Retrophin, Inc.
Nov 3, 2016

Retrophin Reports Third Quarter 2016 Financial Results

Positive top-line results from DUET announced in September; additional data to be presented at ASN Kidney Week 2016

Third quarter revenues increased 21 percent year-over-year

SAN DIEGO, Nov. 03, 2016 (GLOBE NEWSWIRE) -- Retrophin, Inc. (NASDAQ:RTRX) today reported its third quarter 2016 financial results.

"Positive top-line data from the DUET study demonstrating sparsentan's potential to be a significant advancement in the treatment of FSGS enabled a pivotal third quarter for Retrophin," said Stephen Aselage, chief executive officer of Retrophin. "With the RE-024 efficacy study in PKAN patients on track to initiate by year-end and further top-line revenue growth expected, we are in position to deliver on all of our transformational milestones in 2016."

Quarter Ended September 30, 2016

Net product sales for the third quarter of 2016 were $33.9 million, compared to $28.0 million for the same period in 2015. For the nine months ended September 30, 2016, net product sales were $96.3 million, compared to $69.4 million for the same period in 2015. The increase is attributable to growth in the number of patients receiving the Company's commercial products: Thiola®, Cholbam®, and Chenodal®. The Company reiterates its full-year guidance of $130.0 to $140.0 million in net product sales for 2016.

Selling, general and administrative (SG&A) expenses for the third quarter of 2016 were $23.8 million, compared to $22.3 million for the same period in 2015. For the nine months ended September 30, 2016, SG&A expenses were $66.2 million, compared to $56.9 million for the same period in 2015. The increase is largely due to expanded sales and marketing efforts in support of the Company's commercial products. On a non-GAAP adjusted basis, SG&A expenses were $15.0 million for the third quarter of 2016, compared to $13.1 million for the same period in 2015.

Research and development (R&D) expenses for the third quarter of 2016 were $18.4 million, compared to $14.1 million for the same period in 2015. For the nine months ended September 30, 2016, R&D expenses were $50.8 million, compared to $35.0 million for the same period in 2015. The increase is largely attributable to an increase in clinical efforts related to sparsentan and RE-024. On a non-GAAP adjusted basis, R&D expenses were $15.4 million for the third quarter of 2016, compared to $11.2 million for the same period in 2015.

During the third quarter of 2016, the Company recorded a non-recurring legal fee settlement charge of $5.2 million related to the advancement of legal fees.

Total other expense for the third quarter of 2016 was $10.3 million, compared to other income of $164.8 million for the same period in 2015. For the nine months ended September 30, 2016, total other expense was $5.3 million, compared to total other income of $154.0 million for the same period in 2015. The difference is largely attributable to the sale of the Company's Priority Review Voucher and corresponding credit facility prepayment in July 2015, which resulted in a gain on sale of assets and loss on extinguishment of debt, as well as a greater derivative liability resulting from share price appreciation during the third quarter of 2016.

Tax expense of $6.5 million for the third quarter of 2016 was primarily due to an increase in valuation allowance against deferred tax assets.

Net loss for the third quarter of 2016 was $37.1 million, or $1.00 per basic share, compared to net income of $105.6 million, or $2.95 per basic share for the same period in 2015. For the nine months ended September 30, 2016, net loss was $39.3 million, compared to a net income of $119.7 million for the same period in 2015. Non-GAAP adjusted net loss for the third quarter of 2016 was $3.4 million, or $0.09 per basic share, compared to a net loss of $1.9 million, or $0.05 per basic share for the same period in 2015. 

As of September 30, 2016, the Company had cash, cash equivalents, marketable securities and note receivable of $320.8 million.

Commercial Product Updates

Thiola® (tiopronin)

Cholbam® (cholic acid)

Chenodal® (chenodeoxycholic acid)

Pipeline Updates

Sparsentan

RE-024

Liquid ursodeoxycholic acid (L-UDCA)

Conference Call Information

Retrophin will host a conference call and webcast today, Thursday, November 3, 2016 at 4:30 p.m. ET to discuss third quarter 2016 financial results. To participate in the conference call, dial +1-855-219-9219 (U.S.) or +1-315-625-6891 (International), confirmation code 1738305 shortly before 4:30 p.m. ET. The webcast can be accessed at www.retrophin.com, in the Events and Presentations section. A replay of the call will be available starting at 7:30 p.m. ET, November 3, 2016 until 11:59 p.m. ET, November 10, 2016. The replay number is +1-855-859-2056 (U.S.) or +1-404-537-3406 (International), confirmation code 1738305.

Use of Non-GAAP Financial Measures

To supplement Retrophin's financial results and guidance presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP adjusted financial measures in this press release and the accompanying tables. The Company believes that these non-GAAP financial measures are helpful in understanding its past financial performance and potential future results. They are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read in conjunction with the consolidated financial statements prepared in accordance with GAAP. Retrophin's management regularly uses these supplemental non-GAAP financial measures internally to understand, manage and evaluate its business and make operating decisions. In addition, Retrophin believes that the use of these non-GAAP measures enhances the ability of investors to compare its results from period to period and allows for greater transparency with respect to key financial metrics the Company uses in making operating decisions.

Investors should note that these non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles and do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. Investors should also note that these non-GAAP financial measures have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors. In addition, from time to time in the future the Company may exclude other items, or cease to exclude items that it has historically excluded, for purposes of its non-GAAP financial measures; because of the non-standardized definitions, the non-GAAP financial measures as used by the Company in this press release and the accompanying tables may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by the Company's competitors and other companies.

As used in this press release, (i) the historical non-GAAP net income (loss) measures exclude from GAAP net income (loss), as applicable, revaluation of acquisition related contingent consideration, stock-based compensation expense, depreciation and amortization expense, change in fair value of derivative instruments; income tax provision; bargain purchase gain (ii) the historical non-GAAP SG&A expense measures exclude from GAAP SG&A expenses, as applicable, stock-based compensation expense, and depreciation and amortization expense; (iii) the historical non-GAAP R&D expense measures exclude from GAAP R&D expenses, as applicable, stock-based compensation expense, and depreciation and amortization expense.

About Retrophin

Retrophin is a fully integrated biopharmaceutical company dedicated to delivering life-changing therapies to people living with rare diseases who have few, if any, treatment options. The Company's approach centers on its pipeline featuring clinical-stage assets targeting rare diseases with significant unmet medical needs, including sparsentan for focal segmental glomerulosclerosis (FSGS), a disorder characterized by progressive scarring of the kidney often leading to end-stage renal disease, and RE-024 for pantothenate kinase-associated neurodegeneration (PKAN), a life-threatening neurological disorder that typically begins in early childhood. Research exploring the potential of early-stage assets in several rare diseases is also underway. Retrophin's R&D efforts are supported by revenues from the Company's commercial products Thiola®, Cholbam®, and Chenodal®.

Retrophin.com

Forward-Looking Statements

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995, regarding the research, development and commercialization of pharmaceutical products. Without limiting the foregoing, these statements are often identified by the words "may", "might", "believes", "thinks", "anticipates", "plans", "expects", "intends" or similar expressions. In addition, expressions of our strategies, intentions or plans are also forward-looking statements. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. No forward-looking statement can be guaranteed. Among the factors that could cause actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties associated with the Company's business and finances in general, success of its commercial products as well as risks and uncertainties associated with the Company's preclinical and clinical stage pipeline. Specifically, the Company faces risks associated with market acceptance of its marketed products including efficacy, safety, price, reimbursement and benefit over competing therapies. The risks and uncertainties the Company faces with respect to its preclinical and clinical stage pipeline include risk that the Company's research programs will not identify preclinical candidates for further development and risk that the Company's clinical candidates will not be found to be safe or effective. Specifically, the Company faces the risk that additional clinical trials will be required for regulatory approvals, risk that additional clinical trials, if any, will fail to demonstrate that sparsentan is safe or effective and risk that the sparsentan program will be delayed for regulatory or other reasons, risk that RE-024 will not progress to Phase 2 or later clinical trials for safety, regulatory or other reasons; risk that the Company will be unable to file a New Drug Application for liquid ursodeoxycholic acid in 2017 or ever, risk that a New Drug Application for liquid ursodeoxycholic acid will not be approved for efficacy, safety, regulatory or other reasons, and for each of the programs, risk associated with enrollment of clinical trials for rare diseases. The Company faces risk that it will be unable to raise additional funding required to complete development of any or all of its product candidates; risk relating to the Company's dependence on contractors for clinical drug supply and commercial manufacturing; uncertainties relating to patent protection and intellectual property rights of third parties; risks and uncertainties relating to competitive products and technological changes that may limit demand for the Company's products. You are cautioned not to place undue reliance on these forward-looking statements as there are important factors that could cause actual results to differ materially from those in forward-looking statements, many of which are beyond our control. The Company undertakes no obligation to publicly update forward-looking statement, whether as a result of new information, future events, or otherwise. Investors are referred to the full discussion of risks and uncertainties as included in the Company's filings with the Securities and Exchange Commission.

RETROPHIN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
     
  September 30, 2016 December 31, 2015
Assets (unaudited)  
Current assets:    
Cash and cash equivalents $23,895  $37,805 
Marketable securities  250,408  191,799 
Accounts receivable, net 14,955  12,458 
Inventory, net 3,253  2,536 
Prepaid expenses and other current assets 3,553  2,378 
Prepaid taxes   8,107 
Note receivable, current 46,526  46,849 
Total current assets 342,590  301,932 
     
Property and equipment, net 382  428 
Other assets 1,974  1,859 
Prepaid tax asset 3,240   
Intangible assets, net 183,298  161,536 
Goodwill 936  936 
Note receivable, long term   45,573 
Total assets $532,420  $512,264 
     
Liabilities and Stockholders' Equity    
Current liabilities:    
Accounts payable $3,066  $7,639 
Accrued expenses 40,376  23,820 
Other current liabilities 1,143  958 
Guaranteed minimum royalty 2,000  2,000 
Tax payable 3,879   
Business combination-related contingent consideration 6,570  13,754 
Derivative financial instruments, warrants 28,960  38,810 
Total current liabilities 85,994  86,981 
     
Convertible debt 44,257  43,766 
Other non-current liabilities 2,461  3,066 
Guaranteed minimum royalty, less current portion 8,281  8,885 
Business combination-related contingent consideration, less current portion 75,370  45,267 
Deferred income tax liability, net 8,462  24,328 
Total liabilities 224,825  212,293 
Stockholders' Equity:    
Preferred stock $0.001 par value; 20,000,000 shares authorized; 0 issued and outstanding as of September 30, 2016 and December 31, 2015    
Common stock $0.0001 par value; 100,000,000 shares authorized;  37,703,996 and 36,465,853 issued and outstanding as of September 30, 2016 and December 31, 2015, respectively 4  4 
Additional paid-in capital 412,348  365,802 
Accumulated deficit (104,453) (65,153)
Accumulated other comprehensive loss (304) (682)
Total stockholders' equity 307,595  299,971 
Total liabilities and stockholders' equity $532,420  $512,264 
         


RETROPHIN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
        
 Three Months Ended September 30, Nine Months Ended September 30,
 2016 2015 2016 2015
Net product sales$33,945  $28,005  $96,265  $69,444 
        
Operating expenses:       
Cost of goods sold1,573  513  3,351  1,424 
Research and development18,428  14,064  50,775  34,974 
Selling, general and administrative23,848  22,308  66,178  56,856 
Legal Fee Settlement5,212    5,212   
Change in fair value of contingent consideration5,256  6,906  10,741  7,026 
Impairment of intangible assets  4,710    4,710 
Total operating expenses54,317  48,501  136,257  104,990 
        
Operating loss(20,372) (20,496 ) (39,992) (35,546)
        
Other income (expenses), net:       
Other income (expenses), net151  (314) 156  35 
Interest expense, net (299) (695) (609) (7,415)
Debt early payment penalty      (2,250)
Finance expense      (600)
Change in fair value of derivative instruments(10,126) 29,991  (4,849) (36,180)
Gain on sale of assets  140,004    140,004 
Loss on extinguishment of debt  (4,151)   (4,151)
Litigation settlement gain      15,500 
Bargain purchase gain      49,063 
Total other income (loss), net(10,274 ) 164,835  (5,302) 154,006 
        
Income (loss) before provision for income taxes(30,646) 144,339  (45,294) 118,460 
        
Income tax benefit (expense)(6,467) (38,761) 5,994  1,246 
        
Net income (loss)$(37,113) $105,578  $(39,300) $119,706 
        
Net earnings (loss) per common share, basic$(1.00) $2.95  $(1.07) $3.67 
Net earnings (loss) per common share, diluted$(1.00) $1.78  $(1.07)  $3.30 
Weighted average common shares outstanding, basic36,980,356  35,741,877  36,728,911  32,650,408 
Weighted average common shares outstanding, diluted36,980,356  42,752,859  36,728,911  36,800,536 
             


RETROPHIN, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
(in thousands, except share and per share data)
(unaudited)
         
         
  Three Months Ended September 30, Nine Months Ended September 30,
  2016 2015 2016 2015
GAAP operating loss $(20,372) $(20,496) $(39,992) $(35,546)
         
R&D operating expense (18,428) (14,064) (50,775) (34,974)
         
Stock compensation 2,935  2,692  8,061  6,661 
Amortization & depreciation 82  200  246  614 
Subtotal non-GAAP items 3,017  2,892  8,307  7,275 
Non-GAAP R&D expense (15,411) (11,172) (42,468) (27,699)
         
SG&A operating expense (23,848) (22,308) (66,178) (56,856)
         
Stock compensation 4,814  5,489  13,973  12,088 
Amortization & depreciation 4,013  3,712  11,708  8,918 
Subtotal non-GAAP items 8,827  9,201  25,681  21,006 
Non-GAAP SG&A expense (15,021) (13,107) (40,497) (35,850)
         
Change in valuation of contingent consideration 5,256  6,906  10,741  7,026 
Impairment of intangible assets   4,710    4,710 
Subtotal non-GAAP items 17,100  23,709  44,729  40,017 
Non-GAAP operating income (loss) $(3,272)  $3,213  $4,737  $4,471 
          
GAAP net income (loss) $(37,113) $105,578  $(39,300) $119,706 
Non-GAAP operating loss adjustments 17,100   23,709  44,729  40,017 
Change in fair value of derivative instruments 10,126  (29,991) 4,849  36,180 
Bargain purchase gain       (49,063)
Gain on sale of assets   (140,004)   (140,004)
Income tax benefit (expense) 6,467  38,761  (5,994) (1,246)
Non-GAAP net income (loss) $(3,420) $ (1,947) $4,284  $5,590 
         
Per share data:         
Net gain (loss) per common share, basic $(0.09) $(0.05) $0.12  $0.17 
Weighted average common shares outstanding, basic 36,980,356  35,741,877  36,728,911  32,650,408 
             
Contact:

Chris Cline, CFA

Senior Director, Investor Relations

646-564-3680

IR@retrophin.com

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Source: Retrophin, Inc.

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