Why Retrophin Inc. Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Retrophin (NASDAQ: RTRX  ) , a clinical-stage biopharmaceutical company focused on developing orphan drug therapies to treat rare diseases and disorders, vaulted higher by as much as 50% after announcing an agreement to purchase privately held Manchester Pharmaceuticals after the closing bell last night.

So what: According to the press release, Retrophin will pay Manchester $62.5 million, which includes an upfront payment of $29.5 million, plus royalties that are based on its product sales. The reason investors seem to love this move so much is that Manchester has two products already approved by the Food and Drug Administration: Chenodal, a gallstone medication for those who are unable to have surgery due to health risks or advanced age, and Vecamyl, a therapy designed for moderately severe to severe essential hypertension. Based on this transaction, the previously developmental-stage company released revenue guidance of $10 million-$12 million in 2014 and $19 million-$21 million in 2015. The deal is expected to close by March 1.

Now what: Wall Street is obviously very happy with this purchase, as it will help stem the tide of losses for Retrophin and generate cash flow, which will allow it to continue its ongoing research into rare diseases. Despite agreeing with investors that this is clearly a good move for Retrophin, I'm perhaps a bit taken aback by just how enormous the move to the upside has been. I would personally wait a couple of quarters to assess Retrophin's progress with these two drugs before I'd be willing to even insinuate that it could head even higher.

Retrophin shares may be skyrocketing today, but they'll be hard-pressed to keep up with this top stock in 2014.
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  • Report this Comment On February 13, 2014, at 5:53 PM, Cado05 wrote:

    It's look like pumping worthless RTRX stock( no revenue, ) and from BMO:Questions have arisen recently regarding potential competition to Intercept's obeticholic acid (OCA) from other bile acid therapeutics, following Retrophin's acquisition Manchester Pharmaceuticals of Chenodal (chenodeoxycholic acid or CDCA a synthetic bile acid). With approval of Chenodal in the US for treatment of gallstones and use in cerebrotendinous xanthomatosis (CTX), the question is whether Chenodal could be studied successfully in primary biliary cirrhosis (PBC) and non-alcoholic steatohepatitis (NASH). Recall, that ICPT has completed two successful randomized phase 2 studies and is set to report phase 3 POISE data in 2Q14, with early stoppage of a large phase 2B study by the NIH for efficacy at improving NAFLD activity scores.

    Our View:

    * We see limited competitive risk from synthetic bile acids like CDCA in PBC and NASH.

    * We would note that CDCA levels are normal in PBC and NASH, as opposed to a deficiency state in CTX, and use of exogenous CDCA could be limited by dose-limiting detergent effects on the liver.

    * Current use of Urso in PBC is specifically designed to displace CDCA and prevent detergent toxicity that occur in conditions of cholestasis and use of CDCA in gallstones is associated with elevated liver enzymes.

    * Ultimately, OCA is the most potent FXR agonist in development for PBC and NASH, and with 100x greater potency than CDCA, we expect OCA to be the bile acid therapeutic of choice for cholestatic liver disease.

  • Report this Comment On February 13, 2014, at 6:20 PM, Cado05 wrote:

    Another interesting question is: Is it legal to buy own stocks 6 days before announcement buying Manchester Pharma ???http://www.nasdaq.com/symbol/rtrx/insider-trades

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