PTC Therapeutics, Inc. — Q3 2013 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2013. The interim financial statements are unaudited. PTC is a clinical-stage biopharmaceutical company developing ataluren and other candidates; it had no product-sales revenue and had not completed development of a drug.
Financial results and liquidity
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $16.3 million | $7.2 million | $30.3 million | $27.3 million |
| Research and development | $13.9 million | $10.5 million | $39.9 million | $36.7 million |
| General and administrative | $6.7 million | $3.8 million | $17.7 million | $11.4 million |
| Operating loss | $4.3 million | $7.1 million | $27.3 million | $20.8 million |
| Net loss | $4.4 million | $7.3 million | $33.7 million | $20.0 million |
| Net loss per common share, diluted | $0.19 | $1,605.53 | $5.40 | $39.41 income per share |
Q3 revenue included a $10.0 million Roche milestone for selection of a spinal muscular atrophy development candidate. No product revenue was reported. Gross margin is not meaningful for this development-stage company. Q3 2013 operating loss narrowed year over year as revenue rose, while nine-month net loss increased, notably reflecting $6.0 million of non-cash interest expense associated with the 2013 convertible debt discount and an $18.2 million deemed dividend. Per-share comparisons are affected by the 2013 recapitalization, IPO and reverse stock split.
- Cash and investments: At September 30, 2013, cash and cash equivalents were $24.0 million and marketable securities were $133.2 million, totaling $157.2 million. Total assets were $167.2 million; stockholders’ equity was $151.0 million.
- Cash flow, nine months: Operating cash used was $32.5 million; investing cash used was $133.7 million, primarily for marketable securities; financing cash provided was $187.5 million, principally IPO and preferred-stock proceeds.
- Debt and obligations: PTC paid off the secured debt facility in July, including $2.6 million of principal and interest; the debt carried a 13.65% rate. At quarter-end, the balance sheet showed $84,000 of current debt and no long-term debt. Contractual obligations totaled $4.9 million, mostly leases.
- Runway: Management expected existing cash, investments and collaboration research funding to support planned operations through Q4 2015, subject to assumptions including no early EU conditional approval requiring significant commercialization spending.
Material changes and business developments
- Q3 revenue increased 126% year over year, primarily from the Roche milestone; nine-month revenue rose 11%. Grant revenue declined in both comparisons.
- Q3 R&D increased 33%, mainly from ataluren nmDMD Phase 3 trial costs and share-based compensation. Nine-month R&D rose 9%; higher trial and share-based compensation costs were partly offset by lower personnel costs.
- Q3 G&A rose 77%; nine-month G&A rose 56%, reflecting share-based compensation, pre-commercial work and public-company costs.
- June IPO proceeds were approximately $131.6 million net. PTC also raised approximately $60 million gross through the Series Four financing and related bridge financing during Q1.
Outlook, risks and contingencies
- Management expected initial top-line results from the confirmatory Phase 3 nmDMD trial in mid-2015. The first patient had been dosed in April 2013. The company planned to start a Phase 3 nmCF trial in the first half of 2014, subject to regulatory discussions on trial design.
- The EMA had reiterated major objections to conditional approval of ataluren for nmDMD. An EMA scientific advisory group meeting could shift a final opinion into Q1 2014; management emphasized substantial risk of rejection. The FDA had previously refused to file PTC’s nmDMD NDA for lack of substantial evidence of effectiveness from the single Phase 2b trial.
- Prior nmDMD Phase 2b and nmCF Phase 3 trials did not meet their primary efficacy endpoints at the prespecified statistical significance level. Management’s supportive interpretations relied in part on retrospective/subgroup analyses and nominal p-values, which regulators may give less weight.
- EMA-requested GCP inspections of selected sites produced critical and major findings involving patient eligibility waivers, site oversight and documentation. PTC described corrective actions; further consequences could include rejection of data or additional studies.
- Management expected spending to rise with Phase 3 trials, early-access programs, potential commercialization and public-company operations. The company warned that further financing may be needed; financing might be unavailable or dilute shareholders, and failure to raise capital could delay or curtail development.
- Other significant risks include trial enrollment, safety, regulatory approval, manufacturing dependence on third parties, reimbursement and pricing, competition, intellectual-property challenges, and the possibility that ataluren will not become commercially successful. The filing disclosed no pending legal matter expected by management to have a material adverse impact, while noting ordinary-course patient-access and clinical-trial disputes.
- Potential contingent payments are excluded from the contractual-obligations table. Wellcome Trust agreements could require up to $68.9 million in development and regulatory milestones, plus royalties, if specified products are developed and commercialized.
Important facts for investors to verify
- Progress, enrollment and results of the nmDMD and planned nmCF confirmatory Phase 3 trials, including whether the stated timelines remain achievable.
- EMA review outcome and timing, and whether inspection findings or corrective actions affect the underlying clinical data or approval prospects.
- Cash consumption versus management’s Q4 2015 runway estimate, particularly if trial costs rise or conditional approval triggers earlier commercialization costs.
- Revenue quality and repeatability: Q3 revenue benefited materially from a one-time $10 million Roche milestone; PTC had no product-sales revenue.
- Clinical safety and efficacy evidence, including renal events and antibiotic restrictions noted for nmCF, and the limitations of post-hoc analyses from earlier trials.
- Potential future financing, dilution, contingent milestone/royalty obligations, and the company’s ability to secure commercial manufacturing and reimbursement.