Travere Therapeutics(US:TVTX)2020-11-05 21:51PART I – FINANCIAL INFORMATION Financial Statements For the nine months ended September 30, 2020, the company reported a net loss of $47.8 million on $147.3 million in net product sales, with cash and equivalents increasing to $200.5 million due to a $108.7 million equity offering Condensed Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2020 (Unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $200,481 | $62,436 | | Total current assets | $497,682 | $429,064 | | Total assets | $692,220 | $604,800 | | Liabilities & Equity | | | | Total current liabilities | $75,426 | $95,449 | | Convertible debt | $212,651 | $204,861 | | Total liabilities | $390,807 | $383,604 | | Total stockholders' equity | $301,413 | $221,196 | Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net product sales | $51,139 | $44,373 | $147,338 | $128,651 | | Total operating expenses | $70,574 | $78,810 | $204,950 | $237,844 | | Operating loss | $(19,435) | $(34,437) | $(57,612) | $(109,193) | | Net loss | $(22,549) | $(36,490) | $(47,809) | $(116,168) | | Net loss per share (basic & diluted) | $(0.44) | $(0.85) | $(1.03) | $(2.76) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(28,873) | $(53,722) | | Net cash provided by investing activities | $64,184 | $18,283 | | Net cash provided by (used in) financing activities | $102,674 | $(2,172) | | Net change in cash and cash equivalents | $138,045 | $(37,685) | Notes to Unaudited Condensed Consolidated Financial Statements - The company is a biopharmaceutical firm focused on rare diseases, with key clinical programs like Sparsentan and Chenodal, and approved products including Chenodal, Cholbam, and Thiola/Thiola EC262832 Net Product Revenues (in thousands) | Product Line | Q3 2020 | Q3 2019 | 9 Months 2020 | 9 Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Bile acid products | $22,912 | $19,938 | $66,766 | $59,258 | | Tiopronin products | $28,227 | $24,435 | $80,572 | $69,393 | | Total | $51,139 | $44,373 | $147,338 | $128,651 | - In June 2020, the company raised $108.7 million in net proceeds from an underwritten public offering of 7.5 million shares of common stock at $15.50 per share113 - Post-quarter, on October 21, 2020, the company agreed to acquire Orphan Technologies Limited and its candidate OT-58 for a $90 million upfront cash payment and up to $427 million in contingent payments115116 Management's Discussion and Analysis of Financial Condition and Results of Operations Net product sales increased for the first nine months of 2020 due to higher patient counts, operating expenses decreased from R&D program discontinuation, and liquidity was significantly enhanced by an equity offering Results of Operations Net Product Sales Analysis (in thousands) | Product Line | 9 Months 2020 | 9 Months 2019 | Change | | :--- | :--- | :--- | :--- | | Bile acid products | $66,766 | $59,258 | $7,508 | | Tiopronin products | $80,572 | $69,393 | $11,179 | | Total | $147,338 | $128,651 | $18,687 | - The increase in sales for the three and nine months ended September 30, 2020, was attributed to higher patient counts and fluctuations in the timing of new patient starts and refills136 - Research and development expenses decreased by $11.2 million for the nine months ended September 30, 2020, primarily due to the discontinuation of the fosmetpantotenate program in PKAN139162 - For the nine months ended September 30, 2020, the company recognized an income tax benefit of $18.9 million, primarily related to CARES Act provisions for net operating loss carrybacks146 Liquidity and Capital Resources - Management believes available cash and short-term investments are sufficient to fund anticipated operations for at least the next 12 months148165 Key Liquidity Metrics (in thousands) | Metric | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash & Cash Equivalents | $200,481 | $62,436 | | Debt securities | $255,786 | $336,088 | | Net Working Capital | $422,256 | $333,615 | - Cash from financing activities increased significantly to $102.7 million for the nine months ended September 30, 2020, primarily due to the June 2020 public offering of common stock164 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate changes affecting its debt securities, with a hypothetical 1% adverse change decreasing value by approximately $1.4 million - The company invests excess cash in U.S. government-backed securities and investment-grade corporate debt with maturities not exceeding two years170 - A hypothetical 1% adverse move in interest rates would decrease the value of the company's available-for-sale debt securities by approximately $1.4 million as of September 30, 2020170 Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2020, with no significant changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the quarter172 - No material changes in internal control over financial reporting occurred during the quarter173 PART II – OTHER INFORMATION Legal Proceedings Legal proceedings include advancing legal fees for former CEO Martin Shkreli and a dismissed antitrust lawsuit from Spring Pharmaceuticals regarding Thiola® samples - The company advanced legal fees for its former CEO, Martin Shkreli, with $3.8 million reimbursed by insurance carriers who reserve recovery rights97 - A lawsuit by Spring Pharmaceuticals alleging antitrust violations related to Thiola® samples was voluntarily dismissed in April 202098 Risk Factors Key risks include potential clinical trial failures, generic competition, manufacturing dependence, significant convertible debt, regulatory and reimbursement changes, and challenges with the planned Orphan Technologies acquisition, exacerbated by COVID-19 impacts Risks Related to Product Candidate Development - Clinical trials for product candidates like sparsentan may fail to demonstrate safety and efficacy, potentially delaying or preventing regulatory approval, with risks amplified by the COVID-19 pandemic176179 - The company is pursuing an accelerated approval pathway (Subpart H) for sparsentan based on a proteinuria endpoint, but regulatory bodies may not deem the data sufficient for approval188189 - Delays in patient enrollment for DUPLEX or PROTECT studies, potentially due to COVID-19, could push back timelines for top-line results and regulatory approval filings193 Risks Related to Commercialization - The company faces generic competition for products like Thiola, with legislative changes such as the CREATES Act designed to encourage this competition206207 - Changes in third-party payer reimbursement practices and potential loss of patient insurance coverage due to economic factors like COVID-19 could negatively affect product demand and pricing211215 - The company relies on sole-source third-party manufacturers and a single third-party distributor for its commercial products, creating significant supply chain risk due to a lack of internal manufacturing capabilities216217 Risks Related to Business Operations - The COVID-19 pandemic could materially adversely affect business by disrupting clinical trials, impacting the supply chain, and reducing access to capital markets266267 - The company may require substantial additional funding for development and commercialization, and market conditions could hinder raising capital on attractive terms282 - The planned acquisition of Orphan Technologies is subject to closing conditions and may not be completed, or if completed, integrating the new business presents potential difficulties288289 Risks Related to Indebtedness - As of September 30, 2020, the company had approximately $276 million of total debt outstanding from its 2.50% Convertible Senior Notes due 2025, which could adversely affect its financial condition338 - The company may lack sufficient cash to repurchase the 2025 Notes after a fundamental change or to pay cash upon conversion, potentially leading to default340342 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None Defaults Upon Senior Securities The company reported no defaults upon senior securities - None Mine Safety Disclosures This item is not applicable to the company - Not applicable Other Information The company reported no other information for this item - None Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, convertible note indentures, agreements, and CEO/CFO certifications - Exhibits include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002, and indentures related to the company's convertible notes351