Travere Therapeutics(TVTX) - 2019 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2019, detailing balance sheets, operations, cash flows, and notes on accounting policies and program discontinuations Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $65,188 | $102,873 | | Marketable securities | $341,835 | $368,668 | | Total current assets | $439,718 | $495,678 | | Total assets | $613,816 | $709,160 | | Liabilities & Equity | | | | Total current liabilities | $88,017 | $104,621 | | Total liabilities | $367,859 | $390,907 | | Total stockholders' equity | $245,957 | $318,253 | Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Net product sales | $44,373 | $40,706 | $128,651 | $120,475 | | Total operating expenses | $78,810 | $76,289 | $237,844 | $195,530 | | Operating loss | $(34,437) | $(35,583) | $(109,193) | $(75,055) | | Net loss | $(36,490) | $(54,516) | $(116,168) | $(95,223) | | Net loss per share (basic & diluted) | $(0.85) | $(1.34) | $(2.76) | $(2.37) | - The company recorded a $15.0 million impairment of a long-term investment in Q3 2019. For the nine-month period, significant expenses included a $25.5 million impairment of an IPR&D intangible asset and a $15.0 million investment impairment, partially offset by an $18.0 million write-off of related contingent consideration[18] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(53,722) | $(21,393) | | Net cash provided by (used in) investing activities | $18,283 | $(154,489) | | Net cash (used in) provided by financing activities | $(2,172) | $231,338 | | Net change in cash and cash equivalents | $(37,685) | $55,426 | Notes to Unaudited Condensed Consolidated Financial Statements These notes detail accounting policies, financial results, and key events including the discontinuation of three development programs (fosmetpantotenate, CNSA-001, L-UDCA) and related impairment charges - In August 2019, the Phase 3 FORT Study for fosmetpantotenate in PKAN failed to meet its primary and secondary endpoints, leading to the discontinuation of the program[27] - The company declined its option to acquire Censa Pharmaceuticals in August 2019 and discontinued the CNSA-001 program, resulting in a $15 million impairment of its long-term investment[28][53][104] - In Q1 2019, the company discontinued the L-UDCA program, leading to a $25.5 million impairment of the intangible asset and the reversal of an $18.0 million contingent liability, resulting in a net $7.5 million non-cash charge[29][103] Net Product Revenues (in thousands) | Product Category | Q3 2019 | Q3 2018 | 9 Months 2019 | 9 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Bile acid products | $19,938 | $18,052 | $59,258 | $55,153 | | Tiopronin products | $24,435 | $22,654 | $69,393 | $65,322 | | Total | $44,373 | $40,706 | $128,651 | $120,475 | - In May 2019, the remaining $22.6 million principal amount of the 4.50% senior convertible notes due 2019 was converted by holders into approximately 1.3 million shares of common stock[84][147] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting increased net product sales, rising operating expenses due to R&D and SG&A, strategic program discontinuations, and analysis of liquidity and capital resources Overview - The company's key investigational product candidate, sparsentan, is being evaluated in two pivotal Phase 3 studies: the DUPLEX Study for FSGS and the PROTECT Study for IgAN[109] - Top-line data from the interim analysis of the DUPLEX Study (sparsentan in FSGS) are expected in the first half of 2021 and may support an accelerated approval submission[110] - Top-line data from the primary endpoint of the PROTECT Study (sparsentan in IgAN) are expected in the first half of 2022 and may also support an accelerated approval submission[111] - In June 2019, the FDA approved THIOLA EC, a new enteric-coated formulation of tiopronin for cystinuria, which became available to patients in July 2019[118] Results of Operations Operating Expense Changes (in thousands) | Expense Category | 9 Months 2019 | 9 Months 2018 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $104,597 | $91,544 | $13,053 | Increased clinical trial expenses for sparsentan studies | | Selling, general and administrative | $101,418 | $77,675 | $23,743 | Increased compensation and legal expenses | | Change in fair value of contingent consideration | $5,820 | $22,387 | $(16,567) | Changes in projected revenues and passage of time | Liquidity and Capital Resources - Management believes that available cash and short-term investments will be sufficient to fund operations for at least the next 12 months[136][151] Financial Position (in thousands) | Metric | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Cash & Cash Equivalents | $65,188 | $102,873 | | Marketable securities | $341,835 | $368,668 | | Net Working Capital | $351,701 | $391,057 | - Cash used in operating activities increased to $53.7 million for the nine months ended September 30, 2019, compared to $21.4 million for the same period in 2018, primarily due to higher R&D and legal expenses[148] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate changes affecting marketable securities, with a hypothetical 1% adverse change potentially decreasing their value by $1.8 million - The company invests excess cash in investment-grade securities with maturities not exceeding two years and does not use derivative instruments[157] - A hypothetical 1% adverse move in interest rates would decrease the value of the company's available-for-sale marketable securities by approximately $1.8 million[157] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2019, with no significant changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2019[159] - No significant changes to internal control over financial reporting were identified during the quarter ended September 30, 2019[160] PART II – OTHER INFORMATION Legal Proceedings This section incorporates legal proceedings information from Note 12, including a lawsuit from Spring Pharmaceuticals regarding alleged antitrust violations related to Thiola® sales - Information regarding legal proceedings is incorporated by reference from Note 12 to the Unaudited Condensed Consolidated Financial Statements[161] Risk Factors This section details significant risks, including potential clinical trial failures for sparsentan, regulatory approval uncertainty, generic competition, reliance on third-party manufacturers, pricing pressures, and convertible debt risks - The company's clinical trials for product candidates like sparsentan may fail to demonstrate safety and efficacy, potentially preventing or significantly delaying regulatory approval[163] - The company faces immediate generic competition for products like Thiola and is involved in a lawsuit with Spring Pharmaceuticals, also receiving a civil investigative demand from the FTC regarding this matter[187][189] - The company relies on third-party sole source suppliers for manufacturing its products, posing risks related to supply chain disruption, regulatory compliance, and cost[195][232] - The company's outstanding $276 million in 2.50% Convertible Senior Notes due 2025 could adversely affect its financial condition by requiring significant cash flow for debt service and potentially limiting financial flexibility[295][296] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the reporting period - None[304] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[305] Mine Safety Disclosures This item is not applicable to the company - Not applicable[306] Other Information The company reported no other information required to be disclosed under this item - None[307] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents, debt indentures, and CEO/CFO certifications required by Sarbanes-Oxley Act - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[309]