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Retrophin’s Busy Week: A Financing, a Drug Approval and a Valuable FDA Voucher

Just a day after Retrophin Inc. (NASDAQ:RTRX) announced a $100 million financing the U.S. FDA has approved its Cholbam (cholic acid) for pediatric and adult patients with bile acid synthesis disorders due to single enzyme defects, and for peroxisomal disorders. With the approval also comes a Priority Review Voucher, the last of which was sold to Gilead Sciences, Inc. (NASDAQ:GILD) for $125 million in 2014.

Retrophin acquired exclusive rights to Cholbam in mid-January, paying $5 million up front and agreeing to an additional $36 million if Cholbam were approved. Announced on Wednesday, Retrophin will make this payment with $27 million in cash and approximately 661,278 shares of Retrophin common stock (initially valued at $9 million at the time of the agreement), and Asklepion is still eligible to $37 million in cumulative sales milestones, as well as tiered royalties on sales of the drug.

The PRV can be applied to any drug candidate to expedite the FDA’s review from the standard 10 months, to 6 months.The vouchers are transferable (sellable), and the most recent public sale was done at $125 million, from Knight Therapeutics to Gilead in November 2014. Regeneron Pharmaceuticals Inc (NASDAQ:REGN) recently used a priority review voucher to expedite the review of alirocumab, the company’s cholesterol-lowering PCSK9, leaping months ahead of rival Amgen Inc’s (NASDAQ:AMGN) similar drug, evolocumab. For a potential multi-billion product, an early start on the competition is valuable time.

Retrophin announced on Monday that it plans to sell 5.1 million shares of its stock in a secondary offering. Assuming a price of $18-$19 and including the underwriter’s over-allotment option, the deal could gross $100-$110 million. The company ended 2014 with $27.8 million in cash/equivalents. The secondary offering has yet to price.

With 31.1 million shares to be outstanding after the stock offering and an additional 661,278 issuable to Asklepion, re-selling the PRV at the same price that Gilead paid last year would net about $4 per outstanding share. On a fully diluted basis, this is closer to $3. Investors did the math on Wednesday morning and RTRX was up 30% to $19 before the bell.

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