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What happened

Shares of Retrophin Inc (NASDAQ:TVTX) are off to the races today, up 38% as of 10:30 a.m. ET after the company reported results from an important phase 2 clinical trial.

So what

Retrophin released positive top-line results from its phase 2 DUET study today. This clinical trial was testing the company's compound sparsentan as a potential treatment for focal segmental glomerulosclerosis, or FSGS, a rare kidney disorder can lead to end-stage renal disease.

The results showed that patients who used sparsentan achieved a 45% reduction in proteinuria, or abnormal quantities of protein in the urine. That was more than double the 18.5% reduction observed in the control group who took irbesartan, which was a statistically significant difference.

The data also showed that sparsentan was was generally safe and well-tolerated by patients, though anemia was observed in one study participant. However, the patient remained in the study throughout the full eight-week trial period. In addition, every patient who completed the trial entered the ongoing open-label extension study, and the bulk of these patients are still receiving therapy today.

This study looked like a home run all around, so it's no surprise to see Retrophin shares skyrocketing today.

Now what

Retrophin isn't the only stock benefiting from today's clinical release. Shares of Ligand Pharmaceuticals (NASDAQ:LGND), a company that acquires royalty assets in the biotech space, are also up nearly 6% based on the news. The reason is that Retrophin in-licensed sparsentan from Ligand back in 2012 when Martin Shkreli was still in the top chair. Thus, Ligand has set itself up to profit if sparsentan can find its way to market. 

From here Retrophin plans on meeting with the Food and Drug Administration to discuss moving sparsentan to a phase 3 trial.

Since there are currently no approved drugs on the market that treat FSGS, winning regulatory approval could be a huge financial win for Retrophin and Ligand. Some analysts are projecting peak sales of nearly $1 billion, which is a big number for a company that's currently valued at just over $800 million.

The risks here are still quite high, but today's results are encouraging. That makes this a must-watch drug for investors in both Retrophin and Ligand.

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