PTC Therapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited consolidated results; dollar amounts below are in millions unless noted.
Business context
PTC is a commercial-stage biopharmaceutical company focused on rare diseases. Its marketed products include Translarna and Emflaza for Duchenne muscular dystrophy (DMD), and it commercializes Tegsedi and Waylivra in certain Latin American and Caribbean markets. It also receives royalties and milestone revenue from Roche’s Evrysdi (risdiplam), developed under the company’s spinal muscular atrophy collaboration.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $116.7 | $75.2 | $234.6 | $143.5 |
| Net product revenue | $103.1 | $75.2 | $194.4 | $143.4 |
| Operating expenses | $215.2 | $262.5 | $431.3 | $423.8 |
| Loss from operations | $(98.5) | $(187.3) | $(196.6) | $(280.3) |
| Net loss | $(118.4) | $(181.4) | $(247.0) | $(294.1) |
| Basic and diluted loss per share | $(1.68) | $(2.78) | $(3.51) | $(4.61) |
- Revenue mix and growth: Q2 net product revenue rose 37% year over year, with U.S. sales of $49.1 million and non-U.S. sales of $54.0 million. Six-month product revenue increased 36%. Growth was attributed primarily to Emflaza prescriptions and persistence, and Translarna sales in existing and new markets.
- Collaboration and royalties: Six-month collaboration revenue was $20.0 million, including a Roche milestone triggered by Evrysdi’s first EU commercial sale. Evrysdi royalties were $13.6 million in Q2 and $20.2 million for the half-year.
- Expenses and operating performance: Q2 R&D expense declined 29% to $125.5 million, mainly because 2020 included one-time Censa acquisition-related and MassBiologics manufacturing-space charges; the company said increased pipeline investment partly offset the decline. SG&A increased 28% to $68.9 million. Q2 amortization of acquired intangibles was $12.8 million.
- Interest and other items: Net interest expense was $22.6 million in Q2 and $41.7 million for the half-year, primarily reflecting interest on the liability for sold future royalties. The company recognized a $3.2 million Q2 net gain in other income, but a $7.7 million net expense for the half-year, including foreign-exchange effects and changes in ClearPoint investment values.
- Cash flow: For the six months, operating cash use was $131.3 million, investing cash provided was $86.2 million and financing cash provided was $13.5 million. Cash, cash equivalents and restricted cash totaled $184.8 million at June 30; cash and cash equivalents alone were $177.3 million.
- Balance sheet and debt: Cash, cash equivalents and marketable securities totaled $947.1 million. Current assets were $1,066.2 million and current liabilities $291.0 million. Long-term debt was $430.5 million; the company also reported a $709.2 million liability for the sale of future royalties and $241.2 million of contingent consideration. Convertible-note principal totaled $437.5 million: $150.0 million due August 2022 and $287.5 million due September 2026.
Material changes versus prior comparable periods
- Q2 and first-half revenue increased substantially, reflecting higher product sales and newly recognized Evrysdi royalties; the first-half comparison also includes the $20.0 million Roche milestone.
- Net losses narrowed year over year, mainly alongside lower operating losses. The quarterly R&D comparison benefited from significant one-time charges in Q2 2020, while SG&A and amortization increased.
- First-half operating cash use improved from $156.4 million in 2020 to $131.3 million in 2021.
- Long-term debt increased from $309.1 million at December 31, 2020 to $430.5 million at June 30, 2021, substantially reflecting early adoption of ASU 2020-06, which changed convertible-note accounting. The adoption also reduced opening additional paid-in capital and increased opening accumulated deficit through adjustments.
- Cash and marketable securities decreased from $1,103.7 million at year-end 2020 to $947.1 million at June 30, 2021.
Outlook, risks and unusual items
- Management stated existing cash, cash equivalents, marketable securities and expected product cash flows should fund operations for at least the next 12 months, while cautioning that assumptions may prove incorrect. PTC has never been profitable and expects continued significant expenses and operating losses; it may need additional financing.
- Expected milestones included a CHMP opinion on PTC-AADC in Q4 2021 and a U.S. BLA submission by year-end 2021; a Brazilian regulatory decision on Waylivra in Q4 2021, subject to pandemic-related delays; and initiation of a Phase 3 PTC923 trial in Q3 2021. The first Japanese commercial sale of Evrysdi would trigger a further $10.0 million Roche milestone.
- Translarna’s EEA authorization was renewed in June 2021 through August 5, 2022, subject to annual reassessment and Study 041. The study report is due by the end of Q3 2022. Failure to maintain authorization or secure favorable reimbursement could materially reduce Translarna revenue.
- Study 045 for Translarna did not meet its prespecified primary endpoint. U.S. approval remains uncertain; the company planned to discuss the results and other evidence with the FDA, and a potential NDA resubmission after Study 041 depends on a positive outcome.
- COVID-19 continued to delay clinical and regulatory activity, including PTC-AADC inspections and information gathering, and contributed to Brazilian order-processing delays that may make Translarna revenue there fluctuate. Management warned the pandemic could further adversely affect operations, trials and revenue.
- The $650.0 million royalty transaction with RPI transferred 42.933% of specified Evrysdi royalties. The related liability is accounted for as debt, with an 11.5% effective interest rate at June 30, 2021; reported first-half non-cash interest expense was $38.1 million.
- The company recorded $1.7 million of inventory write-downs in the first half, primarily for product approaching expiration. It reported no material legal proceedings and no material subsequent events.
Important facts for investors to verify
- Whether Study 041 remains on schedule and supports renewal of Translarna’s EEA authorization, and whether the FDA sees a viable U.S. approval path after Study 045.
- Evrysdi royalty growth and the timing of the Japanese commercial-sale milestone, considering the portion of royalties assigned to RPI.
- Revenue durability and reimbursement, particularly Translarna’s exposure to Brazilian centralized purchase-order delays and Emflaza market access.
- Cash burn, future financing needs and debt obligations, especially the $150.0 million notes due in August 2022 and the growing royalty-sale liability.
- Whether planned regulatory and clinical milestones are achieved despite COVID-19 delays, and whether increasing commercial and development costs can be supported by revenue.