Chris Cline - VP, IR Steve Aselage - CEO Neil McFarlane - COO Laura Clague - CFO Bill Rote - SVP, and Head of R&D.

Tim Lugo - William Blair Do Kim - BMO Capital Markets Liisa Bayko - JMP Securities.

Good day, ladies and gentlemen, and welcome to the Retrophin, Inc. First Quarter 2017 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time.

[Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference Mr. Chris Cline, Vice President of Investor Relations. Sir, you may begin..

Thank you, Skylar [ph]. Good afternoon everyone, and thank you for joining Retrophin's first quarter 2017 financial results and corporate update call. Joining me on the call today are Steve Aselage, Chief Executive Officer; Neil McFarlane, Chief Operating Officer; Laura Clague, Chief Financial Officer; and Dr.

Bill Rote, Senior Vice President and Head of R&D. Before we begin, I'd like to remind everyone that statements made during this call regarding matters that are not historical facts are forward-looking statements within the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are not guarantees of performance; they involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by the statement.

Please see the forward-looking statement disclaimer on the company's press release issued today, as well as the Risk Factors section in our Form 10-K filed with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made, May 4th, 2017.

And Retrophin specifically disclaims any obligation to update such statements to reflect future information, events, or circumstances. With that, I'll now turn the call over to Steve.

Steve?.

Thanks Chris. Good afternoon everyone and thank you for joining us on today's call. We reached important milestones in the first quarter which have kept us on course to deliver sustainable value in 2017, and the years ahead. Perhaps most importantly, we made solid progress with Sparsentan and RE-024.

These programs from our pipeline have great opportunities to make meaningful differences in the lives of people living with FSGS and with PKAN. Based on our End of Phase 2 meeting with the FDA during the quarter, we gained regulatory clarity on a path to approval for Sparsentan in FSGS.

Specifically, FDA agreed on an outline of a single Phase 3 trial to enable an NDA filing. Our Research & Development team is working diligently to develop a protocol that positions the trial for success at both the interim and confirmatory readouts of this study.

We are working to define the optimal statistical model that will allow us to design the most robust protocol. Once we have gotten that piece of the statistical analysis set, we'll go back to confirm alignment with the FDA in the second half of this year with the intention of initiating the trial around the end of the year.

We still have a bit of work to go, but I'm pleased with the progress to date, and look forward to updating you as we get closer to those milestones. We also made significant headway with RE-024, and continued the advancement of our pivotal Phase 3 FORT study, for which we have received IRB approvals, and study sites have begun recruiting activities.

I am very pleased that we are now in a firm position to begin dosing to first PKAN patients mid-year. We look forward to further our work with the investigators and PKAN community to get additional sites activated, and patients enrolling in the trial.

There is clear momentum now behind RE-024, and we are eager to build upon that through the rest of 2017. From an operational perspective, we continue to see double-digit year-over-year revenue growth, and remain disciplined in our spend on key programs that will drive future growth to the organization.

Importantly, we strengthened our leadership team during the quarter, adding Bill Rote as Head of Research & Development, and Elizabeth Reed as General Counsel. We added valuable management expertise to the company. We also recently bolstered our Board of Directors with the addition of industry veterans John Orwin and Ron Squarer.

Overall, we had a strong start to the year, and I am pleased that we were able to advance our pipeline, while simultaneously growing top line revenues and exhibiting strong fiscal responsibility. Let me now turn the call over to Bill to walk you through our development updates in a bit more detail.

Bill?.

Thanks, Steve, and good afternoon everyone. It's been almost three months since I've joined, and I'm delighted to be onboard and aiding in the advancement of our programs. One of the things that most attracted me to Retrophin is the incredible potential of the pipeline.

We're in the fortunate position of advancing two first-in-class Phase 3 programs in rare disorders that currently have inadequate or no treatment options. I'm humbled by the opportunity to now guide these programs alongside a talented organization, and to build upon all of the great work that has already been completed. Let me start with Sparsentan.

As mentioned, we had a very constructive and insightful End of Phase 2 Meeting with the FDA. Coming out of that meeting, we have a clear understanding regarding the outline of a Phase 3 trial that will us to move Sparsentan forward toward ultimate approval.

As a reminder, this single pivotal trial will have pre and post-marketing elements comparing Sparsentan to Irbesartan, an angiotensin II receptor antagonist commonly used to treat FSGS in the absence of approved pharmacologic treatments. The pre-marketing element of the trial will contain an interim analysis measuring reductions in proteinuria.

We expect this measurement to be similar to our secondly endpoint in the Phase 3 DUET trial, namely modified partially remission of proteinuria. Importantly, the DUET data showed that a significantly greater proportion of patients receiving sparsentan achieved modified partial remission of proteinuria compared to Irbesartan treated patients.

This gives us confidence that we should be able to show a meaningful difference in the interim analysis during the pre-marketing phase of the pivotal trial, and ultimately file for Subpart H accelerated approval. The post-marketing confirmatory phase of this trial would continue to run over a longer period.

This portion of the study is expected to measure reductions in estimated glomerular filtration rate, or eGFR.

The purpose of the confirmatory phase is to tie the reductions in proteinuria seen in the interim analysis to an established and accepted endpoint, specifically changes in eGFR that reflects kidney health, and which is widely regarded as the best overall measure of kidney function in this setting.

Currently, we are working to pull together a trial protocol encompassing the two phases that will best position the trial for clinical success. Working closely with our collaborators at Neptune, we have generated preliminary statistical analysis, which have given us great direction thus far.

As many of you know, there is considerable heterogeneity in the injury pattern related to FSGS. To account for this in our statistical assumptions liking the interim analysis to our confirmatory endpoint, we're continuing to define the optimal statistical model.

As Steve mentioned, we expect to have the protocol finalize and aligned with the agency in the second half of the year, and subsequently initiate our Phase 3 trial. Also note we will be simultaneously interacting with the EMA to ensure our protocol will ultimately support an EU filing.

In parallel, our clinical operations team is working diligently to capitalize on the heightened excitement created by our positive Phase 2 DUET data presentations. As we noted previously, we've already selected more than a hundred sites with an estimated 1,600-plus subjects that have interest in participating in the trial.

While our number one priority for Sparsentan is developing the protocol and launching this trial for FSGS, we are also exploring the ability to maximize the potential of this molecule by investigating its use in other glomerular nephropathies.

Our initial diligence suggests that there may be a good fit in one or two other indications, and we look forward to finalizing our strategy after completing the FSGS protocol. Overall, we're excited about our momentum for Sparsentan, and we anticipate having a great deal more to discuss later this year.

I'll now switch over to RE-024, our replacement therapy for PKAN. The program is moving along well, and we took all of the necessary steps during the quarter to ensure the first PKAN patients will be dosed this summer in our Phase 3 study, named FORT.

FORT was designed under a special protocol assessment agreement to evaluate RE-024 for the treatment of PKAN. We anticipate that this trial will support regulatory filing in both the U.S. and EU. FORT will be an international randomized double-blind placebo-controlled study evaluating RE-024 in approximately 82 PKAN patients, ages six to 65 years.

The primary endpoint of the trial will be the change in score of the PKAN activities of daily living scale from baseline through 24 weeks of treatment. The PKAN-ADL scale is an adaptation of part 2 of the comprehensive and widely-referenced unified Parkinson's disease rating scale, or UPDRS.

We're excited to get the first PKAN patients dosed in the trial soon, and all is moving along as anticipated. As Steve mentioned earlier, sites have begun recruitment activities, and we have our U.S. investigator meeting this week. Finally regarding RE-024, all four patients receiving treatment as part of physician-initiated protocols outside the U.S.

remain stable on therapy today. So in looking ahead to the balance of 2017, we have a number of clinical milestones that we are anticipating. Most notably, we're looking forward to finalizing our Phase 3 protocol for Sparsentan with the intent of initiating the trial towards the end of the year.

We'll update on our development plans for additional glomerular nephropathies, and we'll be dosing our first patients in our pivotal trial of RE-024 and PKAN and ramping up enrolment throughout the end of the year. I look forward to sharing more about our progress as we reach these key milestones.

Now, let me turn the call over to Neil for an operational update on the quarter.

Neil?.

Thanks, Bill. Operationally, we carried momentum from the end of the year into the first quarter and I'm proud of our continuous focus on creating value for the patients we serve.

Our commercial team had great execution on our initiatives from the onset of the year and delivered double digit year-over-year top line growth to $34 million in revenue, we reported for the quarter gives us a great start to achieving our full year 2017 guidance of $150 million to $160 million.

Importantly, we saw growth across all three products which continues to be based solely on volume, as expected at the beginning of the year we saw our gross to net adjustments impacted by the temporary widening of discounts related to higher co-pays and temporary shifts in Medicare exposure.

The impact was slightly greater than the first quarter of 2016 but like last year, we expect to move back to our typical gross to net levels for the balance of 2017.

Regarding Thiola, we recently began our targeted efforts with the ICD-10 code data to identify more physicians with diagnosed patients and we look forward to seeing how that progresses through the rest of 2017.

As our team's utilization of this data increases, we expected to be a driver of growth for Thiola as they identify additional untreated system patients, the bile acid therapies, Cholbam and Chenodal both experienced growth during the quarter.

Our neonatal and adult cholestasis sequencing panel remains a valuable diagnostic tool for patients with bile acid synthesis disorders, our team is working with physicians to pull through the positive tests from the cholestasis panel and convert those patients that may benefit on to Cholbam therapy.

We also made further traction in educating physicians on the potential hepatic benefits Cholbam may be able to provide we expect from patients. This education and alliance with physicians to find the best therapeutic outcome for patients will be instrumental to Cholbam's continued growth.

Also during the quarter, we executed on our plan to expand the sales force and divide it into two dedicated teams between Thiola and Cholbam. We're eager to see the impact of the enhanced focus in each disease indication over the coming quarters.

Regarding Chenodal, we continue to make headway on our long term initiative to better characterize CTX through our prevalence study. From a lifecycle management perspective, we made encouraging progress on our new formulation of Thiola.

As we hit some key internal milestones related to this program in the near future, we expect to be able to give you additional information.

Finally, regarding business development, we continue to be opportunistic but disciplined in our search for additional assets, our focus will remain on evaluating investments both internally such as additional indications for Sparsentan and externally to ensure we're creating value for the future of our organization and our shareholders.

Let me now turn the call over to Laura to walk through the financials.

Laura?.

Thanks, Neil. During the first quarter, net product sales from our commercial portfolio grew 16% year-over-year to $33.6 million. We reported a GAAP net loss of $11.1 million for the first quarter of 2017. After adjusting for extraordinary and one-time expenses, we reported a non-GAAP net income of $300,000.

Significant non-cash adjustments for the quarter included $14.7 million of non-GAAP operating loss adjustment and income tax benefit of $2.1 million and $1.3 million related to the company's derivative liability resulting from share price fluctuations.

R&D expenses on a GAAP basis were $20.9 million for the first quarter of 2017, the increase over the same period last year is due to higher clinical expense related to Sparsentan and RE-024.

On an adjusted basis, R&D expense for the first quarter was $18.1 million relevant non-cash expenses for the first quarter included $2.8 million of stock-based compensation and amortization. Selling, general and administrative expenses were $23.1 million on a GAAP basis in the first quarter of 2017.

The year-over-year increase is largely attributable to support of our growing commercial products and a one-time benefit that occurred in the same period last year related to a settlement covering disputed legal fees. On an adjusted basis, non-GAAP SG&A expense for the first quarter was $14.5 million.

Significant one-time and non-cash adjustments for the quarter consisted of $8.6 million related to stock-based compensation and depreciation and amortization. As of March 31, 2017, we have $295.3 million in cash and cash equivalents, marketable securities, and a note receivable from the sale of our PRB.

This value includes the present value of the $147.5 million payment remaining from Sanofi, which we expect to receive this coming July. Cash used in the quarter was primarily related to payment of the company's annual performance bonus and contingent consideration payments associated with royalties.

Looking forward, we continue to expect operating expenses to increase through the balance of 2017. We anticipate R&D expenses will rise from current levels as we prepare and execute on our two Phase 3 programs, and we expect SG&A to increase to a lesser extent as a result of supporting out top line growth.

I will now turn the call back over to Steve for his closing comments.

Steve?.

Thank you, Laura. As you can tell from the team's remarks, we have made considerable progress to start the year, and we have a great deal more in store for the rest of 2017. The promise of our pipeline continues to grow. And as such, our greatest priority is execution of the Sparsentan and RE-024 programs.

Moving ahead, we will maintain focus on achieving the key milestones for both of these Phase 3 programs, and take meaningful strides and ultimately building upon our current commercial portfolio to shape the promising future of our organization. Let me now turn the call back over to Chris to open the lines for questions.

Chris?.

Thanks, Steve.

Skylar, can we go ahead and open up the lines for Q&A please?.

Yes, sir. [Operator Instructions] Our first question comes from Tim Lugo with William Blair. Your line is now open..

Thanks for taking my question and congratulations on the progress in the quarter. With 024 pivotal kicking off, can you just remind us why you are so uncomfortable with [ph] the ability of 024 to cross the blood-brain barrier? I know that that was kind of a topic of concern a while back..

Well, I don't know that -- Well, hi Tim, this is bill, thanks for the question. I don't know that it's really been a topic of concern. I know that there has been some controversy out in the field. We have preclinical data that shows that labeled drug when as administered to animals shows up in [indiscernible] in the brain of those animals.

We know that it crosses the blood-brain barrier. That's in primate studies..

Okay. And what would the natural history suggest for these four PKAN patients which are still on therapy outside the U.S.? And can you compare/contrast what we would expect from the….

Well, certainly. Yes, it's difficult in any open-label compassionate use study to draw conclusions in the absence of a control. However, it's a degenerative disease, and these are subjects who had a progressive decline throughout the course from diagnosis.

And what we've seen, in general, is an improvement over the first six months of treatment, and then a stabilization that occurs and seems to be durable now out to beyond a year, actually two or three years..

Great. And maybe one last question.

Should we expect the impact of the sales force expansion to begin to see the top line? Should we expect that sometime in Q3, Q4, or is that going to be a Q2 impact?.

Yes, thanks, Tim, for the question. This is Neil. We expect the impact of the sales force to start in -- now. We've executed on brining the sales force in, and it's in our current guidance..

Great. Thanks..

And our next question comes from Joe Schwartz with Leerink. Your line is now open..

Hi guys, thanks for taking the questions. This is [indiscernible] in for Joe.

So just two quick ones, one on Sparsentan, and one on the PKAN, for the Sparsentan, we'll expected updates once you meet with the FDA, but any preliminary thoughts on potential duration of the study for the accelerated approval endpoint, but also for the full study? And for the PKAN, the FORT trial, what pretrial initiatives have you conduced? I know you mentioned more than a hundred sites have been identified for the Sparsentan trial, but something along the lines for the PKAN trial? Thanks..

Certainly. Thanks, [indiscernible] for the question. The duration for the Sparsentan trial, I really hesitate to comment on until we have the statistical work done, which is going to be the foundation of the entire study. So, until we have the modeling work done we need to be able to understand effect size, duration, as well as powering.

So it would be premature to comment on duration. For the FORT study, we have an investigator meeting this week, here in Boston, for the U.S. investigators. We'll have a subsequent European investigators' meeting toward the end of the summer as we begin enrolling those sites..

Great. Thank you..

Our next question comes from Liisa Bayko with JMP Securities. Your line is now open..

Hi. This is John [ph] on for Liisa. Thanks for taking the questions. Just a few on the FORT trial, I think I missed this in the prepared remarks.

But how long will patients be treated? What will patients in the placebo arm be receiving for standard of care? And them my last question, is there any breakdown as far as requirements for how many patients you'll need to enroll in the U.S. opposed to internationally..

Thanks, John for the question. There's no breakdown between U.S. and international patients. Overall patient number is right around 82. The placebo arm will be treated with placebo on a one-to-one randomization..

And what's the duration of the trial one more time? Sorry..

It's six months treatment period..

Great. Thank you..

Thanks..

And our next question comes from Do Kim with BMO Capital Markets. Your line is now open..

Hi. Thanks for taking my questions.

For Sparsentan, as you're looking at additional indications for the drug, do you anticipate starting additional clinical trials while the Phase 3 trials is FSGS is ongoing, or waiting till after you get the data?.

No, that would be something that -- they'd be run in parallel. They're just not going to start at the some time. We need to get the FSGS trial up and running, and make sure that we're in a position to execute on that before we start any subsequent line expansion studies..

And do you think you have the bandwidth to look at multiple indications, or start at one and go from there?.

Well, we have the bandwidth to evaluate the indications. The ability to execute two Phase 3 studies and start them at the same time would be a challenge for us, and that's part of the reasons we would stagger the start of those studies.

That also allows us to bring up additional personnel to make sure that we've got that covered, and we don't put any jeopardy on the FSGS execution..

I see.

So you anticipate starting straight into a Phase 3 trial for whatever the next indication is?.

No, I don't know that we've made that decision. I think that analysis is still underway. But any subsequent trial startup, whether it's Phase 2 or Phase 3 is going to be significant effort, and that's part of the reason we'd offset those..

Okay.

And for 024, the FORT study, what do you think could be the challenges of enrolling that study? Are patients easily identified and available to enroll in the study?.

Well, I think it's yes and no. It's a rare disease, so there aren't a ton of patients. There are patients that are identified that are waiting to enroll in this study, and there's a lot of information that flows through the specific investigators who treat them, as well as through advocacy organization and KOLs.

That said, they still have to meet inclusion/exclusion criteria. They have to consent to be in a clinical trial. All the standard challenges you have enrolling patients and convincing them that a trial is a good idea for them to enroll in. So it's never a trivial enterprise.

I think we're in a as good a places I think we could be at the start of this study, and time will tell once we begin enrolling, we will start in the U.S.

and then the European sites will come on later in the summer, toward the end of summer, and we don't expect a lot from them, at the end of the summer, but more we expect to see that impact in September as the summer holidays end..

Okay.

And the patients that you are enrolling, do you expect an even distribution between the classic form and [indiscernible] form?.

No. I don't know that we can say this point how they are going to be distributed..

Okay. Right, thank you very much..

Certainly..

And we have a follow-up question from the line of Liisa Bayko with JMP Securities. Your line is now open..

Hi, this is Liisa; just a couple of quick questions, the RE-024 study, how many patients?.

That's 82 patients..

Okay.

And can you just talk a little bit more about your gross to net across the products like this quarter versus normalization, and kind of what do you expect for the year?.

Yes. Hi, Liisa, this is Laura. So, generally, as we described on the call, our gross to nets are a little higher in the first quarter of the year, because insurance programs reset, co-pays reset, Med Part D or the donut hole coverage reset.

So, we're at couple of percentage points higher than we would normally expect, but as we go out throughout the rest of the year we should revert back to our normal gross to net levels..

Okay, right.

And then, what would the normal levels be?.

Normal levels will be in the 11% to 12% range..

Okay, right.

And then, finally, how many people are on that you have now in total on sales?.

Yes. So, in our Thiola group we have 24, and in our Cholbam team we have 12..

Okay. Thank you very much..

You are very welcome..

Thank you, Liisa..

At this time, I'm showing no further questions. I'd like to turn the call back over to Mr. Chris Cline for closing remarks..

Great. Thank you, Skylar, and thank you everybody for joining. We look forward on updating you on our progress in the coming quarters..

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day..