PTC Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Unaudited consolidated results; dollar amounts below are in U.S. dollars. The company develops and commercializes medicines primarily for rare diseases, with commercial products including Translarna and Emflaza.
Key financial results
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $118.4 million | $71.4 million | $261.9 million | $210.5 million |
| Net product revenue | $82.7 million | $71.4 million | $226.1 million | $209.9 million |
| Loss from operations | $(55.1) million | $(60.5) million | $(335.4) million | $(168.4) million |
| Net loss | $(69.7) million | $(60.0) million | $(363.8) million | $(173.9) million |
| Net loss per share, basic and diluted | $(1.03) | $(1.06) | $(5.59) | $(3.01) |
| Cash used in operating activities | Not separately provided for Q3 | $(129.7) million | $(88.4) million |
- Revenue mix and drivers: Q3 product revenue increased 16%, mainly from Emflaza; U.S. product sales were $38.5 million versus $22.9 million, while sales outside the U.S. were $44.2 million versus $48.5 million. Nine-month product revenue increased 8%. Roche collaboration revenue included $35.0 million of milestones triggered by Evrysdi’s U.S. FDA approval and EMA acceptance of its marketing application; the company also recognized $0.7 million of Evrysdi royalties.
- Costs: Research and development expense was $93.0 million in Q3 and $359.6 million for nine months, versus $63.1 million and $175.6 million, respectively, in 2019. Selling, general and administrative expense was $57.8 million in Q3 and $169.7 million for nine months. The filing does not present a consolidated gross-margin measure.
- Liquidity: At September 30, cash and cash equivalents were $434.0 million and marketable securities were $707.0 million, totaling $1.141 billion. Current assets were $1.244 billion and current liabilities were $253.8 million. Management expects cash, securities and product cash flows to fund operations for at least 12 months, while noting this estimate depends on assumptions.
- Debt and financing: Balance-sheet long-term debt carrying value was $303.0 million, primarily the 2022 and 2026 convertible notes; the $18.3 million secured term-loan principal was repaid when that facility was terminated in July. The company received $650 million for selling 42.933% of its future Evrysdi royalty stream. The transaction is recorded as debt, with an initial effective interest rate of 11%; the company retained 57.067% of the royalty stream and associated milestone rights. Nine-month financing cash flow was $628.6 million, driven chiefly by that transaction.
Material changes and unusual items
- Total Q3 revenue rose 66%, largely because of the $35 million Roche milestones as well as higher Emflaza sales. Translarna sales were affected by delayed Brazilian government purchase orders; the comparable 2019 quarter included a material order.
- Nine-month net loss more than doubled year over year. R&D growth included approximately $53.6 million of Censa acquisition-related and other expense, including the expensing of acquired PTC923 research and development, and a $41.4 million charge for dedicated MassBiologics manufacturing facilities for the AADC gene-therapy program.
- Nine-month interest expense increased to $32.1 million from $7.0 million, including interest accretion on the royalty-sale liability. Other income included foreign-exchange and ClearPoint investment gains. The royalty-sale proceeds also resulted in a $22.1 million state tax provision; total nine-month income tax expense was $22.6 million.
- The July 2020 Agilis rights exchange used $36.9 million cash and 2.82 million shares to cancel specified contingent milestone rights. The company reported $10.6 million of settlement expense for the nine-month period; remaining Agilis contingent consideration was $234.1 million at quarter-end.
- Operating cash use increased year over year to $129.7 million for nine months. Investing cash use was $353.4 million, primarily reflecting net purchases of marketable securities, product-right acquisitions and capital spending.
Outlook, commentary and risks
- Management expects rising commercialization and R&D spending and states the company has never been profitable and may require additional financing in the future, notwithstanding its expectation of at least 12 months of funding.
- Translarna’s EEA authorization is subject to annual renewal and completion of Study 041, with the final report due by the end of Q3 2022. Study 045 biopsies were completed in October 2020; top-line results were expected in Q1 2021, followed by a possible U.S. NDA resubmission. The FDA previously declined the application and any future approval remains uncertain.
- PTC-AADC regulatory work was delayed by COVID-19-related testing and hospital disruptions. The company expected to submit a U.S. BLA and receive an EMA committee opinion in the first half of 2021. Brazil’s centralized purchase-order delays may continue to cause Translarna revenue fluctuations.
- Other stated development expectations included completing Stage 1 of the PTC299 COVID-19 trial in Q4 2020 and reporting results from both stages in the first half of 2021; initiating a vatiquinone Phase 3 Friedrich ataxia trial in Q4 2020; and beginning a PTC923 Phase 3 PKU trial in mid-2021. These are forward-looking plans, not assured outcomes.
- COVID-19 may continue to disrupt clinical trials, regulatory reviews, suppliers, patient access and commercial activity. The filing also highlights reimbursement and pricing uncertainty, clinical and regulatory risk, and the possibility that development programs will require further investment without successful commercialization.
- The company reported no material legal proceedings, and management concluded disclosure controls were effective at a reasonable-assurance level as of September 30, 2020.
Investor facts to verify
- Whether Study 045 results support a Translarna NDA resubmission, and whether Study 041 supports continued EEA authorization.
- Progress, timing and regulatory outcomes for PTC-AADC, including any further COVID-19-related delays.
- Brazilian Translarna order timing and the durability of Emflaza growth, reimbursement and patient access.
- Evrysdi royalties retained after the sale, the royalty liability’s effective cost and repayment profile, and the impact on future cash flows.
- Cash burn, growing R&D and commercial spending, convertible-note obligations, contingent acquisition payments and the assumptions underlying management’s 12-month liquidity assessment.