PTC Therapeutics, Inc. — Q2 2013 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2013. Financial statements are unaudited. PTC is a clinical-stage biopharmaceutical company developing ataluren, principally for Duchenne muscular dystrophy caused by nonsense mutations (nmDMD) and cystic fibrosis caused by nonsense mutations (nmCF). It had no product sales.
Financial performance
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $6.9 million | $7.6 million | $14.0 million | $20.1 million |
| Research and development | $14.7 million | $11.9 million | $26.0 million | $26.2 million |
| General and administrative | $6.6 million | $3.2 million | $11.1 million | $7.6 million |
| Operating loss | $14.5 million | $7.5 million | $23.0 million | $13.7 million |
| Net loss | $14.6 million | $6.1 million | $29.3 million | $12.7 million |
| Net loss attributable to common stockholders | $14.6 million | Net income of $153.5 million | $44.1 million | Net income of $146.9 million |
- Q2 revenue declined 10% year over year; six-month revenue declined 30%. The six-month decrease mainly reflected lower collaboration revenue related to the restructured Genzyme agreement, as well as lower grant revenue.
- Q2 R&D increased 23%, primarily from $3.8 million of additional clinical-trial costs associated with starting the nmDMD Phase 3 trial. Six-month R&D was broadly flat: higher nmDMD trial costs were offset by lower personnel and laboratory costs.
- G&A rose 108% in Q2 and 45% for the six-month period, reflecting public-company costs, pre-commercial activity, personnel and share-based compensation.
- Six-month net interest expense was $6.3 million, including a $6.0 million non-cash debt-discount charge on 2013 convertible debt. Six-month common-stockholder loss also included an $18.2 million deemed dividend. Prior-year common-stockholder income included a large preferred-stock exchange gain; these items make per-share and common-stockholder comparisons unusually volatile.
Cash, liquidity and debt
- At June 30, cash and cash equivalents were $154.1 million and marketable securities were $11.6 million, or $165.7 million combined, versus $2.7 million cash at December 31, 2012.
- For the first six months of 2013, operating cash use was $27.3 million, investing cash use was $11.7 million, and financing cash provided was $190.3 million. Financing included $131.7 million net IPO proceeds and $60.8 million net proceeds from Series Four preferred stock.
- Total assets were $175.5 million; total liabilities were $22.5 million. Current liabilities were $19.8 million, including $10.1 million of accounts payable and accrued expenses and $7.0 million of deferred revenue.
- Debt at June 30 was $2.7 million, all classified as current. PTC reported that it repaid $2.6 million of principal and interest in July on notes under a secured facility carrying a 13.65% fixed rate. Remaining disclosed fixed contractual obligations included $4.9 million of operating and equipment leases.
Material changes, outlook and risks
- PTC completed its IPO in June, selling 9,627,800 shares at $15.00 per share for approximately $131.7 million in net proceeds. Its shares began trading on Nasdaq on June 20. A one-for-120 reverse stock split and preferred-stock recapitalization occurred earlier in 2013.
- Management estimated existing cash, investments and expected collaboration research funding would support planned operations through Q4 2015. This estimate assumes, among other things, no early EU conditional approval that would trigger significant commercialization costs; management cautioned that actual funding needs could arise sooner. The company expected expenses to rise as it advanced trials and prepared for possible commercialization, and said substantial additional funding would be needed over time.
- The nmDMD Phase 3 trial began dosing in April 2013; PTC expected initial top-line results in mid-2015 based on enrollment estimates. It planned to begin nmCF trial-site enrollment in the second half of 2013 and expected first dosing in the first half of 2014, subject to regulatory discussions about trial design.
- PTC had submitted an EU application for conditional approval of ataluren for nmDMD. The EMA’s March 2013 questions cited major objections, including insufficient efficacy evidence from a single Phase 2b trial, uncertainty about dose, and questions about continuation of the confirmatory trial. Prior nmDMD Phase 2b and nmCF Phase 3 trials did not meet their primary endpoints at the prespecified statistical-significance level; PTC’s supportive conclusions relied partly on retrospective and subgroup analyses.
- EMA inspections of selected sites from the nmDMD Phase 2b trial identified critical and major findings concerning patient eligibility waivers, site oversight and trial documentation. The EMA’s assessment of PTC’s responses and corrective actions remained important to the application.
- PTC disclosed renal adverse events and creatinine elevations in the prior nmCF Phase 3 trial, particularly alongside certain antibiotics; concomitant use of those antibiotics was subsequently prohibited in the trial. It also reported modest liver-enzyme elevations in some Phase 1 subjects. The company highlighted the possibility of further trial, regulatory, safety, enrollment, manufacturing, reimbursement, competition and financing setbacks.
- As a subsequent event, PTC announced on August 8 selection of a development candidate in its Roche/SMA Foundation spinal muscular atrophy collaboration, triggering a $10 million payment from Roche.
- Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of June 30. PTC reported ordinary-course legal matters involving patient access to trials and stated pending matters were not expected to have a material adverse impact.
Investor verification priorities
- Track nmDMD and nmCF Phase 3 enrollment, trial designs, endpoints and results against the stated timelines.
- Check EMA decisions on the nmDMD application and inspection findings, and confirm any FDA requirements for the proposed trials.
- Assess cash burn and funding runway against management’s Q4 2015 estimate, including the impact of commercialization spending, collaboration receipts and future financing.
- Reconcile reported losses with non-cash debt-discount expense, deemed dividends and preferred-stock recapitalization accounting.
- Monitor ataluren safety findings, manufacturing supply arrangements, and the availability and terms of reimbursement if approval is pursued.