PTC Therapeutics, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; unaudited. Financial amounts below are in U.S. dollars. PTC is a biopharmaceutical company developing and commercializing small-molecule therapies. Its lead product, Translarna (ataluren), had conditional European authorization for ambulatory patients aged five and older with nonsense-mutation Duchenne muscular dystrophy (nmDMD); commercial availability depended on country-specific pricing and reimbursement.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Total revenue | $7.5 million | $9.2 million; down 19% |
| Net product revenue | $5.1 million | None |
| Collaboration revenue | $0.3 million | $9.1 million |
| Grant revenue | $2.1 million | $0.1 million |
| Research and development expense | $27.9 million | $15.9 million; up 76% |
| Selling, general and administrative expense | $17.6 million | $7.5 million; up 134% |
| Loss from operations | $(38.1) million | $(14.2) million |
| Net loss / loss per share | $(37.9) million / $(1.15) | $(14.1) million / $(0.58) |
| Operating cash flow | $(36.4) million | $(13.4) million |
- Revenue included $1.4 million deferred from 2014 under the prior cash-based product revenue recognition approach. Beginning in Q1 2015, PTC recognized Translarna revenue upon shipment after establishing a pattern of collectability.
- Management attributed lower collaboration revenue mainly to a $7.5 million Roche SMA milestone recognized in Q1 2014. Higher R&D reflected clinical trial, launch supply-chain and pipeline costs; higher SG&A reflected commercialization build-out. Both expense increases also included higher share-based compensation.
- At March 31, 2015, cash and cash equivalents were $36.8 million and marketable securities were $243.6 million, totaling $280.5 million. Current assets were $289.8 million; current liabilities were $23.9 million. Total liabilities were $26.2 million, and the balance sheet did not present a separate debt balance.
- Cash declined by $12.9 million during the quarter. Investing activities provided $20.6 million, principally from marketable-security sales and redemptions; financing provided $3.0 million, principally from option exercises. No material product gross margin is provided; product costs were not separately presented and were described as insignificant to date.
- Accumulated deficit was $460.5 million. Management estimated existing cash, marketable securities and expected collaboration research funding would cover operating and capital expenditure needs through late 2017, subject to assumptions that could prove inaccurate. PTC expected significant losses and rising expenses for at least the next several years.
Material changes and business developments
- Translarna sales began in Germany in December 2014; Austria launch followed in April 2015. PTC planned broader EEA launches during 2015, contingent on pricing and reimbursement negotiations, which can take more than 18 months in some markets. Reimbursed early access programs were authorized in several countries.
- PTC completed ACT DMD enrollment in September 2014 and expected top-line results in Q4 2015. The EEA authorization was subject to annual EMA review and renewal and completion and reporting of ACT DMD during 2015.
- ACT CF was enrolling; PTC anticipated completing enrollment by year-end 2015 and top-line data about a year later. PTC planned to seek an EEA authorization variation for nmCF in the second half of 2015, while noting approval was uncertain.
- PTC expected to initiate Phase 2 studies of Translarna for nonsense-mutation MPS I and aniridia in 2015. A rolling U.S. NDA for nmDMD was underway; conditional on positive ACT DMD results and FDA approval, management saw potential for a U.S. launch in the first half of 2016.
- Roche and the SMA Foundation temporarily suspended dosing of additional patients in the MOONFISH Phase 2 study in April 2015 after a longer-term monkey toxicology study showed an eye finding at exposures above those explored in people. The partners were evaluating the finding and next steps.
- PTC initiated a Phase 1 study of cancer candidate PTC596 in April 2015 and was conducting IND-enabling studies for antibacterial candidate PTC672.
Outlook, risks and contingencies
- Management expected 2015 revenue primarily from Translarna sales where acceptable reimbursement was obtained and from reimbursed access programs. It expected increased commercial, clinical development, manufacturing and regulatory costs, and stated additional financing might be needed if plans or assumptions changed.
- Key risks include ACT DMD results and renewal of the conditional EEA authorization; uncertain U.S. and additional-indication approvals; small eligible patient populations; pricing, reimbursement and market uptake; clinical safety and efficacy; trial enrollment; and reliance on third-party manufacturers, distributors and research collaborators.
- Prior nmDMD and nmCF trials did not meet their primary efficacy endpoints at the prespecified statistical significance level; PTC’s favorable interpretations relied partly on retrospective or subgroup analyses. The filing also describes prior renal adverse events in the nmCF trial, including creatinine elevations associated with certain antibiotics.
- PTC reported no material legal proceedings and no material change in contractual obligations outside the ordinary course. Potential future obligations include Wellcome Trust development and regulatory milestones of up to $68.9 million plus single-digit royalties if specified programs are commercialized. These are contingent, not reported as current amounts due.
- Disclosure controls and procedures were assessed as effective at the reasonable assurance level; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- ACT DMD top-line timing and outcome, and the EMA’s annual reassessment and renewal decision.
- Translarna’s country-by-country pricing, reimbursement, sales and cash collection, including the effects of the revenue-recognition change.
- MOONFISH safety review, the eye finding’s relevance to human exposure, and any revised development plans.
- Actual cash burn versus management’s late-2017 runway estimate, including expected collaboration funding and planned increases in commercial and clinical spending.
- Whether ACT CF, the U.S. NDA process and planned additional indication studies meet stated timelines and regulatory requirements.