PTC Therapeutics (NASDAQ:PTCT) – an unheralded, albeit business stage uncommon illness specialist primarily based in New Jersey – lastly put an finish to a prolonged bear run on its shares this week because it launched high line knowledge from a placebo managed trial of its Duchenne Muscular Dystrophy drug Translarna.
PTC already has a conditional approval from the European Medicines Company (“EMA”) to market and promote Translarna – a formulation of the energetic ingredient Ataluren – in Europe, and in addition markets the drug in Brazil, however a New Drug Software filed with the FDA in 2017 led to the company issuing a Full Response Letter (“CRL”), questioning the conclusiveness of earlier medical research, and highlighting points with the info.
It was the third time that the FDA had rejected the drug, and PTC CEO Stuart Peltz, who co-founded PTC in 1998, was unimpressed, commenting in response to the CRL that:
We’re extraordinarily upset for the Duchenne group and strongly disagree with the company’s conclusions. We consider that this resolution fails to contemplate the benefit-risk of Ataluren and the excessive unmet medical want.
Now PTC is again with extra knowledge from its confirmatory trial, STUDY 041, designed to attain a full approval in Europe. The examine failed to satisfy its major objective of a statistically-significant profit in response to the six-minute stroll check, however secondary endpoints have been met, together with proof of the slowing of decline in useful skills together with strolling. CEO Peltz stated the outcomes would “reinforce our sturdy worth proposition within the EU and worldwide markets,” including:
We stay totally dedicated to bringing Translarna to…the US and we sit up for discussing these outcomes and a possible path ahead for approval with the FDA.
PTC inventory responded by climbing from a low of $27 – its lowest value since April 2018 – to $39, representing a 44% achieve, that means the inventory value has misplaced solely 11% throughout the previous yr, though it’s up 115% over the previous 5 years.
PTC is a closely loss making firm, making a internet lack of $127m in Q122, and losses of $438m and $524m in 2020 and 2021, respectively. The corporate does have a robust money place of $588m however the outlook doesn’t look promising after we take into account that income steerage for FY22 is for $700 – $750m, however GAAP R&D and SG&A bills are forecast to be $915 – $965m.
PTC is a 1,300-employee firm that is concerned within the advertising and marketing and promoting of 5 commercialized merchandise. Each Translarna and Emflaza – a formulation of Deflazacort, a glucocorticoid used as an anti-inflammatory and immunomodulatory agent – are accredited to deal with Duchenne Muscular Dystrophy, described by the Muscular Dystrophy Affiliation as:
a genetic dysfunction characterised by progressive muscle degeneration and weak spot because of the alterations of a protein known as dystrophin that helps maintain muscle cells intact. DMD symptom onset is in early childhood, often between ages 2 and three. The illness primarily impacts boys, however in uncommon circumstances it could have an effect on ladies. In Europe and North America, the prevalence of DMD is roughly six per 100,000 people.
Translarna is accredited in Europe, Brazil, and Russia, whereas Emflaza is accredited within the US. Translarna generated $79.2m of gross sales in Q122, whereas Emflaza generated $48.6m, that means these 2 medication account for ~88% of PTC’s Q122 revenues.
The rest of the corporate’s earnings got here from royalty revenues, paid by Swiss Pharma large Roche (OTCQX:RHHBY) on gross sales of Evrysdi – indicated for Spinal Muscular Atrophy (“SMA”), which is accredited in Europe and the US in sufferers over the age of two.
Lastly, PTC holds the rights to market and promote two medication developed by Ionis Prescribed drugs (IONS) – Tegsedi and Waylivra, accredited for hereditary transthyretin amyloidosis (“hATTR”) and familial chylomicronemia syndrome (“FCS”) in Latin America and the Caribbean. Each have been just lately accredited in Brazil the place PTC is now starting to make its first gross sales.
One necessary factor to notice from the corporate’s most up-to-date 10Q submission is that the advertising and marketing authorisation for Translarna within the EU is topic to annual overview and expires in August this yr.
As such, the examine outcomes printed this week will probably be submitted as a part of the brand new authorization software. Regardless of administration’s optimism and the rising share value, the missed major endpoint might be a difficulty, and if PTC loses the proper to promote Translarna within the EU, it appears set to lose a probable >$300m of income every year.
Wanting Forward – $8bn Business Gross sales By 2030?
PTC could also be closely loss making however administration has plans afoot to succeed in ~700k sufferers with a diversified portfolio of property by 2030, and generate ~$8bn in annual income, in response to a latest company presentation. Its ambition is to succeed in $3bn in annual income by 2026, with its pipeline property by then accounting for 57% of all income.
PTC does have 5 Registration directed trials ongoing – 4 for those who low cost STUDY041 – for Emvododostat in COVID-19, Vatiquinone in mitochondrial illness related seizures (“MDAS”), and Freidreich Ataxia, and PTC-923 in Phenylketonuria.
The Vatiquinone knowledge is anticipated later this yr in MDAS, and in mid-2023 in Freidreich Ataxia (“FA”), with the COVID and PKU knowledge anticipated this yr. these alternatives it is troublesome to get overly enthusiastic about PTC’s share value prospects, as though every of those illnesses has a excessive unmet want, market alternatives – exterior of COVID – appear prone to be within the low triple digit tens of millions, and that could be being beneficiant. And my feeling re COVID can be that chance could have handed PTC by.
The FA market, for instance, is independently estimated to be value $777m, and that could be on the beneficiant aspect. All of those uncommon illness markets are comparatively crowded with biotechs, too, so even when PTC is ready to safe approval – which is devilishly onerous in itself – the corporate would possible have to drive a >50% market share with a view to obtain its objectives.
Wanting Additional Forward – ALS, Gene Remedy, Oncology
If the close to time period uncommon illness alternatives are unlikely to unravel the issue of PTC’s mounting monetary losses and shrinking funds, then wanting on the earlier stage pipeline there are not less than some extra engaging alternatives in bigger markets.
There is a Part 2 trial in Amyotrophic Lateral Sclerosis (“ALS”) about to get underway, though it ought to be famous the biotech Amylyx (my observe right here) is on the NDA submission stage in ALS, with a shot at an approval in September. Huntington’s Illness is one other goal, due to a splicing know-how platform used to develop Evrysdi, which is used to degradation of HTT mRNA on this case, and a two-part early-stage trial is underway.
In oncology, the goal is Leiomyosarcoma (“LMS”) – a uncommon and aggressive most cancers with tumors present in clean muscle – with ~4k sufferers with the illness every year within the US. The drug candidate Unesbulin is now in a dose ascending trial, with further Development Free Survival (“PFS”) the goal.
Lastly, there is a gene remedy platform apparently in its infancy. The primary goal is AADC deficiency. CEO Peltz mentioned progress on the Q122 earnings name as follows:
we now anticipate a CHMP opinion in Might. If accredited, PTC-AADC would be the first marketed gene remedy administered on to the mind. We’re very proud to have gotten thus far within the European regulatory course of, and can now focus efforts on submission of the BLA.
Conclusion – Regardless of A Constructive Response To A Broadly Constructive Information Readout, It is Exhausting To Make The Worth Proposition
Primarily based on the above, I discover it powerful to make the bull case for PTC Therapeutics, as a lot as I hope the corporate succeeds in all of its uncommon illness fields.
It is troublesome to search out a lot supporting proof (for my part) for the income goal of $8bn by 2030, or certainly the $3bn income goal by 2026, as I’ve mentioned with a overview of the product portfolio and pipeline. Actually, though PTC arguably obtained the info readout it wanted from the Translarna trial, and its total income technology in Europe – greater than half of its present revenues – will disappear if the EMA rejects the advertising and marketing authorisation software for 2023.
Though it is spectacular to have late-stage alternatives in so many uncommon illnesses, the FDA rejected Translarna 3 times, so administration should enhance its observe report considerably if it is to get any of those alternatives over the road. Even when all 5 accredited, that $3bn income goal is definitely an impossibility primarily based on the respective market alternatives.
That leaves us with an early-stage pipeline that doesn’t sound sufficiently differentiated or with sufficient preclinical knowledge so as to add a lot worth to the corporate’s present market cap of $2.85bn, which appears very excessive for an organization that has misplaced practically $1bn in its final two full years of operation.
As such, I think this week’s share value good points could show to be chimeric, and since I am unable to see the justification for the multi-billion market cap which is sort of 5x ahead gross sales, fairly excessive even when PTC was worthwhile, which it is not and does not look prone to be except it slashes prices and begins to win approvals not solely in uncommon illnesses however in a number of different markets too.