PTC Therapeutics, Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed March 2, 2020. This is an annual report, with unaudited fourth-quarter results also disclosed. PTC is a commercial-stage biopharmaceutical company focused on rare diseases. Its marketed products were Translarna for nonsense-mutation Duchenne muscular dystrophy (nmDMD) in certain territories outside the United States, and Emflaza for Duchenne muscular dystrophy in the United States.
Financial performance and position
| Metric | FY2019 | FY2018 | Change |
|---|---|---|---|
| Total revenue | $307.0 million | $264.7 million | +16% |
| Net product revenue | $291.3 million | $263.0 million | +11% |
| Collaboration and grant revenue | $15.7 million | $1.7 million | Primarily $15.0 million Roche milestone |
| Operating expenses | $548.1 million | $380.4 million | +44% |
| Operating loss | ($241.2 million) | ($115.7 million) | Loss widened |
| Net loss | ($251.6 million) | ($128.1 million) | Loss widened |
| Basic and diluted loss per share | ($4.27) | ($2.75) | |
| Operating cash flow | ($98.6 million) | ($27.6 million) | Cash use increased |
- Translarna generated $190.0 million in reported sales (financial statement revenue outside the U.S.: $190.3 million); Emflaza generated $101.0 million.
- R&D rose 50% to $257.5 million, reflecting gene-therapy and pipeline investment; SG&A rose 32% to $202.5 million as commercial activities expanded.
- Operating and net margins, calculated from reported figures, were approximately negative 78.6% and negative 81.9%, respectively, versus negative 43.7% and negative 48.4% in 2018.
- At year-end, cash, cash equivalents and marketable securities totaled $686.6 million; working capital was $543.4 million and total assets were $1.624 billion.
- Reported total debt was $313.9 million on the balance sheet. This carrying amount reflects accounting discounts on convertible notes; contractual principal included $150.0 million of 2022 notes, $287.5 million of 2026 notes, and a $28.3 million remaining secured term loan.
- Financing activities provided $613.2 million in cash, principally from equity offerings and the 2026 convertible-note issuance. Stockholders’ equity was $594.3 million, up from $350.7 million.
- Q4 2019 revenue was $96.5 million, comprising $81.4 million of product revenue and $15.1 million of collaboration and grant revenue. Operating loss was $72.8 million and net loss was $77.7 million. Q4 2018 revenue was $86.3 million, operating loss $45.1 million and net loss $48.3 million.
Material changes and notable items
- Revenue growth was driven by expansion of Translarna sales and higher Emflaza sales, but spending growth substantially exceeded revenue growth, widening losses.
- PTC recorded a $48.4 million expense from changes in the fair value of deferred and contingent consideration, primarily related to the Agilis acquisition; year-end contingent consideration liabilities were $356.3 million.
- Other income was $13.7 million, mainly reflecting foreign-exchange gains and a $2.2 million unrealized gain on the ClearPoint Neuro investment.
- PTC acquired BioElectron assets in October 2019 for stated upfront consideration of $10.0 million, with potential milestone payments up to $200 million plus sales-based payments. The acquisition included PTC743, an investigational asset.
- Shares outstanding increased from 50.6 million at year-end 2018 to 61.9 million at year-end 2019, primarily reflecting equity offerings and other issuances.
Outlook, commentary and risks
- Management expected operating losses to continue through 2020, although it anticipated lower losses than in prior periods. It stated that cash, investments and expected cash flows would fund operations and capital needs for at least 12 months; this outlook relies on assumptions that may not hold.
- Translarna’s EEA authorization is conditional, subject to annual renewal, and depends on Study 041 results due by the end of Q3 2022. The 2019 renewal ran through August 5, 2020 unless extended. Study 041 enrollment, outcomes and renewal decisions are material revenue risks.
- Translarna remained investigational in the U.S. FDA had issued a Complete Response Letter and denied PTC’s appeal. PTC planned a mid-2020 NDA resubmission supported by Study 045 dystrophin data; both data sufficiency and FDA acceptance of the methods remained uncertain.
- Roche’s risdiplam NDA for spinal muscular atrophy received FDA filing acceptance and priority review; the stated FDA decision date was May 24, 2020. Roche anticipated an EEA application in mid-2020. PTC’s economics depend on collaboration milestones and potential royalties.
- PTC submitted a PTC-AADC marketing application in the EEA in January 2020 and anticipated a U.S. BLA submission in Q2 2020. Approval, commercial manufacturing, surgical delivery and reimbursement remained significant execution risks.
- Other planned 2020 activities included three Bio-e trials using two compounds and a planned Waylivra application to Brazil’s ANVISA in the second half of 2020. These were plans, not reported outcomes.
- PTC had a required $40 million Agilis development payment due in August 2020 regardless of milestone achievement, as well as a potential additional $4 million Akcea payment upon Brazilian approval of Waylivra.
- The company signed a 15-year Hopewell manufacturing-facility lease, expected to commence July 1, 2020, with approximately $88.1 million in aggregate rent over its initial term. PTC had limited in-house gene-therapy manufacturing experience and continued to rely on third parties.
- COVID-19 was identified as a possible disruption to clinical trials, suppliers and manufacturing. Management specifically noted potential delays to Study 041, whose enrolled patients were largely in affected countries.
- Other key risks include pricing and reimbursement pressure, reliance on a small number of products and distributors, manufacturing concentration, competition, contingent acquisition obligations, convertible debt and potential future financing or dilution. PTC reported no material legal proceedings and received unqualified audit opinions; management and the auditor reported effective internal control over financial reporting.
Important facts for investors to verify
- Reconcile the reported $190.0 million Translarna sales figure with the $190.3 million non-U.S. net product revenue disclosure and review country-level revenue and reimbursement trends.
- Track Translarna’s annual EEA renewal, Study 041 enrollment and timing, and Study 045 results and FDA response; these could materially affect sales and the U.S. opportunity.
- Confirm the timing and outcome of risdiplam and PTC-AADC regulatory reviews, and distinguish anticipated milestones from approvals or realized revenue.
- Assess whether revenue growth can offset rising R&D, commercial and acquisition-related costs, and review cash burn against management’s stated 12-month funding outlook.
- Review the $40 million Agilis payment, debt maturities and terms, contingent consideration valuation assumptions, and the potential impact of further equity issuance or dilution.