PTC Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Financial statements are unaudited; dollar amounts below are in millions unless noted.
Business context
PTC is a commercial-stage biopharmaceutical company focused on rare diseases. Its commercial portfolio includes Translarna and Emflaza for Duchenne muscular dystrophy, Upstaza for AADC deficiency, and Tegsedi and Waylivra in certain Latin American markets. It also receives royalties from Roche’s Evrysdi. The pipeline spans splicing, metabolic, Bio-e, oncology and gene therapy programs.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $213.8 | $165.5 | $434.2 | $314.3 |
| Operating loss | $(209.5) | $(92.4) | $(327.2) | $(178.9) |
| Net loss | $(198.9) | $(152.1) | $(337.8) | $(278.8) |
| Net loss per share | $(2.66) | $(2.13) | $(4.55) | $(3.91) |
| Operating cash flow | Not presented quarterly | $(43.6) | $(152.6) |
- Q2 revenue increased 29%; first-half revenue increased 38%. Product revenue was $174.6 million in Q2 and $362.1 million for the first half. Evrysdi royalty revenue was $36.9 million and $67.7 million, respectively.
- Q2 and first-half net product revenue growth was driven mainly by Translarna and Emflaza. Q2 Translarna sales were $96.5 million and Emflaza sales were $65.7 million.
- Research and development expense was $185.9 million in Q2 and $381.0 million for the first half. Selling, general and administrative expense was $88.4 million and $175.4 million, respectively. The filing does not provide a clear standalone gross-margin figure.
- At June 30, cash and cash equivalents were $208.4 million and marketable securities were $129.6 million, totaling $337.9 million. Current assets were $589.7 million versus current liabilities of $476.3 million. Cash, cash equivalents and restricted cash totaled $224.5 million for cash-flow reporting purposes.
- Six-month investing cash outflow was $52.7 million; financing cash inflow was $22.6 million. Cash and cash equivalents decreased $71.4 million during the period.
- Balance-sheet long-term debt was $572.6 million, including the Blackstone term loan and 2026 convertible notes. The separate liability for sold future royalties was $766.6 million, of which $105.4 million was current. Stockholders’ deficit was $579.3 million.
- Management said product cash flows, Roche royalties and existing cash, cash equivalents and marketable securities are expected to fund operations for at least the next 12 months. The company also stated it has never been profitable and may require additional funding.
Material changes and unusual items
- Revenue growth was accompanied by higher costs: first-half R&D rose 28%, SG&A rose 14%, and acquired-intangible amortization rose 74% year over year.
- PTC recorded a $217.8 million impairment of gene-therapy intangible assets after discontinuing preclinical and early research programs for Friedreich ataxia and Angelman syndrome. It also recorded an approximately $129.8 million fair-value gain on related contingent consideration, contributing to the reported $126.5 million first-half gain in that line.
- The impairment and contingent-consideration gain are unusual, noncash items that materially affected reported operating results. A $50.9 million deferred tax benefit was also recorded in connection with the impairment.
- PTC announced an approximately 8% workforce reduction, planned to be completed by August 31, 2023; it recorded $8.0 million of restructuring costs and had $6.0 million accrued at quarter-end.
- PTC issued 657,462 shares, plus $0.4 million cash, to satisfy a $30.0 million sepiapterin development milestone. It also recorded $46.5 million of Emflaza-related milestone payments in the first half, increasing intangible assets and future amortization.
Outlook, commentary and risks
- PTC expected a CHMP opinion in Q3 2023 on Translarna’s conditional-to-standard authorization variation and annual renewal. Continued EEA authorization depends on regulatory review and Study 041; the company warned that nonrenewal or a label restriction could materially reduce Translarna revenue.
- The company expected to submit an Upstaza BLA to the FDA in Q3 2023, subject to FDA feedback, and a sepiapterin NDA in Q4 2023, pending feedback from a pre-NDA meeting. It anticipated a potential $20 million Upstaza regulatory milestone upon FDA acceptance of the BLA and a potential $25 million sepiapterin milestone in 2023.
- The FDA had advised PTC that Study 041 did not provide substantial evidence of effectiveness for a Translarna NDA resubmission. PTC planned to seek further FDA discussion. U.S. enrollment in the PTC518 Huntington’s disease Phase 2 study was paused pending additional FDA-requested data; enrollment continued outside the U.S.
- Sepiapterin met the primary endpoint in its Phase 3 PKU trial. Vatiquinone’s Friedreich ataxia Phase 3 trial missed its primary endpoint, though PTC cited positive secondary signals and planned FDA discussion. The vatiquinone mitochondrial-disease seizure program was deprioritized after missing its primary endpoint.
- The Blackstone facility includes a $300 million funded term loan and a $150 million delayed-draw commitment subject to conditions. Its variable-rate borrowing cost was reported at a 13.4% effective interest rate for the first half. The agreement requires at least $100 million of consolidated liquidity at quarter-end, with a higher threshold under specified acquisition conditions, and pledges certain product-related assets and intellectual property.
- Key risks include product reimbursement and market access, Translarna regulatory renewal, clinical and regulatory outcomes, commercialization execution, variable-rate debt costs, and the possibility that additional financing may not be available on acceptable terms. No material legal proceedings were reported.
Important facts for investors to verify
- Progress and outcome of the Translarna EMA review, including renewal and conversion to standard authorization.
- Timing and FDA feedback for the Upstaza BLA and sepiapterin NDA, as well as any resulting milestone obligations.
- Revenue trends and market access for Translarna, Emflaza, Upstaza and Evrysdi royalties, including exposure to major countries and distributors.
- Cash burn, available liquidity under the Blackstone covenant, variable-rate interest expense and the balance and repayment trajectory of royalty-sale obligations.
- Whether reported losses and future-period comparisons are affected by further impairment, amortization, contingent-consideration revaluation or restructuring charges.
- Additional FDA requirements for PTC518 U.S. enrollment and the regulatory path for vatiquinone following its mixed trial results.