PTC Therapeutics, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing was signed February 29, 2024. PTC is a global biopharmaceutical company focused on rare diseases, with commercial products and a development pipeline in neurology and metabolic disorders. Unless stated otherwise, amounts below are in U.S. dollars.
Financial results and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $937.8 million | $698.8 million | Up 34% |
| Net product revenue | $661.2 million | $535.2 million | Up 24% |
| Collaboration revenue | $100.0 million | $50.1 million | Up 100% |
| Royalty revenue | $168.9 million | $113.5 million | Up 49% |
| Operating loss | $439.5 million | $447.4 million | Loss narrowed 2% |
| Net loss | $626.6 million | $559.0 million | Loss widened 12% |
| Net loss per share, diluted | $8.37 | $7.79 | Loss per share increased |
| Cash used in operating activities | $158.4 million | $356.7 million | Cash use decreased |
- Product revenue growth reflected Translarna sales of $355.8 million, up 23%, and Emflaza sales of $255.1 million, up 17%. Revenue from Tegsedi, Waylivra and Upstaza accounted for the remainder of non-U.S. product sales.
- Reported operating margin was approximately negative 47% of revenue; PTC remained substantially unprofitable. Research and development expense was $666.6 million, and selling, general and administrative expense was $332.5 million.
- At year-end, cash and cash equivalents were $594.0 million and marketable securities were $282.7 million, totaling $876.7 million. Current assets were $1.219 billion and current liabilities $603.1 million, implying working capital of about $615.5 million.
- Long-term debt carrying value was $284.2 million, principally the 1.50% convertible notes due September 2026. The separate liability for sold future royalties was $1.814 billion ($194.3 million current and $1.620 billion noncurrent). Total liabilities were $2.714 billion; stockholders’ deficit was $818.6 million.
- Financing cash flow was $646.4 million, substantially reflecting $1.0 billion received from Royalty Pharma for additional Evrysdi royalty rights, offset in part by repayment of the $300 million Blackstone loan and related termination costs. Investing activities used $176.7 million.
Material changes and unusual items
- Revenue increased, supported by product growth and higher Evrysdi-related royalties and milestones. The $100 million 2023 collaboration milestone followed Evrysdi reaching $1.5 billion in worldwide annual sales; the comparable 2022 milestone was $50 million.
- Net loss included $217.8 million of impairment charges after PTC discontinued early gene-therapy programs for Friedreich ataxia and Angelman syndrome. It also recorded a $127.7 million gain from reducing contingent consideration tied largely to those discontinued programs.
- PTC recorded $137.6 million of loss on extinguishment of debt: $92.7 million related to terminating the Blackstone facility and $44.9 million related to restructuring the royalty-sale liability. The Blackstone loan was repaid in October 2023, and its liens were released.
- PTC received $1.0 billion from Royalty Pharma in exchange for a further share of Evrysdi royalties. Royalty Pharma’s share of the total royalty is 80.9777% until the specified $1.3 billion receipt threshold is met, and 66.6667% thereafter. PTC may put remaining retained royalty rights for up to $500 million of additional consideration, subject to the agreement’s terms.
- PTC recorded $32.8 million of restructuring costs from a workforce reduction of 32%, substantially completed in January 2024. It also recorded $12.5 million of inventory write-downs, primarily for reserves and product approaching expiration.
Outlook, management commentary and risks
- Management said cash, cash equivalents, marketable securities and expected operating cash flows should fund operations and capital needs for at least 12 months. PTC nevertheless expects operating losses through 2024 and says it may never achieve or sustain profitability.
- Translarna is a major revenue risk. On January 25, 2024, the EMA’s CHMP issued a negative opinion after re-examination on renewal of its conditional EEA authorization; the European Commission had 67 days to decide whether to adopt it. PTC said adoption would end the EEA authorization and could affect approvals, pricing or reimbursement in other countries. The FDA had also said Study 041 did not provide substantial evidence to support an NDA resubmission; a further FDA meeting was scheduled for March 2024.
- Emflaza’s seven-year U.S. orphan exclusivity for patients age five and older expired in February 2024. PTC expects significant negative revenue impact and generic competition. Exclusivity for ages two to under five runs to June 2026.
- Planned milestones included a March 2024 U.S. BLA submission for Upstaza and an EMA application for sepiapterin, plus an FDA sepiapterin NDA no later than Q3 2024. FDA requested a 26-week mouse carcinogenicity study for sepiapterin. PTC expected PTC518 12-month interim data in Q2 2024 and utreloxastat Phase 2 topline results in Q4 2024.
- Sepiapterin met its Phase 3 primary endpoint in PKU, with reported blood phenylalanine reductions of about 63% in the primary analysis population. Vatiquinone’s Phase 3 Friedreich ataxia trial did not meet its primary endpoint, although certain subscales and secondary measures showed benefits; FDA indicated it was willing to review a potential NDA using the trial and extension-study data, while EMA advice indicated the data likely would not support conditional authorization.
- Other significant risks include reimbursement and pricing pressure, dependence on third-party manufacturers and collaborators, generic competition, clinical and regulatory uncertainty, international exposure and foreign exchange, and the need to fund ongoing research and commercialization. The company relies on Roche-related royalties, but sold a substantial portion of future Evrysdi royalties.
Most important facts for investors to verify
- The European Commission’s final decision on Translarna, and the resulting revenue, patient-access and country-level authorization effects.
- Emflaza sales trends and the extent and timing of generic entry following expiration of U.S. orphan exclusivity.
- Cash burn, milestone obligations and financing needs against management’s 12-month liquidity assessment; review the $1.814 billion royalty-sale liability and remaining 2026 convertible notes.
- Whether Upstaza and sepiapterin submissions are accepted and progress through regulatory review, including any additional FDA requirements.
- Underlying recurring performance apart from milestone revenue, royalty monetization, impairments, contingent-consideration gains and debt-extinguishment losses.
- Execution and financial effects of the workforce reduction, discontinued programs, manufacturing commitments and long-term facility leases.
Audit and controls: Ernst & Young issued unqualified opinions on the consolidated financial statements and internal control over financial reporting. The filing reports no material legal proceedings known to the company and no material weakness in internal controls.