PTC Therapeutics: Overdependence On One Asset, Poor Cash Management (NASDAQ:PTCT)

PTC Therapeutics (NASDAQ:PTCT) is a mid-sized rare disease player with 6 approved products and a number of registrational trials ongoing. The company has been around since 1998, and their goal has been to bring a new product to the market every 2-3 years. Their platform is based on four technologies – nonsense suppression, splicing, Bio-E, and gene therapy.

Nonsense suppression in PTC is where a small molecule inserts an amino acid at the single point nonsense codon, helping the ribosome bypass this dysfunctional early stop codon. This produces functional copies of the intended protein. This technology has been used to develop Translarna (ataluren) for the treatment of nonsense mutation genetic disorders, including Duchenne muscular dystrophy.

A small molecule splicing modifier like PTCT’s risdiplam (Evrysdi) can bind strongly to the splicing site and strengthen the functioning of the spliceosome. This enables the formation of the correct protein by removal of the correct intron – splicing – and joining the correct exons together. Risdiplam is approved for the treatment of spinal muscular atrophy, which can produce a stable, functional SMN protein by modifying the splicing process. The company’s next splicing modifier molecule is PTC518, “which is being developed for the treatment of Huntington’s disease. This rare disease is caused by a defective gene which produces a mutated protein called HTT. PTC518 caused splicing of an imperfect exon called a pseudoexon becoming part of the mRNA which contains a premature stop codon, that prevents the production of the full length HTT protein and caused rapid degradation of the HTT mRNA. PTC518 has demonstrated a dose dependent reduction in HTT mRNA and protein.”

Bio-E targets mitochondrial pathways to treat CNS diseases and cancer. The platform targets a family of enzymes critical to the mitochondrial energy production system, and are key to disease pathology in a number of diseases. PTCT has two Bio-E molecules, vatiquinone (formerly PTC743) and utreloxastat (formerly PTC857). Vatiquinone has two registration-directed trials ongoing, a phase ⅔ trial in refractory mitochondrial epilepsy and a Phase 3 trial in Friedreich ataxia. Utreloxastat has a trial in amyotrophic lateral sclerosis (ALS).

The gene therapy approach introduces a corrective therapeutic DNA into the patient’s cells using a vector. This DNA helps produce a functional protein in the correct volume, thereby removing a pathological condition created by mutations.

The company’s products are 6 – EMFLAZA (deflazacort), EVRYSDI (risdiplam), TEGSEDI (inotersen), TRANSLARNA (ataluren), UPSTAZA (eladocagene exuparvovec) and WAYLIVRA (volanesorsen). EMFLAZA, EVRYSDI AND TEGSEDI are approved in the US. TRANSLARNA, UPSTAZA and WAYLIVRA are approved in the EU and elsewhere, but not in the US. EMFLAZA is approved for DMD in patients two years or older. EVRYSDI is approved to treat SMA in patients two months or older. TEGSEDI is approved in the USA for the treatment of polyneuropathy of hereditary transthyretin-mediated amyloidosis (hATTR) in adults. TRANSLARNA is approved in the EU for ambulatory patients aged 2 years and older with DMD resulting from a nonsense mutation in the dystrophin gene. UPSTAZA is approved in the EU for the treatment of aromatic L-amino acid decarboxylase (AADC) deficiency for patients 18 months and older. WAYLIVRA is approved in the European Union for the treatment of familial chylomicronemia syndrome (FCS). PTC has commercial rights to WAYLIVRA.

Together, these products pulled in $710mn in unaudited revenue in 2022. Of this, $507mn was from the DMD franchise. 2023 revenue guidance is $940mn-$1bn, of which $545mn-$565mn is from the DMD franchise, and $940mn is the OpEx guidance. This does not present as pretty a picture as the science talk did. That the bulk of the revenue has been put in the DMD basket is dangerous, and the very high OpEx is a matter of concern as well.

Lead indication is Sepiapterin targeting Phenylketonuria (PKU). Current treatment is using Kuvan, or Sapropterin. There is a phase 1 trial in healthy volunteers which has available data. This data has shown higher bioavailability of Sepiapterin over Sapropterin. According to the company, a majority of patients do not respond well to Sapropterin. Only 10% PKU patients are well-controlled by Sapropterin. APHENITY is a global registration-directed trial whose primary endpoint is reduction in blood phenylalanine levels. Control is placebo, not Sapropterin, which is the standard of care. Part 1 data, which is open label, shows strong improvements in a crucial biomarker. APHENITY will readout in Q1 2023.

A second candidate is Vatiquinone in a phase 2/3 trial targeting Mitochondrial Disease in Participants With Refractory Epilepsy (MIT-E). The primary endpoint of this 60-subject placebo controlled randomized trial is “Percent Change From Baseline to Week 24 in the Number of Observable Motor Seizures per 28 Days.” Mitochondrial disease associated seizures (MDAS) is a condition of refractory seizures in patients with inherited mitochondrial disease. There are 20,000 global patients (prevalence) with no approved treatment. Enrollment has been completed, and there is planned data readout by the end of Q1. This molecule, when it was known as EPI-743, did a phase 1 trial and multiple phase 2 trials in related mitochondrial diseases, but there are not trials matching the seizure indication.

A second indication for this molecule, Friedreich ataxia (FA), has a Q2 readout of a registration-directed phase 2 trial in Q2. This is a 146 patient randomized trial, and the primary endpoint is “Change From Baseline in the Modified Friedreich Ataxia Rating Scale (mFARS) Score at Week 72.” An earlier trial, with readout in 2018, showed:

There were no significant improvements in key end points during the placebo phase. However, at 24 months, EPI-743 treatment was associated with a statistically significant improvement in neurological function and disease progression relative to a natural history cohort (p < 0.001).

Thus, this wasn’t an entirely satisfactory trial.

A third trial, for PTC518 in phase 2 in Huntington’s Disease, was paused in the US last year because the FDA asked for some data. The company was quick to point out that this was not a clinical hold, however, as of the last update in October earnings call, there is no lifting of the trial pause. They will release ex-US data in 1H 2023.

Financials

PTCT has a market cap of $3.38bn and a cash reserve as follows:

Cash, cash equivalents and marketable securities totaled approximately $288 million as of September 30, 2022 compared to $773 million as of December 31, 2021. We’re happy to report our recent financing increases at cash balance to approximately $635 million on a pro forma basis.

They also received a “strategic financing” of up to $1bn from Blackstone Life Sciences. About this:

The financing consists of $350 million upfront. This includes $300 million in senior secured debt at 7.25 plus SOFR with a seven year bullet term and an additional $50 million of equity. Additionally, the term loan includes another $150 million in delayed draw debt that can be accessed in the first 18 months after close. Lastly, the total financing includes a potential $500 million credit line from mutually agreed upon business development opportunities. Importantly, the term loan investment by Blackstone will be secured by a limited assets collateral bucket, including and limited to Translarna, Emflaza, Upstaza, Sepiapterin and Vatiquinone.

Third quarter total revenue was $217mn. Non-GAAP R&D expenses were $150 million for the third quarter of 2022, while Non-GAAP SG&A expenses were $67 million. At that rate, the company would be starving for cash in about a quarter and a half (which would be now) except for the financing they have received in exchange for what they call a “collateral bucket” which basically consists of their entire high level portfolio, both approved and pipeline.

Bottomline

It is difficult to pinpoint the exact problem; however, the cash situation and the DMD overdependence, coupled with a relatively high valuation, does not make PTCT attractive to me.