PTC Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Financial statements are unaudited; comparisons are with Q1 2021 unless otherwise noted. Dollar amounts are in millions, except per-share data.
Business context
PTC is a rare-disease biopharmaceutical company with marketed products including Translarna and Emflaza for Duchenne muscular dystrophy, and rights to commercialize Tegsedi and Waylivra in Latin America and the Caribbean. It also receives royalties from Roche’s Evrysdi and is advancing clinical programs across gene therapy, splicing, Bio-e, metabolic and oncology platforms.
Financial performance and liquidity
- Revenue: $148.7, up 26% from $117.9. Product revenue was $129.8, up 42%; royalty revenue was $18.9, versus $6.7. Collaboration revenue was negligible, compared with $20.0 in Q1 2021.
- Product detail: Translarna revenue was $79.2, up 70%; Emflaza revenue was $48.6, up 12%. Management attributed growth to higher sales in existing markets and geographic expansion for Translarna, and patient additions and continued compliance for Emflaza.
- Costs and losses: Operating expenses were $235.3, up from $216.1. Research and development expense was $140.1, up 4%, and selling, general and administrative expense was $73.3, up 20%. Operating loss was $86.5 versus $98.1; net loss was $126.7 versus $128.6. Loss per share was $1.78 versus $1.83.
- Margins: The filing does not present a single consolidated gross-margin percentage. Cost of product sales excluding acquired-intangible amortization was $10.1; acquired-intangible amortization was $23.5.
- Cash flow: Operating cash used was $97.4, compared with $100.2. Investing activities provided $49.0 and financing activities provided $1.2. Cash and cash equivalents declined by $45.5 during the quarter.
- Liquidity: Cash, cash equivalents and marketable securities totaled $587.8 at March 31, 2022; current assets were $774.0 and current liabilities were $476.8. Management stated available resources and anticipated product cash flows were expected to fund operations for at least 12 months.
- Debt and equity: Convertible notes had a combined carrying value of $431.9, including $149.7 of 3.00% notes due August 15, 2022 and $282.2 of 1.50% notes due September 2026. The future-royalty liability was $744.7, including $69.9 current. Total liabilities were $1,890.2; stockholders’ equity was negative $90.6. Accumulated deficit was $2,224.7.
Material changes and unusual items
- Product and royalty revenue increased, while the prior-year $20.0 Roche milestone did not recur. Evrysdi royalties rose to $18.9 from $6.7.
- Amortization of acquired intangibles more than doubled to $23.5, primarily reflecting contingent payments related to Emflaza rights. PTC paid Marathon a $50.0 Emflaza sales-based milestone in Q1.
- A $11.7 gain from changes in the fair value of deferred and contingent consideration reduced reported operating expenses; Q1 2021 had a $0.1 loss.
- Interest expense, net increased to $23.5, primarily due to the royalty-sale liability. The company recorded $18.9 of non-cash interest expense on that liability.
- Income tax expense increased to $4.8, principally due to 2022 tax rules requiring capitalization and amortization of certain research and development expenditures.
Outlook, risks and contingencies
- PTC expected Study 041 placebo-controlled results by the end of Q2 2022 and planned to submit available trial and extension data to the EMA by the end of Q3. Translarna’s EEA authorization was subject to annual renewal and study obligations; the CHMP recommended renewal in April 2022. A positive Study 041 result was a condition management identified for potential U.S. NDA resubmission.
- PTC expected an EMA opinion on PTC-AADC in May 2022 and a U.S. BLA submission in Q3 2022. Other stated milestones included results for PTC518, vatiquinone and PTC923 by year-end 2022, and a Waylivra FPL decision in Brazil in H2 2022.
- The $150.0 principal amount of 2022 Convertible Notes matured in August 2022. Holders could convert beginning February 15, 2022; settlement could be in cash, shares or a combination at the company’s election.
- Management expected expenses to remain significant and increase with commercialization, research and development, manufacturing and regulatory activities. PTC had never been profitable and stated it might need additional financing; financing could be unavailable or dilute shareholders.
- Key risks include maintaining Translarna authorization and reimbursement, Study 041 outcomes and deadlines, clinical and regulatory uncertainty across the pipeline, pricing and reimbursement, COVID-19-related disruption, manufacturing and supply, and the ability to meet debt and contingent-payment obligations. Management reported no material legal proceedings and no material changes in market-risk disclosures.
Important facts for investors to verify
- How the August 2022 maturity of the $150.0 million convertible notes was ultimately settled, and the resulting effect on liquidity and share count.
- Study 041 results, EMA renewal conditions and timing, and any implications for Translarna revenue or a U.S. resubmission.
- Whether PTC-AADC regulatory milestones and the anticipated U.S. BLA submission were achieved, including associated contingent payments.
- Whether revenue growth and Evrysdi royalties continued, and whether pricing, reimbursement or patient access changed in key markets.
- Cash use, financing needs and material changes to contingent liabilities, including royalty-sale obligations and potential milestone payments.