PTC Therapeutics, Inc. — Q1 2018 Form 10-Q
Business context and reporting period. Unaudited results for the three months ended March 31, 2018, compared with Q1 2017. PTC is a commercial-stage rare-disease biotech with Translarna for nonsense mutation Duchenne muscular dystrophy (nmDMD) outside the U.S. and Emflaza for Duchenne muscular dystrophy (DMD) in the U.S.
Key financial results
| Metric | Q1 2018 | Q1 2017 / change |
|---|---|---|
| Total revenue | $56.1 million | $26.5 million; up 111% |
| Net product revenue | $56.0 million: Translarna $36.8 million; Emflaza $19.2 million | $26.4 million; up $29.5 million, or 112% |
| Operating expenses | $72.8 million | $52.9 million |
| Operating loss | $16.7 million | $26.4 million loss |
| Net loss | $19.3 million; $0.46 per share | $29.1 million; $0.85 per share |
| Operating cash flow | $(15.9) million | $(28.9) million |
Product cost of sales was $3.0 million, plus $5.4 million of amortization of the acquired Emflaza intangible asset. Including amortization, derived product gross profit was approximately $47.6 million, or about 85% of product revenue. Research and development expense increased 15% to $31.4 million; selling, general and administrative expense rose 29% to $33.0 million. Net interest expense increased to $3.3 million; other income was $1.0 million, primarily reflecting foreign-exchange changes.
At March 31, cash and cash equivalents were $97.7 million and marketable securities were $80.6 million, totaling $178.3 million. Current assets were $242.0 million and current liabilities $72.7 million. Long-term debt carrying value was $146.9 million. Stockholders’ equity was $150.3 million and accumulated deficit was $830.1 million.
Material changes and comparability
- Revenue growth reflected higher Translarna sales in existing and new territories and U.S. Emflaza sales. Emflaza commercialization began in 2017.
- PTC adopted ASC 606 on January 1, 2018. The transition included a $3.3 million one-time adjustment to opening accumulated deficit related to Emflaza. For Q1 2018, the company reported $0.8 million more revenue and $0.7 million less net loss than it would have reported without adoption; prior-year results were not restated.
- Operating cash use declined year over year, partly because higher product revenue increased cash receipts. Cash and cash equivalents decreased $14.1 million during the quarter.
- After quarter-end, PTC sold 4.6 million shares at $27.04 per share in an underwritten offering, receiving approximately $117.9 million net. Shares outstanding were 46,445,672 as of May 4, 2018, versus 41,809,398 at March 31.
Outlook, risks and contingencies
- Management expected operating losses to continue in 2018, while anticipating that future-period operating losses should decline versus prior periods. It expected expenses to rise with commercialization, clinical development and regulatory work. Management stated that cash, investments, product cash flows and the April equity offering were expected to fund operations for at least 12 months.
- Translarna’s EEA authorization is subject to annual review and renewal. Study 041 is required to confirm efficacy and safety, with results due to the EMA by the end of Q3 2021. The authorization was effective through August 5, 2018, unless extended; a renewal request was submitted in February 2018.
- The FDA denied PTC’s appeal of the Translarna complete response letter in February 2018. The FDA suggested a potential accelerated-approval path requiring new dystrophin data; PTC expected to initiate a study by the end of 2018. The filing cautions that such data may not support approval.
- PTC submitted an EEA label-extension request for Translarna in patients aged two to under five; a decision was expected in mid-2018. Emflaza remains subject to FDA post-marketing requirements and reimbursement, supply and exclusivity risks.
- Revenue and liquidity depend on reimbursement, pricing, market access and continued product availability. International sales expose PTC to currency, payment, political, regulatory and market-access risks. The company also cited clinical, manufacturing, regulatory and financing uncertainties.
- The $60 million MidCap senior secured facility had $40 million drawn; the remaining $20 million was conditional on achieving at least $120 million in trailing-12-month net product revenue by December 31, 2018. PTC reported compliance with its covenants at March 31.
- A securities class action had reached a settlement in principle, subject to court approval, expected to be funded by insurance subject to the deductible. A derivative action settlement in principle was also subject to court approval and included plaintiffs’ legal fees and corporate-governance reforms.
Most important facts for investors to verify
- Progress and enrollment in Study 041, the EMA renewal decision and any change to Translarna’s EEA label or access.
- Whether the planned dystrophin study meets FDA requirements and whether a Translarna U.S. resubmission or approval becomes feasible.
- Durability of Translarna and Emflaza revenue growth, payer coverage and reimbursement, and the resulting product margins and cash collections.
- Cash burn against management’s stated 12-month funding outlook, and eligibility for the additional $20 million MidCap tranche.
- Clinical progress and regulatory milestones across Emflaza, SMA and other pipeline programs, alongside associated spending.
- Final court approval and financial implications of the disclosed litigation settlements, plus the dilution from the April share offering.