PTC Therapeutics(US:PTCT)2023-02-21 21:50Part I Business PTC Therapeutics is a global biopharmaceutical company focused on rare disorders, with a commercial portfolio led by its DMD franchise and a diversified pipeline across multiple therapeutic platforms - The company's strategy focuses on leveraging its scientific expertise and global commercial infrastructure to discover, develop, and commercialize treatments for rare diseases with high unmet medical needs31 Key Commercial Products Overview | Product | Indication | 2022 Net Sales/Revenue | Key Markets/Status | | :--- | :--- | :--- | :--- | | Translarna™ | nonsense mutation DMD (nmDMD) | $288.6 million | Approved in EEA, Russia, Brazil. Investigational in the U.S. | | Emflaza® | Duchenne muscular dystrophy (DMD) | $218.3 million | Approved in the U.S. | | Upstaza™ | AADC deficiency | Revenue recognition started in 2022 | Approved in EEA & UK. BLA submission to FDA planned for H1 2023. | | Evrysdi® | Spinal Muscular Atrophy (SMA) | Royalty-generating | Marketed by Roche; PTC receives tiered royalties. | - PTC maintains a diversified development pipeline across multiple technology platforms: - Splicing Platform: Includes PTC518 for Huntington's disease (Phase 2 data expected Q2 2023) - Bio-e Platform: Vatiquinone for mitochondrial disease and Friedreich ataxia (Phase 2/3 results expected Q2 2023) - Metabolic Platform: Sepiapterin for PKU (Phase 3 results expected May 2023) - Gene Therapy Platform: Includes assets for Friedreich ataxia and Angelman syndrome - Oncology Platform: Unesbulin for leiomyosarcoma (Phase 2/3 ongoing)3637 Global Commercial Footprint PTC's commercial portfolio is anchored by its Global DMD Franchise, complemented by the newly launched Upstaza, Latin American rights, and Evrysdi royalties - Translarna's marketing authorization in the EEA is conditional, subject to annual renewal and the submission of results from Study 041. A Type II variation to convert to standard marketing authorization was submitted in September 2022, with a CHMP opinion expected in H1 20234244 - Upstaza™, a gene therapy for AADC deficiency, was approved by the European Commission in July 2022 and in the UK in November 2022. The company plans to submit a Biologics License Application (BLA) to the U.S. FDA in the first half of 20235468 - PTC began commercial sales of Tegsedi® for hATTR amyloidosis and Waylivra® for FCS in Brazil in 2022, leveraging its commercialization rights in Latin America and the Caribbean7378 - Evrysdi® for SMA, developed in collaboration with Roche, is a key revenue driver through royalties. It has received broad approval, including a label expansion in the U.S. for infants under two months old in May 202281 Diversified Development Pipeline PTC's diversified pipeline features multiple late-stage clinical programs across five platforms, with key data readouts anticipated in 2023 - The Splicing Platform's lead candidate, PTC518 for Huntington's disease, is in a Phase 2 study. Data from the initial 12-week phase is expected in Q2 2023. U.S. enrollment is currently paused pending additional data requested by the FDA87 - The Bio-e Platform has two registration-directed trials for vatiquinone, with results for both mitochondrial disease associated seizures (MIT-E trial) and Friedreich ataxia (MOVE-FA trial) anticipated in Q2 20239394 - The Metabolic Platform's lead asset, sepiapterin, is in a Phase 3 trial for PKU. Results from Part 2 of the trial are now expected in May 2023 due to over-enrollment98 - The Oncology Platform is advancing unesbulin, with a registration-directed Phase 2/3 trial for leiomyosarcoma (LMS) ongoing and a similar trial for diffuse intrinsic pontine glioma (DIPG) expected to initiate in Q4 2023100101 Collaborations, Acquisitions, and Intellectual Property PTC leverages strategic collaborations, manages significant contingent payment obligations from acquisitions, and maintains a patent portfolio with key expirations in 2024 and beyond - The collaboration with Roche for the SMA program entitles PTC to tiered royalties (8-16%) on worldwide net sales of Evrysdi and potential sales milestones up to $250.0 million. In July 2020, PTC sold 42.933% of its royalty rights to Royalty Pharma for $650.0 million173174175 - The company has significant ongoing contingent payment obligations from past acquisitions, including up to $311.0 million in regulatory milestones for the Agilis acquisition and up to $217.5 million in development/regulatory milestones for the Censa acquisition216222 - As of January 31, 2023, PTC's patent portfolio included 143 active U.S. patents. Key patents for ataluren (Translarna) expire in 2024 (composition of matter) and 2026-2027 (methods of use). For Emflaza, the company relies on Orphan Drug Act exclusivity, which expires in February 2024 for patients 5+ and June 2026 for patients 2-5224227608 Manufacturing, Commercial Matters, and Competition PTC relies on third-party manufacturing, manages global commercial sales subject to distributor concentration and country-specific pricing, and faces significant competition across its product portfolio - The company relies on third parties for manufacturing, packaging, and distribution of its products. It has a single source for some raw materials and for Emflaza drug substance, creating potential supply chain risks236237241 - PTC operates a biologics manufacturing facility in Hopewell, NJ, to produce clinical materials for some gene therapy candidates and to provide manufacturing services for external customers249250 - In 2022, two distributors each accounted for over 10% of net product sales. Revenue from certain countries, like Brazil and Russia, is subject to fluctuations due to centralized group purchasing orders for multiple months of therapy256258 - The company faces significant competition for its DMD franchise from Sarepta's approved exon-skipping therapies and multiple gene therapies in development from Pfizer, Solid Biosciences, and Sarepta277508 Government Regulation PTC operates under extensive global regulatory oversight, utilizing expedited pathways like Orphan Drug Designation, and faces significant pricing and reimbursement challenges, including the impact of the Inflation Reduction Act - The FDA and EMA provide several expedited review programs for serious conditions, including Fast Track, Priority Review, and Accelerated Approval. PTC has utilized these pathways for its rare disease portfolio299300301 - The company has received Orphan Drug Designation for multiple products, including Translarna, Emflaza, and Upstaza. This provides market exclusivity for seven years in the U.S. and ten years in the EU, which is critical for products with limited or no patent protection like Emflaza334358 - In the EU, Translarna has a conditional marketing authorization, which requires annual renewal based on a reassessment of the benefit-risk balance by the EMA368 - The company is subject to complex pharmaceutical pricing and reimbursement regulations globally. In the U.S., this includes Medicaid Drug Rebate Program, 340B pricing, and new price negotiation provisions under the Inflation Reduction Act of 2022 (IRA). In the EU, pricing is subject to governmental control on a country-by-country basis390391645 Risk Factors PTC faces significant risks in product commercialization, pipeline development, financial sustainability, regulatory approvals, and intellectual property protection, including conditional authorizations and intense competition - Commercialization & Regulatory Risk: A primary risk is the potential failure to renew the annual conditional marketing authorization for Translarna in the EEA, which is contingent on the EMA's reassessment of its benefit-risk profile and the results of Study 041. Loss of this authorization would materially harm revenue477479480 - Financial Risk: The company has a history of significant operating losses ($2.66 billion accumulated deficit as of Dec 31, 2022) and expects to continue incurring substantial expenses. Future profitability is not guaranteed and depends on successful commercialization and pipeline advancement539 - Pipeline Development Risk: There is a substantial risk of delays or failures in clinical trials and in obtaining regulatory approvals for product candidates. The FDA has previously disagreed with the company's interpretation of Translarna data, and securing approval for new candidates like Upstaza involves significant uncertainty436439442 - Competition & Market Access Risk: The company faces intense competition from larger pharmaceutical companies with greater resources. Furthermore, its products are subject to unfavorable pricing regulations, third-party reimbursement challenges, and healthcare reform initiatives like the Inflation Reduction Act, which could limit profitability506518 Properties PTC Therapeutics primarily leases its operational facilities, including principal research and office spaces in South Plainfield, NJ, and other significant sites in New Jersey and internationally - The company's key properties are leased, not owned. Major facilities include: - South Plainfield, NJ: ~126,000 sq. ft. (Principal research/office) - Bridgewater, NJ: ~103,000 sq. ft. (Lab/office) - Hopewell, NJ: ~220,500 sq. ft. (Office/manufacturing/lab) - Warren, NJ: ~360,000 sq. ft. (Shell condition space for future development)773 Legal Proceedings The company is not currently aware of any material legal proceedings against it or its property - As of the filing date, there are no material legal proceedings against the company774 Part II Management's Discussion and Analysis of Financial Condition and Results of Operations PTC Therapeutics reported significant revenue growth in FY2022 driven by product and royalty sales, but increased operating expenses led to a wider net loss, with current liquidity deemed sufficient for the next 12 months Financial Performance Summary (2022 vs. 2021) | Metric | FY 2022 | FY 2021 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $698.8M | $538.6M | +$160.2M | +29.7% | | Net Product Revenue | $535.2M | $428.9M | +$106.3M | +24.8% | | Royalty Revenue | $113.5M | $54.6M | +$58.9M | +107.9% | | Total Operating Expenses | $1,146.2M | $913.0M | +$233.2M | +25.5% | | R&D Expense | $651.5M | $540.7M | +$110.8M | +20.5% | | SG&A Expense | $326.0M | $285.8M | +$40.2M | +14.1% | | Net Loss | ($559.0M) | ($523.9M) | -$35.1M | +6.7% | - The 25% increase in net product revenue was driven by a 22% rise in Translarna sales ($288.6 million) due to geographic expansion and a 17% increase in Emflaza sales ($218.3 million) from new patient prescriptions and high compliance856 - Research and development expenses increased by $110.8 million (20%) in 2022, primarily due to increased investment in research programs and the advancement of the clinical pipeline across multiple platforms863 - As of December 31, 2022, the company had $410.7 million in cash, cash equivalents, and marketable securities. Management believes this is sufficient to fund operations and capital expenditures for at least the next 12 months908915 Quantitative and Qualitative Disclosures about Market Risk PTC is exposed to market risks from interest rate fluctuations on its investments and foreign currency exchange rates from international operations, but does not currently use hedging instruments - The primary market risk is interest rate sensitivity on its $410.7 million portfolio of cash, cash equivalents, and short-term investments. A hypothetical 10% increase in interest rates is not expected to have a significant impact on the fair value of these securities936937 - The company has exposure to foreign currency fluctuations (British Pound, Euro, Brazilian Real, Swiss Franc, Russian Ruble) from its international operations. For FY 2022, it recognized net realized foreign currency transaction losses of $19.6 million939 - The company does not currently engage in hedging activities for interest rate or foreign currency risks but will evaluate the use of derivatives as needed938939 Financial Statements and Supplementary Data The 2022 consolidated financial statements show total assets of $1.71 billion, a stockholders' deficit of $347.1 million, a net loss of $559.0 million, and an unqualified audit opinion Consolidated Balance Sheet Highlights (as of Dec 31, 2022) | Account | Amount (in thousands) | | :--- | :--- | | Assets | | | Cash, cash equivalents, and marketable securities | $410,705 | | Total Current Assets | $693,785 | | Intangible assets, net | $705,891 | | Total Assets | $1,705,619 | | Liabilities & Equity | | | Total Current Liabilities | $406,236 | | Long-term debt | $571,722 | | Liability for sale of future royalties | $757,886 | | Total Liabilities | $2,052,705 | | Total Stockholders' (Deficit) | ($347,086) | Consolidated Statement of Operations (Year Ended Dec 31, 2022) | Line Item | Amount (in thousands) | | :--- | :--- | | Total Revenues | $698,801 | | Total Operating Expenses | $1,146,210 | | Loss from Operations | ($447,409) | | Net Loss | ($559,017) | | Net Loss Per Share | ($7.79) | Consolidated Statement of Cash Flows (Year Ended Dec 31, 2022) | Cash Flow Activity | Amount (in thousands) | | :--- | :--- | | Net cash used in operating activities | ($356,654) | | Net cash provided by investing activities | $290,181 | | Net cash provided by financing activities | $167,952 | | Net increase in cash and cash equivalents | $98,707 | Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with an unqualified audit opinion from Ernst & Young LLP - Management, including the CEO and CFO, evaluated and concluded that the company's disclosure controls and procedures were effective as of December 31, 20221252 - Based on the COSO 2013 framework, management assessed and concluded that the company's internal control over financial reporting was effective as of December 31, 20221255 - Ernst & Young LLP, the independent auditor, provided an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 202212571260 Part III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees Information for Items 10-14, covering directors, executive compensation, and related matters, is incorporated by reference from the 2023 Proxy Statement - The information for Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees and Services (Item 14) is incorporated by reference from the registrant's 2023 Proxy Statement12721274127512761277 Part IV Exhibits and Financial Statement Schedules This section lists financial statements from Item 8 and provides a comprehensive index of all exhibits filed with the Form 10-K, including key agreements and certifications - This item references the financial statements contained in Item 8 and provides a comprehensive Exhibit Index listing all required filings under Item 601 of Regulation S-K12791280