PTC Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Financial statements are unaudited. Unless stated otherwise, amounts below are USD millions.
Business context
PTC is a rare-disease biopharmaceutical company with commercial products including Translarna, Emflaza, and, following its European approval, Upstaza. It also earns royalties and milestone revenue from Roche’s Evrysdi and is advancing clinical programs across gene therapy, splicing, Bio-e, metabolic, and oncology platforms.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $217.1 | $138.7 | $531.4 | $373.4 |
| Operating loss | $(68.2) | $(93.1) | $(247.1) | $(289.7) |
| Net loss | $(109.3) | $(133.6) | $(388.1) | $(380.6) |
| Net loss per share | $(1.53) | $(1.89) | $(5.43) | $(5.41) |
| Operating cash used | — | — | $(190.7) | $(182.5) |
- Q3 revenue included net product revenue of $134.2 million, collaboration revenue of $50.0 million, and royalty revenue of $32.9 million. The $50.0 million collaboration milestone was triggered by Evrysdi reaching $750.0 million in worldwide annual net sales.
- Q3 operating expenses were $285.3 million, including $165.5 million of R&D, $80.1 million of SG&A, and $31.0 million of acquired-intangible amortization. Operating and net margins were approximately (31%) and (50%), respectively.
- At September 30, cash and cash equivalents were $104.4 million and marketable securities were $184.0 million, or $288.4 million combined. Cash, cash equivalents, and restricted cash totaled $120.5 million. Current assets were $517.3 million versus current liabilities of $420.1 million.
- Long-term debt was $282.7 million, representing the 1.50% convertible notes due 2026. The liability for sold future royalties was $758.1 million in total, including current and noncurrent amounts. The company repaid its 3.00% 2022 convertible notes for $152.3 million, including accrued interest, in August.
- For the first nine months, investing activities provided $257.7 million, principally reflecting sales and redemptions of investments; financing activities used $135.0 million, primarily due to repayment of the 2022 notes. Total assets were $1.58 billion and stockholders’ deficit was $226.9 million at quarter-end.
Material changes versus prior comparable periods
- Q3 revenue rose 57% year over year; nine-month revenue rose 42%. Nine-month product revenue increased 32%, led by Translarna and Emflaza, while Evrysdi royalty revenue more than doubled to $73.6 million.
- Q3 net loss narrowed to $109.3 million from $133.6 million, helped by higher revenue, a $5.3 million gain in deferred and contingent consideration, and a $17.9 million tax benefit. For nine months, net loss increased to $388.1 million from $380.6 million despite higher revenue.
- Nine-month R&D increased 18% to $462.8 million and SG&A increased 17% to $233.3 million. Acquired-intangible amortization more than doubled to $80.8 million, primarily reflecting additional Emflaza-related contingent payments.
- Operating cash use increased to $190.7 million from $182.5 million. Marketable securities declined to $184.0 million from $583.7 million at year-end 2021, in part reflecting investment sales/redemptions and deployment of funds.
Outlook, developments, and risks
- Management stated that cash flows from product sales, cash, cash equivalents, and marketable securities were expected to fund operations for at least the next 12 months; it also cautioned that estimates depend on assumptions and the company may need additional financing. PTC has never been profitable and expects continued significant expenses and operating losses.
- After quarter-end, on October 27, PTC entered a Blackstone credit agreement: $300 million funded initially, up to $150 million of committed delayed-draw loans, and up to $500 million of additional discretionary financing. Loans mature in seven years and bear variable interest at adjusted Term SOFR plus 7.25% or Base Rate plus 6.25%, subject to floors. The loans are secured and subject to covenants and potential reserve-account requirements. PTC also agreed to issue approximately $50 million of stock at $45.65 per share.
- Upstaza received European Commission approval in July 2022. PTC expected to submit a U.S. BLA in the first half of 2023 after the FDA requested additional bioanalytical comparability data. The approval triggered a $50 million Agilis milestone, paid in October; a further $20 million was expected upon FDA filing acceptance.
- Translarna’s EEA authorization remains subject to annual review and renewal, currently effective through August 5, 2023 unless extended. PTC submitted a variation seeking standard authorization after Study 041 results; the EMA committee opinion was expected in the first half of 2023. Although Study 041 showed statistically significant benefits on several measures in the full intent-to-treat population, significance was not achieved in the primary analysis group. FDA feedback stated the study did not provide substantial evidence of effectiveness; U.S. approval remains uncertain.
- Other pipeline timing includes expected initial PTC518 Phase 2 data in the first half of 2023, vatiquinone trial results in Q1 and Q2 2023, and sepiapterin results by year-end 2022. U.S. PTC518 enrollment was paused pending FDA-requested data. PTC noted that COVID-19 had caused clinical and regulatory delays and could continue to affect patient access, trials, and revenue.
- Key risks include pricing and reimbursement access, renewal or restriction of Translarna authorization, clinical-trial and regulatory uncertainty, commercialization and manufacturing execution, foreign-exchange exposure, continued cash burn, and availability and terms of future financing. The filing reported no material legal proceedings and stated disclosure controls were effective.
Important facts for investors to verify
- Whether the $50 million Evrysdi sales milestone was collected, and how recurring royalty growth compares with milestone-driven collaboration revenue.
- Translarna’s EMA review outcome and annual renewal, as well as the FDA’s position on any potential U.S. resubmission.
- Upstaza’s U.S. filing progress, commercial uptake, and the timing and funding of related milestone obligations.
- Cash burn, unrestricted liquidity, and the effect of the Blackstone facility’s interest, security, covenants, and potential delayed or discretionary draws.
- Progress and results for the listed pipeline trials, and whether higher R&D, SG&A, amortization, and contingent obligations remain within management’s funding assumptions.