PTC Therapeutics, Inc. (NASDAQ:PTCT) Q3 2023 Earnings Call Transcript

PTC Therapeutics, Inc. (NASDAQ:PTCT) Q3 2023 Earnings Call Transcript October 29, 2023

Operator: Thank you for standing by and welcome to the PTC Therapeutics Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s call is being recorded. I would now turn the conference call over to your host, Jane Hanlon, Associate Director of Investor Relations. Please go ahead.

Jane Hanlon: Good afternoon, and thank you for joining us today to discuss PTC Therapeutics’ third quarter 2023 corporate update and financial results. I’m joined today by our Chief Executive Officer, Dr. Matthew Klein; our Chief Business Officer, Eric Pauwels; Chief Commercial Officer, Kylie O’Keefe; and our Chief Financial Officer, Pierre Gravier. Today’s call will include forward-looking statements based on our current expectations. Please take a moment to review the slide posted on our Investor Relations website in conjunction with the call, which contains our forward-looking statements. Our actual results could materially differ from these forward-looking statements, as such statements are subject to risks that can materially and adversely affect our business and results of operations.

For a detailed description of applicable risks and uncertainties, we encourage you to review the company’s most recent quarterly report on 10-Q and annual report on Form 10-K filed with the Securities and Exchange Commission, as well as the company’s other SEC filings. We will disclose certain non-GAAP information during this call. Information regarding our use of GAAP to non-GAAP financial measures and a reconciliation of GAAP to non-GAAP are available in today’s earnings release. With that, let me pass the call over to our CEO, Matthew Klein. Matt?

Matthew Klein: Thank you, Jane. Good afternoon and thank you for joining the call. I’m pleased to share our third quarter results and outlook for the remainder of the year, including an update on our development programs. I will begin with the recent announcement of our agreement with Royalty Pharma to monetize up to $1.5 billion of the Evrysdi royalty stream. This non-dilutive financing provides PTC to capital to support planned operations and allowed us to retire the Blackstone debt obligation. In addition, the deal structure includes flexibility for accessing additional capital over the next two years. Notably, PTC maintains its right to the remaining $250 million of milestones related to Evrysdi global net sales. The royalty financing deal, along with the operating expense reductions announced in September, put PTC on very strong financial footing as we continue to focus our resources on our differentiated, high potential R&D program and robust global commercial infrastructure.

Now, I’ll turn to our third quarter results. We had another solid quarter with total revenue of $197 million, which keeps us on target for meeting our 2023 total revenue guidance of $940 million to $1 billion. Our DMD franchise revenue in the quarter totaled $136 million. This strong performance allows us to update our 2023 DMD revenue guidance to between $565 million and $595 million from between $545 million and $575 million. Eric and Kylie will provide additional details on our commercial performance shortly. I’d like to now provide an update on recent regulatory activities for several of our programs. Let me begin with an update on Translarna. Following the negative opinion from the CHMP on the conversion of the conditional marketing authorization to full marketing authorization and on the renewal of the conditional authorization, CHMP gave us the option to request reexamination of both opinions or only one opinion.

We decided to pursue reexamination of the negative opinion on renewal of the conditional authorization only. As such, the reexamination process will focus solely on the allowance of continued conditional authorization of Translarna in Europe. We remain optimistic that we can address key concerns raised by the CHMP on the evidence of benefit in the Translarna clinical trials as well as concerns raised on the methodological robustness of the STRIDE data analysis. As previously discussed, in accordance with EMA guidelines, we expect the opinion from the reexamination procedure in late January with adoption of that opinion by the European Commission 67 days later. The U.S. a Type C meeting with FDA to discuss the potential path to NDA resubmission is scheduled for this quarter.

Turning to sepiapterin. We held a pre-NDA meeting in the third quarter with FDA to discuss the NDA submission. At the meeting, FDA stated that the sepiapterin clinical safety and efficacy data supported NDA submission for the treatment of pediatric and adult PKU patients. However, they requested that we complete 26-week nonclinical mouse study to assess potential carcinogenicity risks of sepiapterin prior to submission. This nonclinical study was initially not required when sepiapterin was acquired from Censa as the NDA submission was planned under the Section 505(b)(2) pathway. With our decision to file under the 505(b)(1) pathway, the 26-week study is considered a required NDA component if needed to inform labeling. We will continue to discuss with FDA the potential to submit the mouse study results during the NDA review process.

We now expect NDA submission to occur no later than the third quarter of 2024. This mission could occur in the second quarter if FDA allows submission of the nonclinical study report during the review process. For the EU, we expect to submit a marketing authorization application to EMA in the first half of 2024. The delay in NDA submission in no way mitigates the strength of the APHENITY data. Given the highly meaningful clinical effects observed in the trial as well as the continued evidence of providing phenylalanine tolerance benefits to the full spectrum of PKU patients in a long-term open-label extension study. We remain incredibly enthusiastic about the potential billion-dollar-plus global commercial opportunity to sepiapterin. Moving to the PTC518 Huntington’s disease program.

Enrollment is ongoing in the PIVOT-HD study for both the stage 2 and early stage 2 cohorts. We expect the next data update to occur in the first half of 2024. This update will include 12-month data on the initial group of subjects on whom we reported data in June of this year. Regarding the status of the trial in the United States, we had a type A meeting with FDA to discuss the clinical safety data needed to enable resumption of enrollment of the PIVOT-HD trial at US study sites. At the meeting, FDA stated that the existing three months of safety data could support 12-week dosing at 5 milligrams and 10 milligram dose levels and had six months of clinical safety data demonstrating a similar favorable safety profile could support 12-month dosing in the PIVOT-HD trial.

This is very good news as it suggests that the safety data being generated from PIVOT-HD should be sufficient to lift the partial hold in the United States. Turning to the vatiquinone. The data in the MOVE-FA study demonstrated vatiquinone treatment benefit across several disease endpoints, including favorable effects on the up-price stability subscale of the mFARS assessment, which is predictive of time to loss of ambulation. We had a Type C written response-only meeting with FDA in the third quarter to determine whether the data from MOVE-FA would be sufficient to support an NDA for accelerated approval. In the written response, the FDA stated that they — while they see the value of upright stability as a clinically meaningful endpoint, they believe the confirmatory study would likely be needed to support NDA submission.

As this was a written response only and we believe we can address the concerns raised by the FDA, we have requested a follow-up live meeting. In parallel, we are participating in a scientific advice procedure with the EMA to determine if the MOVE-FA data could support a conditional marketing authorization application in the EU. We expect to have the outcome of this procedure in the first quarter of 2024. Turning to Upstaza. We had an informal meeting with FDA in the third quarter, at which time they said that the data we have provided to support comparability between the clinical drug products and the intended commercial drug product were still not sufficient. However, in that meeting, the FDA says that the available data from the clinical study in the United States, assessing the safety of the drug delivery cannula could be used to support a BLA for accelerated approval based on biomarker data demonstrating a treatment-related increase in de novo dopamine production.

FDA suggested that we conduct a pre-BLA meeting to review the content of the planned BLA. This meeting has been scheduled for December and pending the outcome we expect to submit the BLA shortly thereafter. Let me conclude by saying I’m incredibly proud of our team’s continued ability to execute on all fronts. The recent Royalty Pharma financing deal, along with our operating expense reductions, position PTC as strongly as possible for future growth as we realize the potential of our many promising programs. I will now turn the call over to Eric and Kylie to discuss our strong commercial performance in the quarter. Eric?

Eric Pauwels: Thanks Matt. We are proud of the accomplishments of our global customer-facing team, which continues to deliver revenue growth and build on our success as we focus on a strong close to the year for our commercial portfolio of products. Once again, our global DMD franchise delivered a strong quarter with continued growth from new patient starts, high compliance, low discontinuation, dose adjustments and geographic expansion. Let me focus on our two key products in the DMD franchise. Translarna and Emflaza continues to be important growth drivers, delivering $136 million in net revenue for the third quarter, which is 4% compared — growth compared to the third quarter of 2022. With strong year-to-date performance, we are raising our DMD revenue guidance from $545 million to $575 million to $565 million to $595 million.

For Translarna, we achieved $69 million in quarterly revenue. Year-to-date sales were $281 million. The team has worked tirelessly to continue to bring this important treatment to existing as well as new patients in our markets around the world. The recently concluded World Muscle Society meeting was an opportunity to present and discuss with healthcare providers the totality of data and real-world evidence supporting the efficacy of Translarna and reemphasizing the significant life-changing impact this treatment had on young boys suffering from this devastating disease for whom Translarna is their only therapy that specifically targets nonsense mutation DMD. Our customer-facing teams have increased communications with healthcare providers in Europe, providing medical information on Translarna and its continued availability for all new and existing patients.

Now turning to Emflaza. The Emflaza business continues to be solid. Quarterly net revenues was $67 million, which is 23% growth over the prior year quarter. We have had $188 million in year-to-date sales. We continue to see strong trends in the new patient start forms and high compliance. The continued Emflaza growth is impressive and highlights the brand loyalty in the DMD community in the United States as our team is actively implementing plans to defend and protect the Emflaza brand ahead of loss of exclusivity next year. Now, I will ask Kylie to update the progress of our current and future new product launches. Kylie?

Kylie O’Keefe: Thanks Eric. Let me begin with Upstaza, the first and only approved gene therapy infused directly into the brand. We continue to see transformative results for the patients we have treated thus far. Our rollout across Europe is progressing well with our first patient treated in the U.K. this quarter following the positive NICE recommendation earlier in the year. Patient identification, treatment and readiness and access and reimbursement discussions continue to advance. We also continue to leverage early access programs and cross-border treatment opportunities with the patient from the Middle East also receiving treatment in France this quarter. Moving to Tegsedi and Waylivra in Latin America. We continue to grow our franchise in the region with recent MAA approvals for Tegsedi in Argentina and Waylivra in Mexico.

Patient identification is robust and patient on treatment continue to grow across the region. In Brazil, we anticipate receiving new group purchase orders for both Tegsedi and Waylivra before the end of this year, which is in recognition of the increased number of patients who rely on these life-changing treatments. Lastly, as Matt mentioned, we are extremely excited about the sepiapterin opportunity. The APHENITY Phase 3 data and the long-term extension study preliminary data were presented at the recent SSIEM Congress and were very well received by physicians and the PKU community. They are excited about the opportunity to bring a differentiated therapy to PKU patients in need. With strong differentiation from the mechanism of action and the APHENITY results, coupled with our global commercial infrastructure and proven track record in commercializing rare diseases, the team is actively working on launch activities to ensure a fast uptake upon approval.

The potential market opportunity for sepiapterin is composed of a number of key PKU patient segments, all of which our APHENITY data suggest we can address. First, patients who have not been trialed on Kuvan or are considered therapy-naive. This includes many of the classical PKU patients, where we have demonstrated benefit in both the Phase 2 study and the APHENITY study. Second, patients who have not responded to Kuvan. Third, patients who have achieved some level of blood Phe reduction from Kuvan, but are not well controlled and for whom sepiapterin may deliver a better reduction in blood Phe levels. For these patients, a reduction in blood Phe to target Phe levels is clinically meaningful, potentially allowing them to substantially increase their protein intake and significantly enhance their quality of life.

Many experts who have treated patients with PKU across the world have indicated that based on the data they have seen from our APHENITY study and from their understanding of the mechanistic benefits of sepiapterin, all interested patients should be trialed in sepiapterin. With an expected addressable population of approximately 15% to 30% of the overall global PKU population, this would put us above $1 billion market opportunity. In conclusion, our third quarter builds on an excellent first half of 2023, with significant progress across all of our commercial products and across all geographies. Our customer-facing team is set to have a very strong close for the year and set ourselves up for continued success in the future by continuing to build on our commercial capabilities and to execute prelaunch strategy for our future product pipeline.

Now let me turn the call over to Pierre for a financial update. Pierre?

Pierre Gravier: Thank you, Kylie. I would like to begin by discussing the financing with Royalty Pharma that we announced last week. That deal, together with the pipeline reprioritizations and OpEx reductions that we announced in May and September puts PTC in a very strong financial position. We are pleased to work again with Royalty Pharma on this win-win transaction. The non-dilutive financing provides PTC with the capital to support operations and allow for increased operational and financial flexibility by removing the Blackstone debt obligation from our balance sheet. In addition, the deal structure provides the potential for additional non-diluted capital over the next two years. To recap the details of the deal, PTC monetize up to $1.5 billion of the Evrysdi royalty stream.

Royalty Pharma acquired additional works on equity for $1 billion upfront. The agreement included options for PTC to sell up to an additional $500 million or for Royalty Pharma to acquire half of such retained royalties for up to $250 million at a later date, less royalties received by PTC. PTC maintains all economics associated with up to $250 million in the remaining commercial sales milestone associated with every global net sales. The agreement builds on the previous strategic partnership establishes Royalty Pharma in 2020. The initial agreement was for the monetization of approximately 43% of the Evrysdi royalty stream. As a result of the current agreement, PTC will maintain ownership of approximately 19% of the total Evrysdi royalty stream, pending any exercise of future options by PTC or Royalty Pharma or the achievements of the cap from the 2020 royalty agreement.

I’ll now share the financial highlights of our third quarter 2023. Please refer to the third quarter earnings press release issued this afternoon for additional details. Beginning with top line results. Total revenue for third quarter was $197 million. This consisted of DMD franchise revenue of $136 million and other revenue of $61 million. Starting with the DMD franchise. Translarna net product revenue in the quarter was $69 million, while Emflaza net product revenue of $67 million. Moving to Evrysdi. Third quarter global revenue of CHF 360 million, which equals to over USD 400 million was achieved by Roche, earning royalty revenue of $50 million for PTC. As Matt mentioned, the third quarter performance puts us in a strong position to achieve 2023 total revenue guidance of $940 million to $1 billion, including an expected $100 million milestones whenever surpasses $1.5 billion in annual net sales.

Non-GAAP R&D expenses were $150 million for the third quarter of 2023, excluding $14 million in non-cash stock-based compensation expense compared to $150 million for the third quarter of 2022, excluding $15 million in non-cash stock-based compensation expense. Non-GAAP SG&A expenses were $68 million for the third quarter of 2023, excluding $13 million in non-cash stock-based comp expense compared to $67 million for the third quarter of 2022, excluding $14 million in non-cash stock-based compensation expense. Cash, cash equivalents and marketable securities totaled approximately $295 million as of September 30, 2023, compared to $411 million as of December 31, 2022. I will now turn the call over to the operator for Q&A. Operator?

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Eric Joseph of J.P. Morgan. Your line is open.

Eric Joseph: Hi. Good afternoon. Thanks for taking the question. Just a couple on PKU from us. Really, just around this regulatory path here. I guess, can you just clarify when the decision was made to pursue a 505(b)(1) path for sepiapterin over a 505(b)(2) and maybe what cross that decision? And then I guess, electing to go with the 505(b)(1), was it not clear that carcinogenicity study would be needed, would likely be a requirement? And really, ultimately, I guess, just looking forward, what should give investors confidence that assuming that the carcinogenicity study turns up nothing that the NDA submission and review cycle should otherwise be straightforward. Thank you.

Matthew Klein: Thanks for the questions, Eric. So let me just first start with a little bit about 505(b)(1) versus 505(b)(2). The 505(b)(2) pathway is typically used for Me2 compounds where there’s already been — and then there’s an existing approval for the active ingredient in the compound for which one seeks approval. Alternately, the 505(b)(1) pathway is for innovative therapies, which is much more appropriate for something on sepiapterin, which while its active ingredient is BH4, which is basically the active component of Kuvan, it has many factors that make it differentiated, which underlies the superior efficacy we’ve observed to date and why this is such a promising therapy. Since initially was in thinking about the 505(b)(2) pathway, that’s where things were lined up, but we acquired it and after we did our own analysis and understanding of the relative benefits of each pathway, it became clear that the 505(b)(1) was much more appropriate.

Now with the 505(b)(2) pathway since here, it is an active ingredient already approved, you can utilize the study not safety and efficacy studies, but other supportive studies like nonclinical studies that were used to support that approval. With the 505(b)(1) pathway, you don’t have the ability to rely on those existing studies. Now the decision to switch is based on a couple of things. One, Stepan is quite differentiated in terms of its efficacy profile from Kuvan. Second, if you go 505(b)(2) pathway, the companies product, the company whose products you refer to, to utilize their studies can actually block you from launching the therapy for up to 30 months if they still have an orange for listed at. So obviously, we did not want to be in a situation where we would risk the launch of the compound.

And then again, this really is a novel, innovative compound much more suited to the 505(b)(1) pathway. We then obviously had interactions with the agency to understand what would be required under the 505(b)(1) pathway. And that included things like juvenile toxicity and REPROTOX, all of which studies will be conducted, including the NDA, no issues there. And then for carcinogenicity, what’s typically required is that you submit to the agency a weight of evidence request to request a waiver for carcinogenicity. Now, obviously, we were quite confident in getting that waiver. One, there’s no evidence of genotoxicity in sepiapterin. In the sepiapterin non-clinical studies, the six-month and nine-month studies, there was no evidence of sepiapterin-related carcinogenicity, preneoplastic lesions and neoplastic lesions.

Furthermore, while we weren’t referring to the Kuvan NDA, the clinical experience with Kuvan over many years clearly demonstrates that there’s no carcinogenicity risk associated with BH4. So we submitted all of that to the agency. Now the agency obviously came back and said that there’s two different carcinogenicity studies. One is a two-year rat study. They said, fine, do that post-approval, no problem. But since you’re in the 505(b)(1) pathway, they would want the 26-week mouse study to inform the label, because in the label, they have to say whether or not there’s a potential carcinogenicity risk. And while we were under 505(b)(2) pathway, they could use the labeling in the Kuvan label, which referred to a risk of adrenal tumors, which has never been seen clinically.

But they said, look, we have nothing to refer to. We have nothing to inform the label. So we need you to do this study. And since it’s a standard part, it would be considered a standard part of the 505(b)(1) pathway, it’d be something you would need to submit with the NDA. Now, I’ll also say — and address the other part of your question, in our discussions, they were — it was clearly stated that the safety and efficacy data we have with sepiapterin could support the full spectrum of patients, which would be our desired label. So we fully expect that once we get the study results, if it’s required to have the study report for the mouse study for submission, once we have that, we expect a very smooth path from there. Again, given the incredible strength of the efficacy data we have, the safety data we have, and obviously, while far from ideal.

The additional time we’re going to have now is only going to build that dossier further with greater length of exposure, greater ability to show more durability and effect, the kinds of things we’re seeing in a long-term open label study. And obviously, we’re going to have even more data showing C-tolerance. We recently reported the latest update in the C-tolerance data. Yes, I am meeting in September, again, showing that patients are able to tolerate beyond the recommended daily allowance of protein and still have control of fetality. So the strength of this data remains. It is in no way impacted by the need to do this non-clinical study. It is an unfortunate delay. We’re going to continue discussions with the agency if we could submit the application sooner.

But the bottom line is, this is a strong differentiator compound. The data we have to-date, the studies we’ve done, show there’s been no evidence of carcinogenicity risk. According to the study reports, we have genotoxicity and the like. And again, this continues to be a very — this will be a very strong package.

Operator: Our next question comes from the line of Kristen Kluska of Cantor Fitzgerald. Kristen Kluska, your line is open.

Kristen Kluska: Hi, everyone. First, just wanted to congratulate you on the Royalty Pharma deal. And I had a question about Translarna. Can you talk about why you’re only pursuing reexamination of the conditional authorization? I guess, what advantages do you see going this way versus both? And assuming that you do get the green light, how are things going to be moving forward? Will it be kind of similar, like what we’ve seen over the last eight years when they’ve given you the green light, or will you be required to conduct any type of work in the background? Thank you.