PTC Therapeutics Inc (PTCT) 2013 Q2 法說會逐字稿

Thank you for holding for PTC's second-quarter 2013 conference call. At this time all participants are in a listen-only mode. Following the formal remarks PTC management will open the lines for a question-and-answer period. Please be advised that this call is being taped at the Company's request and will be archived on the Company's website for two weeks from today. At this time, I would like to introduce Jane Baj from PTC.

Thank you, operator and good afternoon everyone. Thank you all for joining us for PTC's first investor conference call. With me here today are Dr. Stuart Peltz, Chief Executive Officer of PTC and Mr. Shane Kovacs, Chief Financial Officer. Dr. Jay Barth, Senior Vice President of Clinical Development will be joining us for the QA session of the call. Earlier today, we issued a press release detailing PTC's second-quarter 2013 results which is available on our website at www.ptcbio.com.

During today's call, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements about our future expectations, clinical development and regulatory timelines, the potential success of our product candidates and financial projections. Actual results may differ materially from those indicated by these statements, including those discussed in the final prospectus for our initial public offering which is on file with the SEC. Any forward-looking statements represent our views as of today only. We may update these statements in the future but we disclaim any obligation to do so. With that, let me pass the call over to Stuart.

Thanks, Jane, and good afternoon everyone. On behalf of all my colleagues at PTC, I'm delighted to welcome you to our first investor call. It's an exciting time for PTC. Since this is our first call, I wanted to give you a brief overview of PTC. We are focused on the discovery and development of orally bioavailable therapeutic for patients living with serious and life-threatening conditions. Our name, PTC, stands for post-transcriptional control, which are the processes that regulate the levels of protein production. As you know, the absence or overproduction of specific proteins can lead to disease.

At PTC we systematically target post- transcriptional control processes by combining our proprietary technology towards our extensive knowledge of this area of biology to bring an unexploited approach to drug discovery. While the therapeutic potential for our product candidates is broad, we are focused particularly on the development and commercialization of treatments for orphan and ultra-orphan disorders. One of our most advanced product candidates is ataluren, which is specific to patients with genetic disorders as a consequence of a genetic mutation known as a nonsense mutation. Ataluren is in late-stage clinical development for the treatment of nonsense mutation Duchenne muscular dystrophy or nmDMD, and nonsense mutation cystic fibrosis, or nmCF. Available treatments today do not address the underlying cause of the disease.

On the heels of two successful financings this year, PTC is well-positioned to continue advancing ataluren in nonsense mutation DMD and CF, as well as continuing to develop our pipeline. In March of this year we closed a $65 million private financing. In June we successfully completed a $144 million initial public offering. These two raises generated approximately $210 million in gross proceeds. We plan to invest the net proceeds in a number of key areas. Our primary focus is the late-stage clinical development of ataluren in nmDMD and CF. Additionally, we are investing in targeted pre-commercial market development activities for ataluren. We also have a significant focus in our R&D efforts. These are based on exploring the potential for ataluren and additional indications as well as other exciting pre-clinical programs.

Let's start with ataluren, which we developed internally. It's an orally administered compound for the treatment of patients with genetic disorders due to a nonsense mutation. We estimate that on average 11% of patients with any monogenetic disorder have a nonsense mutation as the cause of the disease. Nonsense mutations result in premature stop signals in the translation of messenger RNA, which prevents the production of full-length functional protein. We believe that ataluren binds to the machinery within the cell that produces the protein. It's called the ribosome and enables the cell to produce full-length functional protein by reading through the premature stop signal. Some of you may have seen the recent publication questioning ataluren's mechanism of action. I thought it would be good for me to comment on this.

Our experience during a decade-long study of the effects of nonsense mutations led to methodological design of a [heightened prescreen] to identify compounds that promote nonsense read-through. Our understanding of the complex post-transcriptional control processes informed our design and production of reporter genes that accurately reflect the events occurring in the natural messenger RNA. Compounds that demonstrated read-through activity in the reporter assay then went through a rigorous screening tier that included a number of cell and animal nonsense mutation-based disease models. Compounds that passed these screens were then also tested in human myotubes to ensure compounds effective in animals also had activity in humans. Over 3,500 compounds were synthesized and evaluated using this screening tier, and ataluren was ultimately chosen for development. Importantly, 11 independent studies have been published confirming that ataluren promotes read-through of premature translation codons in a number of different disease models. Taken together, these results show that ataluren can promote read-through in many disease models and has the potential to be an important therapy for a subset of patients with DMD, CF, and other genetic disorders for which a nonsense mutation is the cause of the disease.

Now I'd like to focus on DMD. We estimate that approximately 13% of the patients have DMD due to a nonsense mutation. The other 87% have DMD because of other types of mutations, such as deletions or duplications. Within DMD, PTC is the only company specifically targeting the nonsense mutations patient population, where there is a significant unmet medical need. In 2010 we completed a large Phase 2b study of ataluren in nonsense mutation DMD. This was the first placebo-controlled multinational study of a new chemical entity for DMD. In addition to a generally well-tolerated safety profile, data from the Phase 2b study indicated that treatment with ataluren stabilized or slowed the loss of walking ability as measured by the six-minute walk test.

PTC pioneered the development of the six-minute walk test in DMD working closely with Dr. Craig McDonald and other investigators, and demonstrated that the six-minute walk test was a reliable endpoint in this disorder. The natural history data from our Phase 2b study demonstrated that patients five to seven years of age tend to naturally increasing their six-minute walking distance. Their walking distance tends to stabilize at approximately seven years of age and then slowly gets worse until their baseline six-minute walk distance is 350 meters or below. Patients whose six-minute walk distance below 350 meters tend to show a rapid decline in ambulation. Understanding the natural history is important because it enables the prediction of which patients will decline within a given timeframe of a clinical study. This then can guide the inclusion criteria for a study to best demonstrate a clinical benefit.

Without having any natural history to guide us, our inclusion criteria in the Phase 2b study was not optimal. The patient population was quite heterogeneous, ranging in age from 5 to 20 years old. And the baseline six-minute walk distance ranged from 75 to 554 meters. Nonetheless, in our post hoc corrected ITT analysis, ataluren-treated patients demonstrated a clinically meaningful 31.3-meter difference in six-minute walk tests versus patients receiving placebo. However the variability was higher than expected which resulted in a P-value of 0.056.

Armed now with a better understanding of the natural history of the disease, we completed a retrospective subgroup analysis of the patients likely to be in the decline phase of the disease. That included patients older than seven and less than 80% predictive in walking, which enriched the number of patients with baseline six-minute walk distances less than 350 meters. In this subgroup, patients demonstrated an approximate 50-meter difference in change of six-minute walk distance from baseline of 48 weeks. The larger difference of six-minute walk distance in these patients is consistent with our understanding of the roll of distance in protein and the natural history of DMD as it relates to the six-minute walk test. This is the exact subgroup of patients that we are targeting our ongoing pre-clinical Phase 3 trial in nonsense mutation DMD.

Ataluren-treated patients also showed better outcomes than patients of placebo in the time function tests, in the accidental fall, in activity step monitoring, and in the amount of time they spent in the wheelchair. Each of these endpoints reflects clinical benefits for ataluren-treated patients in various functional measures and activities of daily living. Prolonging ambulatory function produces a myriad of benefits that are essential and important for boys living with DMD and reflects an overall improvement in muscle function. To put it in context, a child being able to walk further can mean the difference in walking to a school bus stop, getting to a bathroom unassisted, being able to interact with peers on the playground, and participating in school functions and field trips. It has been demonstrated that extending walking ability helps prevent scoliosis and improves lung function, delaying the need for ventilation so that the long-term benefit is significant.

Based on our findings from the Phase 2b study, we submitted a marketing application to the EMA for conditional approval of ataluren for nmDMD in October of 2012. We filed for a conditional approval because we believe that ataluren has helped nmDMD patients and we want to bring the drug to the patients and their families as rapidly as possible. But there is substantial risk that we will not receive additional approval, we believe that it is worth the effort for the patient and view it as a potential upside for investors. As part of the MAA process the EMA provided us with a Day 120 Questions in March of this year. We responded to those questions in July and we look forward to the EMA's decision, which we expect to receive by the end of the year.

As many of you know, we have an ongoing confirmatory Phase 3 clinical trial in nonsense mutation DMD, which we initiated this past Spring. The design of the trial reflects the knowledge gained from our earlier study as well as the views expressed in discussions with FDA, EMA, our investigators and key opinion leaders. We have adjusted our enrollment criteria in this study to enrich the patient population that are in the decline phase of walking ability, that is patients older than seven years of age with a baseline six-minute walk distance less than or equal to 80% predictive. This enriches for patients where they are likely to decline within 48 weeks. As in our previous study, it's a 48-week, multi-center, randomized, double-blind, placebo-controlled trial evaluating the efficacy and safety of ataluren. The primary objective of this trial is to confirm the effect of ataluren on ambulation. The primary endpoint is the change in walking distance as measured by the six-minute walk test. We plan to enroll approximately 220 patients and anticipate that the patient enrollment should be completed by mid-2014 and that the top-line data will be available in mid-2015.

In addition to the nonsense mutation DMD, we are also developing ataluren for nonsense mutation CF patients. Nonsense mutations account for proximally 10% of all CF patients and is the most severe form of the disease. Available treatments today do not address the underlying cause of the disease for nonsense mutations CF patients. Results from a completed Phase 3 clinical trial in nonsense mutations CF showed clinical evidence of activity with ataluren, and provides us with key insight to the design of an upcoming confirmatory trial. The previous Phase 3 trial was a multi-center, randomized, double-blind placebo-controlled trial assessing the effects of ataluren in 238 patients with nonsense mutation CF.

The primary objective of the trial was to evaluate the effect of ataluren on pulmonary function relative to placebo. The study compared patients over the course of 48 weeks and the results were expressed as percent predicted FEV1. The primary endpoints are the 3% difference between ataluren and placebo groups. In the large subgroup of patients not receiving chronic inhaled tobramycin, ataluren demonstrated a clinically meaningful benefit of nearly 6% difference between ataluren and placebo groups. Approximately 45% of the patient population were not using chronic inhaled antibiotics. And 63% were not receiving inhaled tobramycin. This is important because we're doing the this study and subsequent pre-clinical work show that tobramycin interferes with ataluren's mechanism of action, affecting the potential clinical benefits of this activity.

Pulmonary exacerbation rates was an important secondary endpoint that showed that ataluren treated patients not on tobramycin demonstrated a statistically significant reduction in exacerbation rate in our post hoc analysis. In the overall population, patients receiving ataluren had a 23% fewer exacerbations. However, in the non-toby patients we saw 41% fewer exacerbations. Importantly, ataluren was generally well-tolerated. Based on these results, we expect to submit an MAA for conditional approval of ataluren for the treatment of nonsense mutation cystic fibrosis to the EMA by the end of the year.

We are also preparing for the initiation of a confirmatory Phase 3 clinical trial in the first half of 2014. We are currently discussing the details of the trial design with the FDA and EMA. We expect the trial design for the confirmatory Phase 3 to be largely similar to the previous Phase 3 trial with FEV1 as the primary endpoint and exacerbation rate would be a key secondary endpoint. Based on our subgroup analysis of patients not receiving inhaled tobramycin, as well as the observed interference with ataluren's mechanism of action, we are proposing that the enrollment criteria exclude patients who are receiving chronic inhaled aminoglycoside antibiotics.

Switching gears from ataluren, I will wrap up by speaking about one of our programs in our pipeline, our spinal muscular atrophy, or SMA program. Last Thursday we announced the selection of a development candidate in this program. SMA is a rare disorder that is the leading genetic cause of death in infants and toddlers, and affects an estimated 30,000 patients in the US and Europe. It is caused by a defective SMN1 gene, leaving SMN production solely as the result of the expression of the SMN2 gene. This leads to reduced levels of SMN protein, causing significant muscle atrophy and eventually death in the most severe form of the disease.

We initially developed our SMA program in partnership with the SMA Foundation in 2005. Considerable progress has been made in this program and in November 2011, we expanded the collaboration to include Roche, who was granted an exclusive worldwide license to products from our SMA program. As a reminder, PTC received a $30 million upfront payment from Roche and is eligible to receive up to $460 million upon successful completion of certain development and commercialization milestones, enough to double-digit royalties on commercial sales. Under the terms of the agreement, the recent selection of a critical development candidate triggered a $10 million milestone from Roche. We are very proud of this achievement in this area of an important unmet medical need and gratified by the caliber of our collaboration with both the SMA Foundation and Roche, both of which have dedicated outstanding resources to support the advancement of this program.

In summary, PTC has made great strides in the development of our pipeline and has achieved a number of key clinical and corporate milestones in the recent months. I'm very proud of the incredible efforts of everyone at PTC, our ongoing collaborations and our close relationships with the patient community. We look forward to continuing to provide you updates on the development of our programs as we moved closer to the ultimate goal of treating patients. Before we open up the call for Q&A, let me ask Shane to review our financial results. Shane?

Thanks, Stu. Since we issued a press release earlier outlining our second-quarter 2013 financial results, I'll just review the highlights and then speak to our cash balance and our financial guidance. The Company had reported a net loss of approximately $15 million for the quarter ending June 30, 2013. That compares with net income of approximately $154 million for the second quarter of 2012. In 2012, we had recorded a gain of about $160 million, which was related to the exchange of convertible preferred stock in connection with the recapitalization.

Total revenues for the 2nd quarter were approximately $7 million, comprised primarily of $6 million of collaboration revenue and $1 million of grant revenue. That compares to total revenue in the second quarter of 2012 of approximately $7.5 million, which was comprised of $6 million in collaboration revenue and $1.5 million in dollars related to grants. Research and development expense in the second quarter was $14.7 million, a 23% increase over the $11.9 million of R&D spend in the second quarter of 2012. And as you would expect, the increase resulted primarily from the initiation of the confirmatory Phase 3 clinical trial of ataluren for the treatment of nmDMD.

G&A expense for the second quarter was $6.6 million which was 108% increase over 2012. That was driven primarily by public company-related expenses, pre-commercial activities and increased stock-based compensation. Of note, in July of this year we repaid our outstanding balance of $2.6 million in venture debt. With the proceeds from our IPO financing we ended the second quarter with over $165 million in cash, and based upon our current operating plans, we expect that this capital will be sufficient to fund our operations through 2015. With that, let's open up the call for questions. Operator?

(Operator Instructions)

Geoff Meacham, JPMorgan.

Ataluren and DMD, I'm curious, how many of the sites in the ongoing Phase III were in your previous trials? I know it's not a complicated endpoint, but want to get a sense of the experience with ataluren and the pivotal. I have one follow-up.

Yes, so, let me have Jay actually --

Hello, Jeff.

All of the sites that were previously participating in our Phase IIb study plan to participate in our Phase III study. We'll also have additional sites.

Got you.

And then, I know you are perhaps a year away in CF from starting a pivotal, but how are you guys thinking about expanding the opportunity? Is there an appetite for doing Phase II combo with either one of Vertex's correctors? Or is there a strategy for growing beyond the homozygous nonsense mutation population? Thanks.

Sure. Obviously we're moving forward to look at ataluren in the nonsense mutation cystic fibrosis patient. But clearly the [clinical] has shown some activity with being able to open up the chloride channel in other types of mutations as well as in the wild-type gene. So, it's something certainly that we are interested in evaluating and I think we will think about ways to evaluate them. That is what we're doing right now.

Got you.

But would you start a trial before, a Phase II, before -- with that strategy or would you go full on to a Phase III and then to a Phase II following?

No, I think we are just looking at evaluating this right now, perhaps even pre-clinically, and then deciding what to do after that.

Okay, thanks, guys.

(Operator Instructions)

Jason Kantor, Credit Suisse.

Thanks for the update.

Couple of questions on the plans to file for cystic fibrosis for conditional approval in Europe, is that in any way tied to what happens with the DMD filing? Are you waiting to get the recommendation or not there? Is there any read-through from one filing to the other?

Yes, we are working now towards the MAA filing and that probably has a good chance of being done prior to that. Although we will evaluate that as time moves on. We will probably be putting it in before the end of the year, though.

But, I mean, if the European authorities reject the DMD filing, do you think that this stands separately on the merits as well and you would pursue that? There is no linkage there in your mind?

No, we think that we are going to be adding -- we are working hard on this right now and we will evaluate it as it comes in. But we are working hard now to get that in.

Got it.

And then in terms of the SMA program that you spoke about, what would the next milestone that would trigger a payment? How big might that payment be? And could you speak a little bit to what makes this program particularly differentiated?

Sure, we are pretty excited about the SMA program. It's an orally bioavailable molecule that can pass obviously the blood-brain barrier and has shown some really incredible changes in the pre-clinical, severe form of the SMA model. So, we were happy with Roche and the SMA Foundation to pick a development candidate that triggered the $10 million milestone. So, the next step of that is obviously to move it through the development phase. And so, that's where we are now working with our partner. Beyond that, we can't disclose all that much more beyond where we are right now.

And then if I could ask one more question, there is obviously been a lot of discussion about the FDA's willingness to potentially look at accelerated approval paths for DMD drugs. And I'm wondering, is there any way to potentially get ataluren approved, even if the six-minute walk comes in with some sort of mixed results? Is there any other endpoint that you're looking at or that you've been discussing with the FDA? Or is that pretty much the only path available to you?

Well, we are obviously doing the six-minute walk test and the time function test and the quality of life as well as that, that we are measuring as well. We think we are pretty well-positioned in terms of the six-minute walk test. As you know, we were the first to really do a Phase IIb study and where we pioneered, really trying to understand the natural history. Even though we weren't optimal in terms of the inclusion criteria because we didn't know, I think we now understand the disease quite well. And I think we really positioned the trial to have the best chance of success. So we are pretty confident of this upcoming trial.

Thank you.

Greg Wade, Wedbush Securities.

Just a quick question on the SMA program. How long do you think it's going to take to get this candidate into the clinic? And then can you share with us a potential clinical path to a registration statement -- or a registration filing? Thanks.

Sure. We are working with the Roche and the SMA Foundation on the next steps and they are really putting a lot of resources into this program right now. It's actually getting a high senior attention at Roche, so that we are confident they are going to move it as rapidly as possible. That's about all we can disclose about this at this time.

Okay, thank you.

Thank you. I'm showing no further questions in the queue. I would like to hand the conference back over to management for any closing remarks.

Okay, well thank you, operator. As you know, I founded the Company really with the vision of bringing these medicines to patients with a range of debilitating and fatal diseases, particularly rare disorders. And we are very proud of what we and our partners have accomplished so far. We really know that every day counts for patients living with DMD and CF. And so, we really look forward to bringing these small molecules to these patients who are declining, and their families and their physicians. So, thank you again for joining us to our first call, and we look forward to speaking with you all soon. Thank you.

Ladies and gentlemen, thanks for participating in today's conference. This concludes our program for today. You may all disconnect and have a wonderful day.