consisted of $7.4 million related to stock-based compensation and depreciation and amortization.

As of March 31, 2018, we had $264.1 million in cash and cash equivalents and marketable securities.

In alignment with guidance provided on our last call, we incurred several nonoperational milestone payments during the first quarter.

The aggregate amount of cash used related to these milestones was approximately $24 million, and included the upfront payment to CNSA, a milestone payment related to Cholbam cumulative sales and a payment to Ligand that covered the amount due upon initiation of the DUPLEX study.

While we anticipate further cash use throughout the balance of 2018, as we advance our 3 pivotal programs, we expect it to be at lower levels than we experienced in the first quarter.

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

Steve?

Thank you, Laura.

As you can tell, we had a great start to the year, and we have a lot of confidence in the value that our programs will create throughout the rest of 2018, and the years ahead.

In the near future, we have a number of events that will highlight the potential of our pipeline and products, including completion of enrollment in the Phase III FORT study in late 2018 or early 2019 and corresponding top line results in the second half of 2019, which if positive would be expected to support registration in the U.S. and Europe.

Initiation of our pivotal study for sparsentan in IgA nephropathy in the fourth quarter, initiation of the Phase II proof-of-concept study for CNSA-001 and top line results by early 2019 and NDA filing for the new formulation of Thiola.

On top of that, we expect continued strength from the commercial portfolio with revenue growth expected to help support our research and development efforts.

We remain focused on meeting these key initiatives to drive meaningful value for patients and for our shareholders.

Let me now turn the call back over to Chris.

Chris?

Thanks, Steve.

Valerie, can you go ahead and open up the line for Q&A, please?

(Operator Instructions) Our first question comes from Tim Lugo of William Blair.

A quick one on the IgA nephropathy market.

I guess, unlike FSGS, there is a number of compounds or competitive compounds in the pipeline.

How will you -- how will sparsentan fit in a market where there might be some other immune modulators approved around the similar time if some of the success from the pipeline does come through to the market?

Sure it's hard to know how many of the programs that are in development right now are actually going to make it to market.

But I think what differentiates sparsentan from anything else being considered for the clinic is that sparsentan does not depress immune system.

It's not an immune suppressant.

So it doesn't come with side effect profile that all immune suppressants come with.

Everything else that is being developed falls into the immune suppressant category.

Different types of immune suppressants complement inhibitors, calcineurin inhibitors, but I think being able to go-to-market with an effective product that is not an immunosuppressant would give our commercial team the ability to position sparsentan in a frontline position, which is where we think we create the most value.

Understood.

I guess, broadly can you talk at least about that differences between DUPLEX and the IgA nephropathy study?

I know you obviously want to go into more specifics later in the year.

But could you maybe talk broadly what the variation will be between the 2 programs?

Sure.

I think, I mean it's easier to think of them as more similar than they are different.

The patient populations present differently, IgA nephropathy doesn't have as high a level of proteinuria a what you're going to see with a cohort of patients with FSGS.

So that impacts it, but we expect that we'll still be looking at a an interim analysis based on proteinuria followed by confirmatory endpoint based on slope of eGFR.

Okay.

Maybe one last one.

For business development you obviously have a lot on your plate clinically with 3 Phase III kicking off this year, and potentially another Phase III next year.

Are you looking at platform technologies?

Are you looking at earlier-stage products?

Are you looking at marketed product?

I guess broadly could you talk about what you're doing on this development?

Sure, we look at programs at all stages but with focus that there should be development to the point where we can see value creation in the maximum but 2- to 3-year timeline.

So we aren't looking at technology platforms or truly unproven scientific approaches.

We tend to be very picky about what we put through our system.

What we did with the CNSA deal, I think, is illustrated of how we look at things.

You hit it right on the head when you said our clinical team has a lot of on their plate right now, 2 sparsentan Phase IIIs with a fourth trial in Phase III.

We didn't feel like pulling in sepiapterin, and doing those studies ourselves was going to be realistic given everything else that our R&D group has.

But being able to structure a deal so that we funded that the research with CNSA, which is a very talented group of people, could continue to do the research themselves gave us what we thought was the best of both worlds moving the program forward quickly without distracting our internal team.

So if we look at additional programs that are in Phase II or Phase III type of category, we will try to find opportunities that don't distract our core team here at Retrophin from their task at hand.

Our next question comes from Liisa Bayko of JMP Securities.

Could you maybe give us any highlights or trends on currently marketed products in terms of obtaining new patients, gross to net things like that?

Happy to, Liisa, Neil here.

Happy to give you an update.

All 3 products continue to have organic growth on a quarter-over-quarter basis.

Our gross-to-net impact is higher in Q1 as we discussed on the call at approximately 14% versus our quarterly run rate of 10% to 11% in our gross-to-net, we anticipate that stabilizing back to our previous year's year-over-year numbers.

Okay.

Great.

And then for kind of the ex-U.

S. market, can you talk about for both FSGS and IgA nephropathy.

How you think about what data you need to collect to kind of position those as pharmacoecnomic benefit, et cetera so can get good penetration in those areas?

Sure.

It's good question.

And it's early, but I think one of the essential things that we need to do is do the modeling that shows that not only do patients have a substantial improvement in quality of life, but that if we can delay patients going into dialysis or into transplant that there is a very significant financial benefit to healthcare systems.

And the NEPTUNE data that was presented at ASN in 2016, I think, showed there is clear correlation between benefits of proteinuria reduction and delays in loss of kidney function.

We'll model that to come up with the cost impact -- the cost-savings impact that is sparsentan could make on systems.

And that will be part of the process that goes into setting prices in both the U.S. and in Europe.

Our next question comes from Joseph Schwartz of Leerink Partners.

This is Dae Gon dialing in for Joe.

So couple from me.

Let's start with FSGS.

I was wondering if you can comment on how many trial sites you have currently enrolling patients?

And qualitatively, how is enrollment progressing compared to the DUET trial?

And then second question is on CNSA-001 in PKU.

So one of your colleagues in the west coast recently spoke of gene therapy candidate in PKU.

So in light of this and the potential for RMAT Designation that could expedite the development timeline, what is in consideration points that you have to continue pursuing CNSA-001 after the Phase II proof-of-concept data emerges later in early '19?

And then lastly, on the PKAN trial.

So if we look at the clinical trials website, there was an update on April 12 that showed 3 EU sites that were recruiting patients.

If we hearken back to your 4Q commentary, you mentioned U.K. sites as well as first EU sites are coming up online.

Can you comment on what needs to be done on the U.K. site since I didn't see any U.K. site listed?

And also are there more EU sites that are going to be opening up going forward?

This is Bill.

I'll start, and you're challenging me to remember all of that at once, but we'll take it.

So for FSGS sites and enrollment for the DUPLEX study, just kicked that study off at the beginning of April with the first site and the first patients.

We're now up to 12 sites currently that are open and that number will be more than double by the end of June so that gives you some idea of the pace we're on, and recall that the total number of site is 150.

With comparison to DUET, it's too early to have enough patients in to develop a rate and not an up site, but suffice to say we are structured with a much more aggressive plan on sites and enrollments.

CRO, that's much more capable and different teams that's focused entirely on making this move.

So nothing on enrollment should look like DUET in the coming months.

As for the PKAN question on -- and I know I'm skipping your PKU, I'll come back to that or Steve will.

We're opening up the European sites in a logical order, some of the sites are pediatric specific and so it hasn't made sense to open them up early until we got through the DSMB.

Those will be opening up shortly now.

The specifics on the U.K. site and it's open now, it took them a while to get there, and some of that was around training of site personnel for some of the specific rating scales, but that's all been completed.

And I believe if I recall correctly, there'll be another 5 or so European sites open up in the course of the month of May.

So Europe has gone slower than the U.S, but I think it is moving very quickly at this point.

With regard to PKU and gene therapy, I think, we're at a point in medical development where virtually every genetic disease there's a company somewhere looking at some type of gene therapy.

Some of them are early, some of them are more developed.

If you're company like Retrophin I don't think you can sit back and just assume that gene therapy is going to solve everything.

Some of those programs are going to work and some of them aren't.

And we feel like we've got a very straightforward proof-of-concept type of opportunity that if we're correct can address a significant unmet need within the PKU community.

So if 10 years from now, 20 years from now whenever there is a gene therapy comes out, we'll have to address that when it gets here.

For the moment, we are looking at the competitive landscape in PKU, as the 1 product that is already proved and the second one that has finished clinical trials and as a PDUFA date coming up.

And gene therapy is not something that we're going to worry about right now.

Great.

If I can squeeze in one more question, Steve.

On BD if I could tag along what Tim Lugo was asking earlier.

If we look at where Retrophin is now, sparsentan and Thiola, sort of, on one end of rare kidney disorders and then fosmetpantotenate and CNSA-001 [surround the] rare neurological indications, going forward, are you thinking about BD opportunities in fulfilling either of these buckets?

Or are you thinking of going where I guess Retrophin has not typically been in thus far?

Well, we have a pretty clear guidelines that we've actually worked with for almost the last 4 years.

And that is we specifically focus on therapeutics that would address the significant unmet need in diseases that bring significant morbidity, early mortality or both.

We look for therapeutics that would be used by specialists because we have no ability or intention or desire to build hundreds or thousands of people in our commercial organization.

We like being able to deal with specialists.

Certainly, our sweet spots are neurology, hepatology and nephrology, but we are willing to look outside these areas for the right opportunity.

I think the CNSA program that we partnered with them on this last time is illustrative, I mean, that's a metabolic disease we really hadn't been in metabolics up until now.

But it, kind of, fits the niche of what we think we're capable of doing and doing well, and if we see other opportunities like that we're still open to those type of opportunities.

Our next question comes from [Gobind Singh] of BMO

I'm on for Do Kim.

Just, I guess, 2 questions if you could help me with the IgA nephropathy trial starting up here.

You mentioned the only real difference is probably going to be the patient numbers.

Just wondering if you could help us understand may be the proteinuria differences at baseline?

And how they present?

Might be feeding into that whether it sounds like it might be higher patient numbers than your other indication here in FSGS?

And then going with that, can you help us understand how that model may be operating expenses whether or not you have 3 Phase IIIs going forward?

Or depending on the result of the upcoming trial and acquisition possibly even 4?

I'll take the first part of that question, which is proteinuria at entry for IgA versus FSGS.

For patient with FSGS they can have anywhere from a gram-for-gram up into 30, 40 more grams of proteinuria, and you see a lot higher percentage of frank nephrotic patients.

With IgA, you're correct that it is lower, the entry criteria to get in is about 0.7 gram-per-gram.

When you translate between studies, it's likely to be much lower.

The reason why it doesn't translate to a much larger patient number is with that lower frank level of proteinuria comes a marked reduction in the variability.

So when you're looking at powering a study, you look at the absolute effect that you're looking for as well as the variability and the measure.

And here while we're going to a smaller change, it's in a less variable population.

So it doesn't necessarily translate into a larger number of patients.

If that's helpful.

And on the financial side, I'll hand off to Laura for an answer on that.

Yes.

As far as R&D run rate.

So we expect to see R&D to rise incrementally from current levels as you mentioned 3 pivotal trials and also planning for a fourth with this CNSA-001 molecule.

SG&A may decline slightly or remain relatively flat, but you can expect to see R&D levels rise next quarter above where we are currently.

I'm showing no further questions at this time.

I'll turn the call back over to Mr. Cline for any closing remarks.

Great.

Thank you, Valerie.

Thank, everybody for joining our call.

We look forward to updating you in the coming quarters.

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.