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Retrophin Inc. (NASDAQ:RTRX)

Q3 2013 Earnings Conference Call

November 18, 2013 04:30 PM ET

Executives

Paula Schwartz - SVP

Martin Shkreli - President and CEO

Analysts

Joseph Pantginis - Roth Capital Partners

Operator

Good day, ladies and gentleman, and welcome to the Retrophin Third Quarter 2013 Operational And Financial Update. My name is Jakie and I will be your coordinator today. At this time, all participants are in a listen-only mode and following the prepared remarks there will be a question and answer session. (Operator Instructions).

I will now like to turn the presentation over to Ms. Paula Schwartz, Senior Vice President. Please proceed.

Paula Schwartz

Thank you. Good afternoon everyone. Thank you participating in today’s call. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involved risks and uncertainties regarding the operations and future results of Retrophin. Specifically the content of today’s conference call contains times sensitive information that is accurate only as of today’s date November 18, 2013.

The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. I encourage you to review the Company’s filing with the Securities and Exchange Commission which identifies specific factors that may cause actual results or events to materially differ from those described in the forward-looking statements.

With that I will turn the call over to Martin Shkreli, President and Chief Executive Officer. Please go ahead, Martin?

Martin Shkreli

Thanks, Paula. Good afternoon and thank you joining the Retrophin Q3 results update call. I am with here with our Chief Financial Officer, Marc Panoff. Today we reported financial results for the quarter ending September 30, 2013. The results are summarized in today’s press release and filed in our Form 10-Q. Therefore we will spend most of call to talking about our pipeline activities.

Q3, like most of 2013 was a quarter of quite progress for Retrophin, which we think will lead to exciting events unfolding in 2014. Before I get into each specific drug asset, we spent a lot of time in Q3 growing our infrastructure and building our business development pipeline. We issued a press release earlier today on our new hires. I am now comfortable Retrophin has a world-class team with experience advancing drugs in our exact sweet spot of catastrophic disease.

Regarding our business development pipeline, Retrophin has made a great progress. We have identified several new opportunities and expect to announce at least one new transaction that we have not previously alluded to by yearend.

Turning to our pipeline, I will now discuss each asset in specific detail. Our lead drug, RE-021 which we will now refer to by future name of Sparsentan is nearing initiation of its Phase 2 trial for Focal Segmental Glomerulosclerosis or FSGS. Patient screening is underway and we expect the first patient to enroll in December.

FSGS is a kidney disease that 50,000 American patients suffer from. It is one of the most rapidly progressive kidney diseases identified. The hallmark of the disease is hyperproteinuria levels, due to impaired glomerular integrity. Endothelin receptor antagonists, which is the class of the drugs Persantine belongs to have been shown a reduced proteinuria across all kidney diseases, including FSGS.

Nephrologists are excited about the new way to lower proteinuria, not just for FSGS but possibly additional renal dysfunctions as well. As we’ve said before, we strongly believe that this 100 patient study could service the basis for FDA accelerated approval. The FDA specifically expressed this opinion in a letter to us last year. Given that there are no FDA approved drugs for FSGS and the reduction of proteinuria could allow for patients who are nephrotic to become sub-nephrotic, it is easy to understand this point of view.

Another exciting development is the initiation of large Phase 3 study by our competitor AbbVie. AbbVie is developing their endothelin receptor antagonist Atrasentan for diabetic nephropathy. Their nearly 5000 patient trial named SONAR will study whether Atrasentan can delay the onset of dialysis. We look forward to the SONAR results and the benefit that this class of selective ERA agents being developed for kidney disease of which their only two, Atrasentan and Persantine would receive if this trial were positive. We are also strongly considering expanding the clinical scope Persantine in additional diseases and will more to tell you about this in 2014. We’re also in partnership discussions for Europe and Asia for Persantine.

Turning to RE-024, our potential therapy for Pantothenate Kinase-Associated Neurodegeneration or PKAN, we’ve made substantial progress in 2013 and specifically in Q3. RE-024 represents a potentially profound treatment for patients suffering from PKAN, a fatal childhood disease. RE-024 is designed to replace the molecule that PKAN patients cannot make, phosphopantothenate. When Retrophin leaned that PKAN patients are deficient in this one molecule, we sprang into action and developed a library of phosphopantothenate analogs. We’ve collaborated with two world leading researchers Dr. Susan Hayflick at OHSU and Dr. Suzanne Jackowski at St. Jude Children's Research Hospital to test our compounds.

The result show that RE-024 can successfully replace the missing molecule and PKAN animal models and restore coenzyme A function to well type or normal levels. Indeed our survival study showed an almost 100% survival of RE-024 versus a near 0% survival for placebo in one of our tests.

18 months after reading about PKAN, Retrophin is ready for a Phase 1 trial. This is the kind of the story that makes us proud to be in the pharmaceutical industry. However, much testing for RE-024 remains. We are developing our library of backup compounds and running the gauntlet of preclinical experiments required for fully understanding RE-024. Despite the fact that much work needs to be done, we are pursuing a Phase I study, nonetheless. Many PKAN patients are in dire straits and we believe that we have an ethical obligation to provide access to such a compelling drug to patients as soon as we can. To that end, we have designed a Phase I emergency and compassionate use trial that will begin enrolling in December 2013 or January 2014. This will be an open label trial for very sick PKAN patients and is designed as a safety study.

We will be testing oral doses of RE-024. RE-024 is a small molecule and we predict it will cross the blood–brain barrier. Recent data confirms that RE-024 is orally bioavailable. Needless to say, we are working tirelessly to conduct the DMPK, toxicology and other studies while we initiate the Phase I trial. We have a good amount of data already and this is increasing every day. We will have a relatively complete understanding of RE-024 by March of 2014.

The exclusivity agreement we announced with a major pharmaceutical company to license the drug to be developed for Autism and Schizophrenia is progressing well. We expect to close the license and announce the transaction in the next few weeks. The drug we are licensing has shown in double blind placebo controlled studies, efficacy and safety in both Schizophrenia, as well as Autism.

Schizophrenia is a complex disease with one major treatment modality, which is the dopamine and serotonin antagonist to antipsychotics. While there are almost a dozen of these drugs available, they all have the same mechanism of action and a similar safety profile. Psychiatrists and their patients are desperate for new drug with the new antipsychotic mechanism of action. We are confident this drug could be a new addition to the Schizophrenia treatment armamentarium, as the double blind placebo controlled studies of this agent show efficacy on top of atypical antipsychotics.

While the price of older Schizophrenia medicines is low, probably due to the wide availability of these similar agents, Schizophrenic patients consume large economic resources. One recent study estimated the annual cost of Schizophrenia at $20,000 per patient per year with treatment resistant Schizophrenia costing $60,000 per year, or more. Even at the low prices of modern antipsychotics, many Schizophrenia drugs surpassed $4 billion in peak global revenue.

As we all know, the current antipsychotics are far from perfect, with severe weight gain and diabetes as major side effects. Indeed more than half of who those Schizophrenia did not receive appropriate treatment due to compliance issues, and 20% to 30% of those who do, fail to respond to treatment. We are truly excited by this opportunity.

Autism is a complex and heterogeneous disease that has been on the minds of all Americans in the last decade due to its apparent rapid growth and prevalence. The drug we are licensing appears to be effective in the treatment of some of the social carnation aspects of this condition. We’re cautiously optimistic that we could be developing the first Autism drug within the fact on core symptoms of the disease. With several million patients who are suffering, and also a large economic cost to healthcare systems, we hope to provide a useful treatment option as we move forward with this product. I look forward to updating you all more in the coming weeks.

Retrophin has spent some time looking for other PKAN like diseases. By this we mean we’re attempting to find treatments for diseases that are very severe but also simple in their pathogenesis. We developed RE-024 for PKAN in-house with no outside expertise or in-license. We believe we can do the same again. We have two new drug candidates that are in very early stage development. However, because of the rapid translation from idea to drug we saw in PKAN, we’re very much looking forward to the progress of these two ideas over the course of 2014.

Finally, Retrophin is looking to make commercial acquisitions. We believe the best approach to a growing pharmaceutical company is to balance revenue, earnings and pipeline. There are a number of market assets who generate cash flow, which Retrophin has reviewed and some of which we’ve bid on. Over the next 12 months we hope to bring at least one cash flow producing asset into the company.

With availability of relatively low interest debt financing and the explosion of the specialty healthcare royalty financing sector in recent years, and finally the support of our shareholders, we are confident we can find uncommon value in new acquisitions. Retrophin is poised to become a more valuable company as we convert our pipeline into tangible clinical success and we continue to explore transactions that provide an uncommon risk benefit for our shareholders.

Thank you, and with that I’ll turn the call over to questions.

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from the line of Joe Pantginis with Roth Capital Partners. Please proceed.

Joseph Pantginis - Roth Capital Partners

Few questions if you don’t mind, first on timelines. I know you mentioned the PKAN study would be completed around March 2014 and I know it has the potential to seek quick answers. With regard to the FSGS study, what are your potential timelines or expectations for enrollment?

Martin Shkreli

Thanks Joe. So on PKAN I just wanted to clarify, the full battery of free clinical tests will be completed by March 2014. As you know, despite that we will still be enrolling in human study but the -- as you know, the full gamut of preclinical experiments is lengthy , time consuming and we really want to do a full characterization of the drug, which you often don't see in the orphan drug industry with just a handful of preclinical studies. We really are going to be doing a complete analysis of RE-024, and again we just thought it will be helpful for investors to understand the timeline of that, juxtapose with obviously a clinical program which will begin before that; that helps.

On FSGS and Persantine, first patient is to be enrolled shortly. As I mentioned, I think we can fully enroll this study in about 12 months. That's kind of what we're targeting. So enrollment would be complete in Q4 and results will be available a quarter thereafter and Q1 2015, that's sort of what we're looking at. Obviously we always hope to enroll faster. We have done a lot of pretrial enrollment activities. We have large database of patients. We have supported some of the advocacy community and a cooperative group. So we may be able to beat that timeline, but I think that's a fair timeline for now and we'll update everyone on subsequent calls.

Joseph Pantginis - Roth Capital Partners

Okay. And looking forward to the end of these studies; if you look at the concept of your drug supply, how well equipped are you now to supply these studies with API as well as be able to move quickly, should the FDA view these studies positive enough to be able to allow you to then start treating patients in the open market if you will?

Martin Shkreli

Great question. So for FSGS we have a never ending supply of drugs. It's quite a large amount of medicine, both API and finished drug product. We have had shelf life issues with Persantine before. Part of that was due to the age of the drug when we acquired it. But we're confident at this point that those issues have been resolved. And just to take a step back both of these drugs are small molecules. So there are rather easy to make and could be made quickly if necessary, but it's certainly for Persantine, we're well equipped to supply quite a lot revenue.

The situation is not as clear for RE-024, where obviously we are moving very quickly into human studies. Thankfully this is a rare disease and the amount of drug required to treat the entire world’s population of patients is not a massive one. So at the moment we have a campaign ongoing to create CGMP RE-024 and we expect that to finish shortly. We have achieved the purity levels that we're looking for and we’re fairly comfortable with our CMC situation for RE-024 for PKAN. And again, if we were able to achieve that efficacy quickly, I don't think we’d have a problem supplying the market in the event of an approval.

Joseph Pantginis - Roth Capital Partners

That's helpful. And then maybe two more. Today you announced some key personnel additions to the Company, which were great. I was just wondering are there any additional sort of key additions we might still see?

Martin Shkreli

Well I think with these hires, Retrophin is really a fully capable company with all the capabilities you expect from a biotech company. We really have every division hired for and quite well equipped with experts in the field. I’d say the only remaining hire would be ahead of commercial, should that truly be locking it off to start to approach to looking at revenue.

Joseph Pantginis - Roth Capital Partners

And then just lastly if you don't mind, with regard to your ongoing in-licensing product for these schizophrenia, autism drug; if you stick to the timelines that you mentioned, how quickly do you think you could turn it around internally to get it into the clinic?

Martin Shkreli

It's a good question. You will have more answers in the next few weeks. I’d say that you will be looking at a pretty rapid clinical trial, but again I think you have to stay tuned for more details.

Operator

At time we have no further questions. (Operator Instructions).

Martin Shkreli

Operator I think we can end the call. Thanks everyone for your time and your interest in Retrophin.

Operator

Ladies and gentleman, that concludes today's conference. Thank you for your participation. You may now disconnect. And have a great day.

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