Retrophin Shares Boom Following Manchester Pharma Buyout

Retrophin Shares Boom Following Manchester Pharma Buyout

Shares of Retrophin on Thursday soared after the company cut a deal to acquire privately held Manchester Pharmaceuticals and, along with it, a drug that's long been prescribed off-label for a rare inherited disease.

Late Wednesday, New York-based Retrophin agreed to pay $29.5 million up front, and $62.5 million total, to snap up Fort Collins, Colo.-based Manchester. In the deal, Retrophin is getting two drugs already on the market. One is a synthetic form of a natural bile acid called chenodeoxycholic acid, or CDCA. That drug, sold under the name Chenodal, is approved for patients suffering from gallstones. Manchester also has a second product, mecamylamine HCl (Vecamyl), which is approved to treat certain cases of hypertension and is sometimes prescribed off-label as a treatment for rage attributed to autism.

Wall Street cheered the deal, sending Retrophin's shares soaring more than 40% during trading on Thursday. The company, which began trading on the Nasdaq just a few months ago, traded at $15.04 per share at midday.

The focus of a conference call Retrophin CEO Martin Shkreli held with analysts was firmly on CDCA. That's because while the drug is only formally approved to treat gallstones, it also happens to be the standard of care for cerebrotendinous xanthomatosis, or CTX, a rare inherited error of cholesterol metabolism that triggers chronic diarrhea in infants, cataracts in early life, and neurodegeneration later on as xanthomas -- fatty deposits -- build up in the brain. This can lead to disability and eventually death if the condition is untreated.

CDCA isn't approved by the FDA to treat cerebrotendinous xanthomatosis but was found to be effective against the disorder when prescribed by doctors off-label, Shkreli said on the conference call. The FDA granted Manchester an orphan designation for the drug in March 2010, and Retrophin intends to seek FDA approval this year to treat cerebrotendinous xanthomatosis patients with the Manchester drug.

Shkreli said on the call that the disease is underdiagnosed because many of the symptoms that show up in patients aren't specific to the disorder. He said the company estimates that there are at least 500-1,000 patients in the U.S., and just 5% to 10% are taking CDCA. Shkreli said that measures such as a patient registry, newborn screening, and increased awareness among physicians will help Retrophin identify more people suffering from the disorder. One other CDCA product exists, but Shkreli said that it isn't approved in the U.S. and access to the treatment "is very limited." There are at least another 1,000 patients in the rest of the world that are undiagnosed, untreated, or without an alternative product, he added.

The Manchester drug is priced at $110,000 per year, but Retrophin plans to boost that to put it "in line" with other orphan drugs, Shkreli said. The company forecasts between $100 million and $250 million in peak sales for CDCA.

The drug targets what's known as a farnesoid X receptor, which is found in high concentrations in the liver and intestine. That's the same receptor that New York-based Intercept Pharmaceuticals is honing in on with its experimental drug, obeticholic acid. Shkreli said that Retrophin plans to develop CDCA as a potential treatment for nonalcoholic steatohepatitis and primary biliary cirrhosis, two disease types Intercept is also going after.

The Manchester acquisition is just the latest in a series of buyouts for Retrophin. Two months ago, it used two separate deals to buy up rights to different formulations of oxytocin, and plans to develop it as a potential treatment for schizophrenia and autism. Retrophin also has drug candidates it's developing for a rare kidney disorder called focal segmental glomerulosclerosis and pantothenate kinase-associated neurodegeneration, a life-threatening neurological disorder.

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