Good day, ladies and gentlemen, and welcome to the Retrophin First Quarter 2016 Financial Results Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Chris Cline, Senior Director of Investor Relations. Mr. Cline, you may begin.

Thank you, Matt. Good afternoon everyone, and thank you for joining Retrophin's first quarter 2016 financial results and corporate update call. With me today are Steve Aselage, Chief Executive Officer; Laura Clague, Chief Financial Officer; and Dr. Alvin Shih, Executive Vice President and Global Head of R&D. Before we begin, I have to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Retrophin. I encourage you to review the company's filings with the Securities and Exchange Commission, which identify specific risk factors that may cause actual results or events to materially differ from those described in the forward-looking statements. The content of this conference call contains time sensitive information that is accurate only as of today's date, May 3, 2016, and the company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that, I'll now turn the call over to Steve. Steve?

Thanks, Chris. Good afternoon everyone. Thank you for joining us to talk about our progress to start [ph] 2016. When we did our year-end call a couple of months back, we talked about the need to focus on execution and reaching our key clinical milestones that could make 2016 a transformational year for Retrophin. In this regard, I'm very happy with that advancement made in the first quarter, specifically with the completion of enrollment in the Phase 2 DUET study of sparsentan for the treatment of FSGS. As a result of reaching this goal, we remain on track to top line data available to report in the third quarter. Between now and then, we will be working with thought leaders and the FSGS community to put together an in-depth package supporting proteinuria reduction as an improvable endpoint. This groundwork will put us in position to make a strong case with the FDA for accelerated approval should the DUET data readout as we expect with the robust and clinically meaningful reduction in proteinuria. Also encouraging for our pipeline in the quarter were new data for RE-024 presented at the ACMG meeting in March. Our teams did an excellent job of putting together an array of data that reinforce the need to aggressively pursue clinical development of RE-024 for PKAN. The data from four posters presented at the conference provided foundational evidence and promising insights into the profile of the drug, all of which reaffirm our belief that RE-024 could become the first approved treatment for people suffering from PKAN. We also look forward to the release of new data on two more PKAN patients receiving RE-024 under physician-initiated treatment at the upcoming MDS conference in Berlin at the end of June. The next key clinical milestone for RE-024 will be the…

Thanks, Steve. The research and development team began the year with some key achievements that helped advance the portfolio and kept us on track to reach our strategic milestones in 2016. I'll start with our later stage development program, which is sparsentan for the treatment of focal segmental glomerulosclerosis or FSGS. I'm very pleased that we met our goal of completing enrollment of the Phase 2 DUET study, this March, thanks in large part to the tremendous efforts of the clinical team and our multinational network of investigators. The DUET trial is the largest industry-sponsored trial in FSGS that's ever been enrolled. And we take a lot of pride in the fact that we're breaking new ground on behalf of the FSGS community. Importantly, delivering on this goal keeps us on track for a top line readout of the primary endpoints in the third quarter of this year. We ran completely blinded to the data, so we do not anticipate significant program updates between now and then. As a reminder, the DUET study was designed to detect a clinically meaningful reduction of proteinuria after eight weeks of treatment, compared to the active control of irbesartan which is an angiotensin receptor block. Reduction in proteinuria is widely regarded to be beneficial in the treatment of nephrotic conditions, including FSGS, and is believed to be associated with the decreased risk of progression to end-stage renal disease in these patients. Based on our previous regulatory interactions, we believe that proteinuria will be given consideration as the surrogate endpoints for Subpart H approval in the U.S. if the data from DUET are robust and supportive. And as Steve already mentioned, our scientific team is also collaborating with academic research networks and patient advocates to develop a supportive data package to articulate the rationale for…

Thank you, Alvin. Net product sales from our commercial portfolio consisting of Thiola, Cholbam and Chenodal were 29 million in the first quarter of 2016, a 67% increase over the same period last year. This increase was driven by more patients receiving Thiola and Chenodal treatments and the addition of Cholbam to the commercial portfolio in March of 2015. We reported GAAP net income of 11.2 million for the first quarter 2016, compared to 39.7 million for the same period in 2015. Adjusting for extraordinary and one-time expenses, net income was 5.2 million for the quarter. Significant adjustments for the quarter included 13.4 million of non-GAAP operating loss adjustments, offset by a 14.3 million change in the company's derivate liability due to share price fluctuation and an income tax benefit of 5.1 million. Research and development expenses on a GAAP basis were 14.7 million for the first quarter of 2016, compared to 10.3 million for the same period in 2015. The year-over-year increase is largely a result of higher clinical trial expense related to the Phase 2 DUET study for sparsentan and ongoing preparations for the next RE-024 study. On an adjusted basis, R&D expense for the first quarter of 2016 was 12.1 million. Relevant non-cash expenses for the first quarter included 2.6 million of stock-based compensation and amortization. Selling, general and administrative expenses were 19.1 million on a GAAP basis in the first quarter of 2016, compared to 14.9 million in the same period last year. The increase over 2015 is attributable to increased headcount and support of the expansion of our commercial efforts, and amortization related to the acquisition of Cholbam. Note that we had a 3 million benefit in the first quarter from the reversal of disputed legal fees as a result of this settlement with our…

Thanks, Laura. We're very pleased with the progress made in the first quarter, particularly in the clinical development area, where we believe we're moving the pipeline forward and getting closer to reaching our 2016 milestones. We're also encouraged by the underlying patient trends for all three commercial products, which signal increased growth from the first quarter through the balance of the year. As a result, we remain confident in our full year revenue guidance range of $130 million to $140 million. Looking ahead, we have some significant catalysts in store for the rest of the year. We are excited to the top line Phase 2 DUET data in the third quarter, which will give us clarity on potential for sparsentan to be the first approved treatment indicated for FSGS. We also look forward to progressing RE-024, with further case report data at the MDS conference in June, and the initiation of what we expect to be a registration-enabling efficacy trial of PKAN patients during the second half. Coupling those catalysts with further clarity on RE-034's development path and increasing commercial growth sets us up to create significant value for our shareholders throughout the rest of 2016. Let me now turn it back over to Chris to open up the line for questions.

Thanks, Steve. Matt, can we go ahead and open up the line please?

Certainly, thank you. [Operator Instructions] Our first question comes from Joseph Schwartz of Leerink Partners. Your question, please.

Great. Thanks very much. Congrats on all the progress. First, on the commercial products, I was wondering if I could just follow-up on your statement that you expect revenue growth to accelerate throughout the year. Is there a backlog of patients, or are there other reasons why you're confident in saying that?

Thanks, Joe. There is no backlog. What we see though is a really encouraging trend with all three products, and I should say Q1 was a bit of an unusual quarter, in that we saw some of the best patient growth, net new patients that we've seen for several quarters. And it's probably obvious to everyone that we did have a slight decrease in net revenues from Q4 to Q1. So we saw patient growth with net revenues go down, which is not something you normally put together. A number of factors influenced that, the primary one being that patient copays were reset with the advent of the New Year, whereas in Q4, we had a gross-to-net that was substantially different from Q1 as we picked up those copays. That gets minimized as the year goes on, and even by the end of the first quarter most of that impact was gone, but it did have a substantial impact on our January net, and put us in a bit of a hole, which by the end of the quarter we felt good about, and we're going to Q2 on a strong run.

Okay, that's great. And then, I was just hoping to ask also on CTX, and I guess what led to the breakthrough with the FDA, it sounds like you had? And then what do you think will be required to get the data, either existing data or do you think you'll have to generate new data for [ph] label to reflect the way the drug is being used?

Yes. So Joe, instead of characterizing it as a breakthrough, I would say, it's more progress in terms of the continuing dialogue we've had. And again, we've always found the agency to be very receptive when it comes to the interest of the patients, which we think are best served by having CTX on label. So the agency's previous position was that we should conduct a placebo-controlled trial, which we found during our conversations with the community to be not acceptable with patients given the current availability of therapy, which is standard of care. So during our last interaction the agency signaled some flexibility with regard to clinical design. The ball is in our court, so we're following up with them with regard to what an acceptable data package might look like. And so that's still under discussion, but again, we see significant progress in those discussions.

Okay, great. And then just one last one on sparsentan, what data do you think would be supportive of registration? What would that look like in terms of being robust and clinically meaningful? And then, can you talk a little bit more about what you're doing to wrap some other contextual information in terms of patient advocacy and other information which, I think you used the words totality of the data in order to support potential registration?

Yes, that's right. So the totality of the data means that, not only will we have the eight-week randomized data, but we'll also have the open-label extension data, where all patients who've elected to go into the open-label extension will be on sparsentan for an extended period of time. By the time we're ready to go to the agency some patients will have been on sparsentan for multiple years. And so I think that that can address both the efficacy and the potential safety concerns that the agency may raise. So in addition to that, but we'd also like to present our data from observational cohorts. And this is what we're working with our academic collaborators on, to really try and tie proteinuria to long-term kidney outcomes. And so that can best be done through looking at natural history and observational data sets to best understand how tight the linkage is between proteinuria and risk of developing ESRD. So that's what we think of in terms of the totality of data, and that's what we're aiming at.

And then just the first part of that question, what would you hope to see that would be clinically meaningful and robust enough to file for accelerated approval?

So that's not been defined for us prospectively by the agency. What we have designed the trial to detect is a meaningfully greater decrease in proteinuria than irbesartan. So recall that we're trialing sparsentan against an active-control irbesartan. So we need to see a clinically meaningful separation between those two arms. And that's what we've powered the study to produce.

So when you say power, that would imply statistical significance, but meaningfully greater implies the same or different degree, do you think?

I would say that the two are related. We need it to be both statistically and clinically meaningful.

Okay, thank you.

Our next question is from Do Kim of BMO Capital Markets. Your question, please.

Hi, everyone. This is Alex Xenakis on for Do Kim. I had a couple of questions, first one is financial, [indiscernible] that big stock repurchase, and we wanted to know if that means that there will not be a product acquisition this year?

Sure, good question. It does not mean that at all. We are still very hopeful of acquiring additional assets this year. We are actively engaged at this point. And we do feel that the best way to use our capital is to move our pipeline forward, and to acquire additional assets or business development efforts. But we saw erratic and sometimes what we felt was irrational stock movements in Q1, and felt like it would be important to have that arrow still on our quiver should we need it in the future.

Okay, thank you. And a little bit about the sparsentan and we want to know what the market research suggests about how well FSGS is diagnosed by clinicians?

The diagnosis of FSGS is I won't say it's easy, but it's relatively straightforward. It's a pathologic diagnosis, which means that FSGS describes the particular lesion that's found once the kidney is biopsied. So the typical course of events would be a patient might present with proteinuria or with peripheral edema. And the workup would ultimately lead to a renal evaluation, where there would be blood work as well as potentially a kidney biopsy if no other sources of disease can be identified. And so once that biopsy is taken, it's a relatively straightforward jump to the diagnosis of FSGS.

Okay, thanks. And in the hypertension studies, this is for sparsentan; sparsentan increase edema over placebo, but was similar to the active control. And is the balance of edema rates that you're looking for in Phase 2 similar or what would be an unacceptable increase over the comparator [ph]?

Yes, it's hard to say, because these are apples to oranges comparisons. So when you look at a hypertensive population, that's very different than looking at a population that has active kidney disease. So I would say the translation between those two patient populations is tenuous at best. So I think what ultimately is going to be the bar is going to be it's going to be a risk-benefit analysis that we perform with the DUET data that says that the risk of edema is acceptable in terms of the clinical benefit of the drug. So we didn't go into it with a particular bar. I think we just have to have acceptable safety, and that's in the discussion that we'll have with the regulators with the data in hand.

Thanks. And one last question with regards to RE-024. In the compassionate use of PKAN, what has been the rate of improvement that you've been seeing the physical sign improvements where people started to show benefit?

Yes, so if you refer to the abstract and the poster that were released at ACMG, you will see that the rate of improvement in UPDRS was roughly 30%, which is clinically meaningful. And the qualitative description of that patient, I think gives you some sense of what that means. He at first was essentially wheelchair-bound, and the improvement on therapy allowed him to be ambulatory. And so I think that's the magnitude of difference that we're seeing. But again, I just want to caveat that by saying that's n-of-1 in an uncontrolled setting. So you have to take that for a while. It's worth. When you see the results coming out from Berlin, I think you'll have more data points pushed to you to contextualize that.

Great. Thank you so much.

[Operator Instructions] Our next question is from Liisa Bayko of JMP Securities. Your question, please.

Hi, there. I'm wondering if you can just expand a little on the gross to net changes [ph]. So, for the different products, maybe you can go through what was the gross to net in the first quarter, and what is that coming out of the first quarter? In other words, what's kind of the rate for the rest of the year? Ballpark.

Sure. The gross to net changes impacted Thiola disproportionately, you know, for whatever reason, and we saw several different things impact that. I mentioned copay is an interestingly -- the copay issue in January was cut in half when we went into February, and then cut in half again by the time we got to March. So we're going into Q2 essentially with something pretty similar to what we had in Q4 of last year; not exactly, but no meaningful difference anymore. But it was a pretty big hit on January sales. We also saw a change in our rebate liabilities in the DoD and TRICARE Systems and the VA System. So that had a bit of an impact. And then the other thing that did have an impact on January is we saw some additional shipments go out at the end of December, and we think that was predominantly related to people who knew their insurance was going to change, and wanted to get some extra product and make sure they didn't run out of supply, whether new insurance was giving authorization. So I've actually given you a broader answer than you just asked for, but the net impact that we see going forward -- it's probably a 2% to 3% difference in gross to net as compared to Q4 of last year, was in the -- in Q1, it was closer to 6% difference in gross to net as compared to Q4 of last year.

Okay, that's really helpful. Thank you. And then could you at all comment on what is kind of the rate of new patient add now? I know you were kind of on a roughly 30 per month or so rate. Is it back up to that level at this point for Thiola?

I think it was closer to 30 per quarter towards the end of last year, but we are quite giving specific numbers, I just -- I don't want to get into a patient counting mode with any of those three products. What I will say is that Q1 had a very significant number of new patient adds for Thiola. Chenodal had the best new patient headquarter since we acquired the product. And Cholbam had the best new patient add number since we rolled the clinical trial patients on to commercial therapy in Q2 of last year. So we're encouraged with the patient numbers. And I think as I said, going forward into Q2, we're going to see less of an impact on the gross to net, and should see solid growth, and that's why we're still very comfortable with 130 million to 140 million forecast on the top line for the share.

Okay, great. And then just for your SG&A, I missed the comment you said about backing out legal would have been something, I'm just wondering if you could sort of give us a -- so this year is the current rate sort of a good run rate for both R&D and SG&A, or no? Maybe you can give us the shape what the year would look like for both of those.

Yes. Hi, Liisa. So in Q1 we had a SG&A credit, if you will, for reversing some legal expenses due to its settlement. So our expense would have been 3 million higher, or closer to maybe 22 for Q1. And so, I think you'd want to neutralize for that going forward, and we do expect that Q1 is probably a little low compared to our future quarters going forward throughout the year. There will be some peaks in Q3, late-Q2, Q3 timeframe as we complete our DUET study, and then we also have the PKAN cost coming in for RE-024. So, our SG&A will increase a little bit, and R&D across the board for those, but I wouldn't say materially from these levels. But this is a low quarter compared to where we expect to be through the year, lower.

Okay. Okay, that's helpful. Thank you.

And at this time, I'm showing no further questions from the audience.

Okay. All right. Thanks, Matt. And that brings the call to an end, and thank you all for joining us, and we look forward to updating you next quarter.

Thanks, everyone.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Good day.