PTC Therapeutics, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; balance-sheet figures are as of March 31, 2016. Amounts are in U.S. dollars unless noted. PTC is a commercial-stage biopharmaceutical company whose revenue was generated by Translarna (ataluren), sold outside the United States for nonsense mutation Duchenne muscular dystrophy (nmDMD).
Financial performance and position
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Total revenue | $18.9 million | $7.5 million |
| Net product revenue | $18.9 million | $5.1 million; up $13.8 million, reflecting expanded Translarna sales |
| Collaboration and grant revenue | $0.02 million | $2.4 million; lower mainly because Roche milestone-related deferred revenue was recognized in 2015 |
| Research and development | $31.4 million | $27.9 million; up 12%, primarily from clinical-trial costs |
| Selling, general and administrative | $25.9 million | $17.6 million; up 47%, primarily from commercialization costs |
| Operating loss | $38.4 million | $38.1 million |
| Net loss | $41.2 million; $1.22 per share | $37.9 million; $1.15 per share |
| Operating cash flow | $(41.6) million | $(36.4) million |
Cash, cash equivalents and marketable securities totaled $298.7 million, down from $338.9 million at December 31, 2015. Current assets were $326.4 million and current liabilities $43.9 million. Long-term debt had a $93.4 million carrying value; the notes have $150 million principal, bear 3% cash interest and mature in 2022. The company reported no material change in off-balance-sheet arrangements. No conventional gross margin was reported: PTC had not capitalized Translarna inventory and stated that hypothetical gross margin, if product costs were expensed as cost of sales, would have exceeded 90%.
Material changes and unusual items
- Translarna product revenue rose substantially year over year as the commercial launch expanded; the product was available in more than 20 countries commercially or through reimbursed early-access programs.
- Net interest changed from $0.5 million of income to $2.0 million of expense, mainly reflecting interest on the convertible notes.
- PTC recorded $1.9 million of restructuring charges in Q1, including $1.6 million severance. It expected about $2.6 million in total one-time workforce-reduction charges and completion of the reorganization by June 30, 2016.
- Accumulated deficit was $634.2 million. The company stated it expected continued significant expenses and operating losses for at least several years.
Outlook, commentary and principal risks
- Management believed available cash, investments, product-sale cash flows and collaboration funding would support operating and capital needs for at least 12 months. This estimate depends on assumptions that may prove incorrect. PTC said expenses were expected to increase with commercial expansion, clinical development and regulatory work.
- United States: The FDA issued a Refuse to File letter on February 22, 2016 for the nmDMD application. It considered the Phase 2b and ACT DMD trials negative and raised concerns about the proposed post-hoc analysis and abuse-potential information. PTC had held a Type A meeting; timing and outcome of a U.S. filing or approval were uncertain, and additional studies could be costly.
- European Economic Area: Translarna’s conditional authorization required annual review and renewal. The EMA raised a major objection concerning the risk-benefit profile, including efficacy and target-population uncertainty, and requested further information on safety issues including blood pressure and lipid changes. PTC expected an EMA opinion in mid-2016; the authorization otherwise was due to expire August 5, 2016. Renewal, restrictions or withdrawal remained uncertain.
- Pricing and access: PTC had not secured acceptable pricing and reimbursement terms in key EEA markets. It delisted Translarna from Germany’s pharmacy ordering system effective April 1, 2016 after an unfavorable arbitration outcome and expected to reimburse German payors for the difference between prior commercial prices and the arbitration price on certain sales since December 2015. NICE recommended use in England subject to final guidance and a managed-access agreement with NHS England.
- Pipeline: PTC anticipated top-line results from the confirmatory Phase 3 ACT CF trial in early 2017. It expected an EMA recommendation on the nmCF variation in mid-2016, while noting that ACT CF results might be required. SMA candidate RG7800’s Moonfish study remained suspended/on clinical hold following a nonclinical safety finding; a patient study of RG7916 was expected to begin in 2016. PTC596’s Phase 1 cancer study was ongoing.
- Contingencies and execution risks: Three securities class actions filed in March 2016 alleged misleading statements concerning the nmDMD FDA application; plaintiffs sought damages and fees. Other key risks include clinical-trial outcomes, regulatory decisions, reimbursement and revenue variability, reliance on third-party manufacturing and distribution, need for additional financing, and potential cash demands under debt terms.
Important facts for investors to verify
- The EMA’s renewal and risk-benefit determination for nmDMD, including any label changes, conditions or withdrawal.
- PTC’s next FDA steps after the Refuse to File letter, and whether additional analyses or trials are required.
- Final NICE guidance and NHS England managed-access agreement, plus German reimbursement adjustments and patient access.
- Translarna sales growth, collection and reimbursement trends, and the effect of country-specific ordering variability.
- Cash burn against the stated 12-month liquidity assessment, future financing needs and the $150 million notes’ terms.
- ACT CF timing and results, and progress or safety developments in the SMA and other pipeline programs.
- Restructuring costs and status of the securities litigation.