PTC Therapeutics, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. The filing also reports unaudited quarterly results, including the fourth quarter. Amounts below are in U.S. dollars; financial figures are in millions unless stated otherwise.
Business context and reporting period
PTC is a commercial-stage biopharmaceutical company developing small-molecule medicines that target post-transcriptional control. Its lead product, Translarna (ataluren), was marketed outside the United States for nonsense-mutation Duchenne muscular dystrophy (nmDMD), through commercial sales and reimbursed early-access programs. The EEA authorization was conditional, limited to ambulatory patients aged five and older, and subject to annual review.
Other key programs included a confirmatory Phase 3 trial of Translarna for nonsense-mutation cystic fibrosis (nmCF), early-stage Translarna studies in other rare diseases, an SMA collaboration with Roche and the SMA Foundation, and Phase 1 development of cancer candidate PTC596.
Financial results and liquidity
| Metric | 2015 | 2014 |
|---|---|---|
| Total revenue | $36.8 | $25.2 |
| Net product revenue | $33.7 | $0.7 |
| Collaboration and grant revenue | $3.1 | $24.5 |
| Research and development expense | $121.8 | $79.8 |
| Selling, general and administrative expense | $82.1 | $44.8 |
| Operating loss | $(167.1) | $(99.4) |
| Net loss | $(170.4) | $(93.8) |
| Net loss per share, basic and diluted | $(5.07) | $(2.97) |
- Fourth quarter: Product revenue was $12.7 million; operating expenses were $60.9 million; operating loss was $48.2 million; net loss was $50.9 million, or $1.50 per share.
- Cash flow: Operating activities used $124.3 million, versus $57.3 million in 2014. Investing activities used $20.8 million; financing activities provided $154.1 million.
- Liquidity: Cash, cash equivalents and marketable securities totaled $338.9 million at year-end, up from $315.2 million. Working capital was $310.6 million; total assets were $368.0 million.
- Debt: PTC issued $150.0 million of 3.0% convertible senior notes due 2022 and received $145.4 million net proceeds. Their year-end carrying amount was $94.6 million after the accounting discount; contractual obligations, including interest, were $181.5 million.
- Margins: The filing does not provide a reported product gross margin; PTC had not capitalized inventory. It estimated that expensing product cost when sold would imply a gross margin above 90%, but this is not a reported margin.
- Cash runway: Management said existing liquidity, product receipts and expected collaboration funding were expected to cover operating and capital needs for at least 12 months, while noting that assumptions could prove incorrect. PTC expected continued operating losses.
Material changes versus the prior comparable period
- Product revenue increased by $33.0 million, reflecting the expansion of Translarna sales and access programs. Total revenue rose despite lower collaboration and grant revenue, which fell $21.5 million, primarily because $17.5 million of Roche milestone revenue had been recorded in 2014.
- R&D expense rose 53% and SG&A expense rose 83%, driven by clinical trial and manufacturing costs, increased headcount, stock-based compensation, and commercial and international infrastructure expansion.
- Net loss widened by $76.7 million. Operating cash use more than doubled year over year.
- Liquidity increased partly following the convertible-note financing, while long-term debt rose from zero at year-end 2014 to a $94.6 million carrying value.
Outlook, commentary, risks and unusual items
- FDA and nmDMD: On February 22, 2016, after the reporting year, the FDA refused to file PTC’s Translarna NDA, stating the application was not sufficiently complete for substantive review. The FDA viewed both the Phase 2b and Phase 3 trials as negative, questioned a post-hoc analysis that excluded data from most participants, and cited inadequate information on abuse potential. PTC planned further discussions; timing and prospects for a U.S. filing or launch were uncertain, and additional studies could be costly.
- Clinical evidence: ACT DMD’s primary endpoint in the overall population was not statistically significant: a 15-meter benefit in the six-minute walk test (p=0.213). PTC highlighted a pre-specified 300–400-meter subgroup benefit of 47 meters (nominal p=0.007) and a pre-specified pooled analysis benefit of 21 meters (p=0.015). The company acknowledged that the primary endpoint was not met in either large nmDMD trial and that regulators may not accept its interpretation.
- Europe and market access: PTC submitted ACT DMD’s final report to the EMA in January 2016 and requested removal of the authorization condition; a CHMP recommendation was expected in mid-2016. Pricing and reimbursement negotiations remained a major constraint. Following an unsuccessful German arbitration, PTC expected to delist Translarna from the German pharmacy ordering system and said it would have to repay payors the price difference for certain sales from December 2015 until delisting. A reimbursed import pathway was possible but not assured. England access also depended on NICE and NHS decisions.
- nmCF: Enrollment in the confirmatory Phase 3 ACT CF trial was complete, with top-line results expected in early 2017. The EMA had requested supplementary information on the submitted indication variation; a recommendation was expected in mid-2016. The earlier Phase 3 trial missed its primary endpoint in the overall population, and the FDA and EMA could require additional evidence.
- Other pipeline risks: RG7800’s SMA Phase 2 Moonfish study remained on clinical hold after a nonclinical animal safety finding; RG7916 entered Phase 1 in January 2016. PTC596 Phase 1 data were expected in 2016. PTC stated that it was no longer advancing antibacterial candidate PTC672 after preclinical safety signals.
- Safety and execution: Translarna was generally tolerated in nmDMD trials. In the prior nmCF trial, renal events and creatinine elevations were more frequent in the treatment arm, particularly alongside nephrotoxic antibiotics; concomitant use with certain antibiotics was subsequently prohibited. PTC also relied on third-party manufacturers and distributors and had not secured long-term commercial supply agreements.
- Profitability and financing: PTC had an accumulated deficit of $593.0 million and expected significant expenses and losses for at least the next several years. It may need further financing, which could dilute shareholders or require less favorable terms.
- Other notable disclosures: Share-based compensation was $34.0 million in 2015. PTC reported no material legal proceedings and no off-balance-sheet arrangements. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Key facts investors should verify
- Subsequent FDA communications and whether a revised or new nmDMD NDA will be filed, what additional evidence may be required, and the resulting cost and timing.
- EMA decisions on annual renewal and full authorization for nmDMD, and the outcome of the nmCF variation review.
- Actual Translarna access, pricing, reimbursement and any German repayment exposure, including the viability of the import pathway and decisions in England.
- ACT CF results and whether regulators consider the trial design and evidence adequate for approval.
- Quarterly product sales, receivables and operating cash burn relative to the stated liquidity runway, including the impact of ongoing commercial and R&D spending.
- Convertible-note terms and cash obligations, potential dilution, and the availability and terms of any future financing.
- Progress and safety updates for the SMA program, PTC596, and other pipeline programs, as well as commercial manufacturing capacity and supply agreements.