Travere Therapeutics(US:TVTX)2022-08-04 21:08PART I – FINANCIAL INFORMATION Item 1. Financial Statements Financial statements for Q2 2022 reveal increased liabilities from new convertible debt, a wider net loss due to higher operating expenses, and significant cash usage in operations offset by financing activities Condensed Consolidated Balance Sheets Total assets slightly increased to $779.5 million, while total liabilities significantly rose to $622.8 million due to convertible debt, leading to a decrease in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $179,759 | $165,753 | | Total current assets | $586,777 | $582,827 | | Total assets | $779,494 | $776,633 | | Total current liabilities | $124,492 | $124,088 | | Convertible debt | $374,690 | $226,581 | | Total liabilities | $622,781 | $474,521 | | Total stockholders' equity | $156,713 | $302,112 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q2 2022 saw total revenue of $54.2 million and a net loss of $67.0 million, a wider loss than Q2 2021, driven by increased R&D and SG&A expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $54,167 | $54,617 | $102,654 | $102,024 | | Research and development | $59,681 | $51,807 | $116,292 | $99,753 | | Selling, general and administrative | $52,979 | $34,965 | $99,767 | $71,743 | | Operating loss | ($65,451) | ($35,315) | ($131,581) | ($82,864) | | Net loss | ($67,032) | ($39,012) | ($143,003) | ($92,879) | | Net loss per share (basic & diluted) | ($1.05) | ($0.64) | ($2.26) | ($1.59) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $92.1 million, offset by $114.7 million from financing, resulting in a $14.0 million net cash increase Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($92,126) | ($19,978) | | Net cash used in investing activities | ($5,931) | ($177,513) | | Net cash provided by financing activities | $114,744 | $196,056 | | Net increase (decrease) in cash | $14,006 | ($1,484) | | Cash and cash equivalents, end of period | $179,759 | $83,288 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail business, accounting policies, revenue, collaborations, and debt, highlighting product sales, the Vifor Pharma collaboration, and significant convertible debt restructuring - The company is a biopharmaceutical firm focused on rare diseases, with key clinical programs for sparsentan (FSGS and IgAN), pegtibatinase (HCU), and Chenodal (CTX) Approved products include Chenodal, Cholbam, and Thiola/Thiola EC283035 Net Product Sales by Category (in thousands) | Product Category | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Bile acid products | $25,534 | $24,974 | $50,609 | $46,938 | | Tiopronin products | $25,416 | $29,643 | $46,784 | $55,086 | | Total net product sales | $50,950 | $54,617 | $97,393 | $102,024 | - Under the September 2021 license agreement with Vifor Pharma for sparsentan, the company received a $55.0 million upfront payment For the three and six months ended June 30, 2022, the company recognized $3.2 million and $5.3 million, respectively, in license and collaboration revenue6166 - In March 2022, the company issued $316.3 million of 2.25% Convertible Senior Notes due 2029 Concurrently, it repurchased $207.1 million of its 2.50% Convertible Senior Notes due 2025, resulting in a $7.6 million loss on early extinguishment of debt97108 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses pipeline updates, including sparsentan's NDA Priority Review, and financial results showing decreased product sales and increased operating expenses, while affirming sufficient liquidity for the next 12 months Pipeline and Approved Products The pipeline is led by sparsentan, with an IgAN NDA under Priority Review and traditional approval planned for FSGS, alongside positive Phase 1/2 results for pegtibatinase and existing approved products - The FDA accepted and granted Priority Review for the New Drug Application (NDA) of sparsentan for IgAN, with a PDUFA target action date of November 17, 2022140 - Following FDA feedback, the company no longer plans to seek accelerated approval for sparsentan in FSGS and will instead file for traditional approval after the DUPLEX study completes in the first half of 2023141 - Pegtibatinase (TVT-058) for HCU demonstrated positive topline results in its Phase 1/2 COMPOSE Study, showing dose-dependent reductions in total homocysteine (tHcy) The company is engaging with regulators on next steps for a pivotal program144145 - A generic version of the 100 mg original formulation of Thiola became available in May 2021, which has impacted sales of the company's Tiopronin products152 Results of Operations Net product revenues decreased by $3.7 million in Q2 2022, mainly from lower Tiopronin sales, while operating expenses significantly rose due to increased R&D and SG&A for pipeline advancement and launch preparations Net Product Sales Change (in thousands) | Product | Q2 2022 vs Q2 2021 Change | YTD 2022 vs YTD 2021 Change | | :--- | :--- | :--- | | Bile acid products | $560 | $3,671 | | Tiopronin products | ($4,227) | ($8,302) | | Total net product revenues | ($3,667) | ($4,631) | - R&D expenses increased by $7.9 million in Q2 2022 and $16.5 million in H1 2022 compared to the prior year periods, due to increased headcount and external costs for the sparsentan and pegtibatinase programs160 - SG&A expenses rose by $18.0 million in Q2 2022 and $28.0 million in H1 2022 year-over-year, largely due to increased headcount for operational growth and commercial launch preparations162 Liquidity and Capital Resources As of June 30, 2022, the company held $553.2 million in cash and investments, deemed sufficient for over 12 months, bolstered by $306.4 million from convertible notes and $20.1 million from an ATM equity offering - The company believes its available cash and short-term investments of $553.2 million as of June 30, 2022, are sufficient to fund operations beyond the next 12 months135168 - In H1 2022, the company sold 701,600 shares under its ATM Agreement for gross proceeds of $20.1 million As of June 30, 2022, $19.5 million remained eligible for sale under the ATM program173 - The company has future contingent cash payment obligations related to the Ligand License Agreement for sparsentan (up to $114.1 million in milestones) and a new collaboration with PharmaKrysto for a cystinuria program (up to $16.0 million in milestones)176177 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its $553.2 million investment portfolio, with a 100 basis point change estimated to impact its value by $1.7 million - The company's main market risk is interest rate sensitivity on its $553.2 million portfolio of cash equivalents and marketable debt securities203 - A hypothetical 100 basis point (1%) change in interest rates would impact the investment portfolio's value by approximately $1.7 million203 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no significant changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the quarter, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level206 - No significant changes to internal control over financial reporting occurred during the quarter ended June 30, 2022, that have materially affected or are likely to materially affect such controls207 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company faces routine legal matters, none expected to be materially adverse, though a French authority claim for Kolbam sales reimbursement from 2015-2020 has an unestimable potential liability - In October 2021, French authorities sought reimbursement for a portion of Kolbam sales in France from 2015-2020 The company cannot estimate the potential liability at this time116 Item 1A. Risk Factors The company faces significant risks including clinical trial failures, regulatory approval uncertainty, manufacturing dependence, generic competition, financial indebtedness, and operational challenges like data security and business disruptions - Clinical trials for key candidates like sparsentan and pegtibatinase may fail to demonstrate safety and efficacy, which could prevent or delay regulatory approval210 - The company faces generic competition for its products; a generic version of the 100 mg Thiola tablet was approved in May 2021, which has negatively impacted sales244298 - The company is dependent on third-party manufacturers, who are often sole-source suppliers, for its products Any disruption could adversely impact commercialization and supply254300 - The company's indebtedness of approximately $385 million as of March 31, 2022, could adversely affect its financial condition and ability to fund operations393 - The business is subject to stringent and evolving data privacy and security regulations (e.g., GDPR, CCPA), and a failure to comply or a data breach could result in significant penalties and reputational harm364372 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None405 Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None406 Item 4. Mine Safety Disclosures This disclosure item is not applicable to the company's operations - Not applicable407 Item 5. Other Information No other material information was reported for the period - None408 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, an equity incentive plan, and CEO/CFO certifications - The exhibits include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as Inline XBRL data files410