PTC Therapeutics Inc (PTCT) 2014 Q2 法說會逐字稿

Thank you for holding for PTC's Second Quarter 2014 conference call. (Operator Instructions) Please be advised that this call is being taped at the Company's request and will be archived on the Company's website until August 21, which is two weeks from today. PTC's current investor presentation slide deck is available at the same website location. At this time, I would like to turn the call over to Jane Baj of PTC.

Thank you, Operator. Good morning, everyone. Thank you all for joining us for PTC's Second Quarter 2014 Financial Results conference call. With me here today are Dr. Stuart Peltz, Chief Executive Officer, Mr. Shane Kovacs, Chief Financial Officer, and Mr. Mark Rothera, Chief Commercial officer of PTC. Stuart will provide opening remarks and share some highlights of the quarter and recent events. Mark will provide an update on our reimbursed extended access program and our preliminary launch plans for Translarna. Shane will then provide detailed financial results, and we will open up the call for questions.

Earlier this morning we issued a press release detailing PTC's second quarter 2014 financial results, which is available on our website at 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 regarding clinical development, regulatory and commercialization timelines, the potential success of our product candidates, and financial projections. Actual results may differ materially from those indicated by these statements as a result of a variety of risks and uncertainties including those discussed under the headings, Special Notes Regarding Forward-looking Statements and Risk Factors in our most recent Form 10-Q, which is on file with the SEC. Any forward-looking statements represent our views as of today only. PTC undertakes no obligation to publicly update any forward-looking statements. With that, let me pass the call over to Stuart.

Thanks, Jane, and good morning, everyone. Welcome to our second quarter 2014 investor conference call. We are pleased to report on the significant progress we have made in the second quarter across each of our research, clinical, regulatory and commercial fronts. I am extremely proud to report that we recently received approval from the European Commission granting conditional marketing authorization for ataluren in the EU for the treatment of nonsense mutation Duchenne muscular dystrophy in ambulatory patients aged five years and older. The brand name for ataluren is Translarna.

This is an extremely important milestone for the Duchenne community and for our Company. Translarna is the first treatment to be approved for Duchenne. The conditional marketing authorization allows PTC to market Translarna in 28 countries that are member states of the European Union, as well as the European Economic Area members. We will be working with regulators, payers, physicians and patient organizations to make Translarna available as quickly as possible in Europe and also in countries that recognize the European approval.

PTC's confirmatory ACT DMD trial is also on track to complete enrollment in the near term, and we expect to have top line data from the trial in the second half of 2015. We expect the positive data from this trial will support full approval in the EU, US and rest of the world. ACT DMD is one of the largest studies ever to be conducted in this disorder.

Given the recent outcome from our regulatory dialogue in Europe, combined with feedback the FDA has provided to some of our peer companies working in Duchenne, PTC is engaging in further dialogue with the FDA to discuss potential pathways to accelerate bringing Translarna to United States patients. I will now turn the call over to Mark Rothera, our chief commercial officer. Mark is responsible for establishing our global commercialization strategy for Translarna and brings a wealth of experience to PTC. Mark has spent 25 years in the biopharmaceutical sector, of which the last 15 has been spent launching orphan drugs internationally for rare diseases. Mark has built international operations from the very earliest stages at PathoGenesis, Chiron Biopharmaceuticals, Shire Human Genetic Therapies, and Aegerion Pharmaceuticals. Mark will outline our current commercialization efforts. Mark?

Thanks, Stu. It is a pleasure to share with you our preliminary launch plans for Translarna and to update you on activities that are already underway. I am truly honored to be part of the team that will bring the first ever treatment for the underlying cause of the disease to Duchenne muscular dystrophy patients.

PTC has the worldwide rights to Translarna and ultimately aims to develop a global footprint for its commercialization. Since I joined PTC approximately 18 months ago, we began developing the organizational structure that would ultimately serve as the basis for Translarna's commercialization in Europe. This included bringing on a leading team of professionals with both rare disease and biotech build experience in key countries including Germany, UK, France, Italy, Spain and the Nordic region. This team has been instrumental in our local country efforts, including enrollment in our ACT DMD study, dialogue with key opinion leaders and patient advocacy groups, as well as patient identification activities. As we grow our commercial organization, this group is being supported by strong global and regional capabilities including market access, medical affairs, marketing, quality, and supply chain. Our team is highly focused on the country-specific processes which are the next step in the journey in bringing commercial access to Translarna for nmDMD patients in Europe.

We have begun our commercialization efforts and plan to launch Translarna in selected countries beginning in the first half of 2015. The market access process and timelines vary from country-to-country and can take over 18 months in some cases. We are very aware, though, that for patients and their families living with DMD, a rapidly progressing muscle-wasting disease, every day counts.

In an effort to accelerate access to Translarna prior to commercial availability, we recently announced the initiation of a reimbursed expanded access program, or EAP, in Europe and other countries that will recognize the EMA approval. Where mechanisms exist and in accordance with local regulations in these countries, PTC will make Translarna available for nonsense mutation Duchenne muscular dystrophy patients through reimbursed EAP programs. Funded name patient programs have already been authorized in Turkey and Spain, and recently the French Medicines Agency has granted an ATU cohort. The ATU cohort allows all nmDMD patients matching certain inclusion criteria to receive the therapy now rather than wait the outcome of a 12- to 18-month pricing and reimbursement process. I am happy to say that PTC has already begun shipment of Translarna to patients enrolled in the EAP program.

I look forward to sharing more of our commercialization plans and milestones achieved on future calls. With that, I will turn the call back over to Stu.

Thank you, Mark. In addition to our efforts in nonsense mutation DMD, we are also highly focused on the development of Translarna as a treatment for nonsense mutation cystic fibrosis. Nonsense mutations account approximately 10% of all CF patients, and a nonsense mutation CF is one of the most severe forms of the disease because of the complete lack of production of the CFTR protein. Available treatments today do not address the underlying cause of the disease for these patients.

We recently initiated ACT CF, our confirmatory Phase 3 clinical trial of Translarna in nmCF patients. This is a global randomized, double-blind, placebo controlled study that will enroll approximately 200 patients 6 years of age or older with nonsense mutation CF who are not receiving chronic inhaled aminoglycosides. To remind you, in our previous Phase 3 trial, a subgroup analysis of patients not receiving chronic inhaled tobramycin showed that patients receiving Translarna had a mean relative benefit in FEV1 of 5.7% versus placebo, and also 41% decrease in pulmonary exacerbations.

ACT CF has been designed to exclude patients who are using chronic inhaled aminoglycosides such as tobramycin. Aminoglycosides are ribosome-binding drugs that were shown to confound Translarna's redirectivity. The primary endpoint in ACT CF trial is lung function as measured by relative change of percent predicted FEV1 and pulmonary exacerbation as a key secondary endpoint. Patients are randomly assigned to Translarna 40 milligram per kilogram per day or placebo. We anticipate that we will complete enrollment in the second half of 2015 with data expected approximately a year later.

We are currently evaluating our strategy and timing for potential EU submission seeking conditional approval for nonsense mutation CF in Europe. Based on our knowledge and experience we gain from our submission in DMD, we plan to file for conditional approval when the ACT CF trial is well underway.

In addition to DMD and CF, we also plan to develop Translarna for other nonsense mutation-based disorders. As previously mentioned, Translarna is both a product and a pipeline. It is estimated that on average, 11% of patients with any monogenetic disorder have a nonsense mutation as the cause of the disease. In the past several years, there have been over 20 publications by independent investigators demonstrating Translarna activity in multiple nonsense mutation preclinical cell and animal based disease models in multiple different organ systems. We have spent a considerable amount of time evaluating the potential clinical development of Translarna in additional indications. And based on this evaluation and discussions with outside experts, we have selected mucopolysaccharidosis type 1, also referred to as MPS I, as the next indication.

MPS I is an inherited genetic disorder caused by a deficiency in an essential enzyme that is responsible for the breakdown of byproducts of chemical reactions in the body's cells. Globally, MPS I occurs in about 1 in every 100,000 births. It is estimated that 60% to 80% of cases of MPS I are caused by a nonsense mutation. While enzyme replacement therapies are on the market, there remains significant unmet medical need for the development of new treatment that can target the underlying cause of this disorder.

In preclinical models of Hurler disease, Translarna has demonstrated that it crosses the blood-brain barrier and penetrates skeletal and cardiac tissues. We therefore believe that Translarna has the potential to address the underlying cause of MPS I caused by nonsense mutation in these tissues. It is our goal to initiate a Phase 2 proof-of-concept study by the end of this year.

Let's now turn to our alternative splicing platform where the lead compound is focused on another deadly genetic disorder, spinal muscular atrophy, or SMA. To remind you, this program is a collaboration with both Roche and the SMA Foundation. SMA is a rare disorder that is the leading genetic cause of death in infants and toddlers. The SMA Foundation estimates that spinal muscular atrophy affects 1 in every 10,000 children born. It is caused by a defective SMN1 gene, leaving the SMN protein production solely as a result of the expression of the SMN2 gene. This leads to reduced levels of the SMN protein causing significant muscle atrophy and eventually death by the age of two in the most severe form of the disease.

In January of this year, a Phase 1a single ascending dose, placebo controlled study in healthy volunteers was initiated. The primary objectives of this study were to explore safety and pharmacokinetics of the drug candidate RG7800. This study has now completed and a multiple dose clinical study in SMA patients is currently in preparation. Preliminary findings in the Phase 1a study indicate that RG7800 was well tolerated at all dose levels studied. There were no serious adverse events or withdrawals due to the adverse events, and no dose-related trends were identified. Importantly, RG7800 had a dose-dependent effect on SMN2 splicing, as shown by a change in the ratio of full length SMN2 mRNA, the delta 7 SMN2 mRNA, which may be interpreted as proof of mechanism in terms of the expected pharmacodynamic effect.

We are looking forward to the continued development of this exciting potential therapy for this devastating disease in collaboration with our partners. Furthermore, we believe that the results we have achieved to date in this program provide strong validation for alternative splicing platforms which we are separately focused on the discovery of compounds that modulates splicing to include or exclude exons in other RNA transcripts to help treat other rare and neglected disorders.

Finally, I would also like to highlight a few of the earlier stage programs in our pipeline. As you may appreciate, there is a lack of novel treatments being developed for tackling the emerging problem of resistance. Our bacterial program is moving forward and is on track to declare a development candidate later this year. This program is based on a novel chemical scaffold and could potentially address the significant need for new treatment options to combat drug-resistant gonorrhea.

We also plan to initiate a Phase 1 study for PTC596, our development candidate for our BMI1 program. PTC596 is a first-in-class oral, potent and selective inhibitor of BMI1 protein expression. Elevated levels of BMI1 are associated with more aggressive drug-resistant tumors and a poor prognosis in a wide variety of cancers, including glioblastoma. Reducing levels of BMI1 therefore represents a promising new therapeutic strategy to treat drug-resistant cancers. We would like to acknowledge the support from the Wellcome Trust for the antibacterial and BMI1 programs.

I would also like to discuss a change on our executive team. After many years of dedicated service, our president, Claudia Hirawat, has informed us of our plans to step down from that role. I would like to take a moment to acknowledge her contributions to PTC. I first met Claudia over 15 years ago, when I was founding PTC. In the early years, Claudia brought organization and discipline to the business as we set up the Company and began our initial stages of growth. Over the years her contributions grew immensely and she played a leading role across business development and other key corporate functions. Our corporate collaborations were a direct result of Claudia's efforts for providing both critical source of funding for the business and an opportunity to expand our research capabilities and platform. She also played a critical role in our successful efforts to obtain a positive opinion from the CHMP for Translarna in Duchenne muscular dystrophy. Claudia is not leaving us. We expect to form a new relationship with Claudia going forward that will allow us to continue to benefit from her expertise. On behalf of the entire organization, I would like to thank Claudia for all she has done for us.

Before we open up the call to Q&A, let me ask Shane to review our financial results. Shane?

Thanks, Stu. I am happy to report that PTC continues to be in a very strong financial position to execute upon our strategy and build a leading commercial company focused on rare and neglected disorders. We finished the quarter ending June 30 with nearly $227 million of cash and marketable securities on our balance sheet, which should be sufficient capital to fund our operations into mid-2016. Here are the financial highlights from our quarter and our updated financial guidance.

The Company reported a net loss of approximately $25.1 million for the second quarter of 2014 compared to approximately $14.6 million for the second quarter of 2013. Total revenues for the second quarter of 2014 were approximately $1.7 million compared to total revenue in the second quarter of 2013 of approximately $6.9 million.

Research and development expenses were $18.3 million for the second quarter, including $2.2 million in noncash stock-based compensation expense, which compares to $14.7 million for the same period in 2013, including $1.1 million in noncash stock-based compensation expense. This increase primarily results from additional costs associated with our clinical trials including the manufacturing of drug products for our studies and regulatory costs associated with the efforts to obtain conditional approval for Translarna in Europe.

General and administrative expenses were $8.7 million for the second quarter of 2014, including $2.1 million in noncash stock-based compensation expense, compared to $6.6 million for the same period in 2013, including $0.8 million in noncash stock-based compensation expense. The increase primarily results from additional costs associated with efforts to successfully obtain conditional approval for Translarna in Europe, pre-commercial activities and public company costs.

Based on the approval we recently received from the European Commission, we have begun executing against our plans related to prelaunch activities for Translarna in Europe and selected other territories. As we transform from an R&D company into an international commercial organization, we are actively putting in place the resources and infrastructure to support the launch.

As Mark mentioned earlier, this includes activities and systems related to commercialization, such as CMC, quality, compliance, regulatory and medical affairs, as well as recruitment. We have also been busy establishing legal entities in setting up our international banking operations.

As a result of this incremental investment, we are updating our guidance for 2014. Total cash operating expenses for 2014 are now expected to be between $103 million and $113 million, excluding expected noncash stock-based compensation expense of approximately $17 million, for total operating expenses of approximately $120 million to $130 million. We expect to end 2014 with approximately $160 million to $170 million in cash, cash equivalents and marketable securities.

We currently have 30.1 million shares issued and outstanding, which include 0.7 million shares in restricted stock grants. With that, let's open the call for questions. Operator?

Thank you. (Operator Instructions) Our first question comes from Jason Kantor with Credit Suisse. Your line is open.

Good morning. This is Jeremiah filling in for Jason. Congratulations on all the success you have had this quarter. First question regarding Translarna in Europe. How are the patients treated in Europe? Are they primarily treated in specialized centers? And, also, do you feel like you have ID'd most of the hospital patient population there?

Thanks for that, Jeremiah. Let me ask Mark to sort of fill you in on this.

Sure. As you know, Europe is a whole collection of different countries, so it does vary between countries. But predominantly the treatment is in reference or specialist centers for neuromuscular disease. And with respect to identification, again, it varies substantially. So, you do have some countries where it is very sophisticated in terms of patient diagnosis, and others where it is pretty basic still. So, one of our efforts is to help sort of the whole stream of patient identification work to be enhanced in Europe, and that's, of course, substantially easier in the presence of a new therapy.

In terms of prepping the market for the product, how much more do you need to do than what you have already done now? And then in terms of the reimbursement discussions, does it go faster in cases of a rare disease? You mentioned a 12- to 18-month timeline; could it be more toward the 12-month time frame?

I think having an orphan drug with a very high unmet medical need certainly helps the case substantially. And there are countries where it will be faster than others, so some of the northern European countries, like the Nordic countries, you know, Germany, UK, are likely to be at the faster end of that spectrum. And then there will be others where there isn't a specific dispensation for orphan drug. But we are expecting to launch in the first half of 2015.

And then we're also in those areas where we can bring drug to patients through expanded access programs, we're doing that as well, both in Europe as well as outside.

And in regards to the SMA program, you provided some detail today, but is there a potential meeting or some sort of timeline that we could see even more data maybe at a scientific meeting or medical meeting?

Yes. We'll be working with Roche and the SMA Foundation at the appropriate time to be able to -- that will be appropriate to disclose. This is a partnership between all three of us, so this is what we are able to disclose today.

And just last question. In regards to what you have seen, I know it's still early, but is it -- you know, given the fact that you're looking at splicing and you are seeing a signal, is there any threshold that you can theorize from your preclinical work that could be meaningful in terms of providing therapeutic benefit in organs or in the central nervous system?

I think again, it is early on a single dose. I think what the important point here though, and I think that's just unique to having healthy volunteers having both SMN1 and SMN2, one could at least look to see if what's going on, and that is to see the splicing of the SMN2 to go more to SMN1 so you have an opportunity to see an early read for proof of mechanism. So, I think that's a good thing. The preclinical data, that's actually one of the advantages of having an orally bioavailable molecule, that you can look in other tissues. So, looking at the periphery and in blood, that gave us a nice opportunity and we were able to do that in animals, to be able to look in tissues both in blood as well as in the brain. We are not obviously able to do that in humans. So, we'll be able to -- it will be determined early -- it's to be determined when we'll be able to disclose that.

Thank you for taking our questions.

Our next question comes from Geoff Meacham with JPMorgan. Your line is open.

Hi. It's actually Mike in for Geoff. Congrats on all the progress and thanks for taking our questions. With respect to the launch in Europe, you mentioned sort of targeting first half of '15. Can you maybe provide a little bit more color on what specific countries you are targeting for the first half?

Yes, sure. Mark, why don't you just tackle that a little?

Sure. As I mentioned in the last question, I think the natural inclination from a launch point of view in terms of earlier launches is to launch in those northern European countries, where the market access process is faster. So, Nordic countries, such as Denmark and Germany, where there is an ability to launch before you've completed the negotiations on pricing and reimbursement, and the UK. Typically these are faster countries. But, as I say, we are also very happy that we've been able to initiate the provision of reimbursed drugs through early access or expanded access programs in a number of countries, where effectively you're kind of quasi beginning to launch in those countries.

With respect to those expanded access programs, can you maybe give us a sense of the pace of enrollment in the ones that are up and running and sort of how that compares to your expectations? Just trying to get a sense of the enthusiasm.

Sure. We just started this, so it's hard to give you precise numbers, but we are already working in Spain, France and Turkey, and others are being set up. So, I think from a point of view of high on the medial need and demand it's probably what you expect for a disorder like DMD, where there is such high unmet medical need.

The other thing I would say is we have through the cohort program, if you like, a broader access platform, whereas, in some countries on a named patient basis, so it's individual patient by individual patient. But certainly we are getting requests from other parts of the world, in Latin America, Canada, etc., so we are aware of the needs of the patients here and we'll do what we can to provide early access.

Great, thanks.

Our next question comes from Tazeen Ahmad with Bank of America. Your line is open.

Hi. Good morning. Thanks for taking my questions. I guess a couple for Shane. Right now we are assuming a US tax rate on your sales, and I was just wondering if there is any kind of opportunity to get a lower rate for ataluren for any of the indications and for any of the products in your earlier stage pipeline?

Thanks, Tazeen, for that question. We are working on our tax planning today. I'm not sure I'm in a position to give you any guidance on what our tax rate would be at this point in time.

But there is an opportunity to potentially get a lower rate?

Yes. We are working on tax planning and how that works with our international commercial operations.

Okay. I think you filed a mixed shelf today. Have you disclosed the amount of that and what you would potentially plan to use the funds for?

Yes. I mean, it's really a housekeeping item. As you know, most companies, once they become eligible to file a shelf, which is after you've been public for at least one year, it's more of a housekeeping item of go ahead and file an S3. And we are above that threshold that you don't actually need to file against a specific number. Today we have no plans for additional capital raising, and so it's really just a matter of process.

Okay. For SMA, can you speak to the involvement that your team has in designing ongoing and planned trials? And can you speak a little bit to what the next phase of development for the product would include?

Sure. That is really right now in the planning stages. The next phase is to go into patients. We're hopeful that we'll pretty aggressive in that, but we're not at the spot yet where we can actually define for you the precise plan.

So, would that be a Phase 1b trial or would it be a Phase 2 potentially?

So, we haven't really disclosed much except that it is being planned to be in SMA patients.

Okay. And the last question I have is, now that you have the official approval from EU for ataluren, can you comment on how many people you currently have on the ground right now in the EU, and when you expect your commercial team to be fully onboarded?

Yes. We are working hard to build the team. Maybe let me have Mark talk a little bit about this.

You know, the important thing is that you don't need a large team to cover countries in Europe for a very rare disease of this nature. I think what counts most is having the right sorts of people with the right experience that know not only the particularities of dealing with a rare disease, where you have a lot of stakeholders, but also know about building a company. And I think what we focused on is really getting the right people in on the ground, and very pleased by the progress we're making on that respect.

Okay, thanks.

Thank you.

(Operator Instructions) Our next question comes from Christopher Marai with Oppenheimer. Your line is open.

Just with respect to the expanded access program and potential for reimbursement there, what are we looking at in terms of price of ataluren in those selected markets? Are you providing any guidance there or what do you anticipate will be the price there and how will that differ potentially from the price in markets that are, I guess, launched under the conditional approval pathway? Thanks.

Thanks, Chris, for the question. We are not disclosing that right now. It may or may not be near the final commercial price, and so we're not disclosing the pricing of the early access program.

However, you can imagine, we do expect the ultimate commercial price to be in line with other ultra-orphan drugs when you're looking at first-in-class therapies. You know, you're treating an area of very high unmet medical need and a very small patient population, but we've not really engaged in that negotiation at a country level yet.

Okay, then. Then with respect to the program in MPS I, I was just wondering, it's actually a proof-of-concept study. Do you think that that study will look at endpoints similar to those for Aldurazyme? How should we look at really that market opportunity given current drug out there, and could the potential proof-of-concept study also be in some way registrationally worthy? Thanks.

Thanks for that. MPS I, there is probably approximately 60%, 80% of the patients have a nonsense mutation. We're doing a proof-of-concept study where we're going to be looking at urine and blood GAG levels and changes in those with treatment. You may recall where we worked with a group that showed we could see reductions of that in Hurler mouse models. And, again, one of the things we think is an advantage is the fact that ataluren is able to distribute widely both into the CNS, heart as well as bone, that this would certainly give us an advantage. But first step is really a rapid proof of concept.

Right. And then would you have any clinical endpoints, like SCC or six-minute walk tests?

We are putting the final touches on the protocol on that, but I don't think that probably will be in the proof-of-concept studies.

Okay. And then, finally, when do you think we'll see a readout from that proof-of-concept study? Will that be before or after the DMD and CF readout? Thanks.

That's always a little [difficult] to say exactly. We are hoping to have results by the end of next year.

Great. Thanks for taking my questions, guys. Congrats on the quarter.

Our next question comes from Debjit Chattopadhyay with ROTH Capital Partners. Your line is open.

Most of my questions have been answered. I'm just wondering if you can just provide some update on the [NBR] gonorrhea program and the BMI1 program going forward in terms of clinical timelines for that?

Yes. Thanks for the question, Debjit. We are working towards filing the IND for the BMI program by the end of this year to get that rolling. And in terms of the -- so, that would be probably an early Phase 1 in refractory cancer patients. And then the gonorrhea program, we expect to choose a development candidate later this year. As I said in the talk that this is based on a novel chemical scaffold, really, a brand new scaffold, antibacterial scaffold, which we think is really quite important. And so it's going into safety -- we would plan to have that in safety toxicology in 2015.

Thank you so much. And just one more. On the choice of the MPS versus, say, Hurler's or any of the other indication, what drove that choice for choosing MPS I versus, say, Hurler's?

So, MPS I or Hurler's was chosen really as, because, really, we think there is a nice pharmacodynamic biomarker that we could readily determine in a relatively short period of time. We still think that there is high unmet medical need. The fact that it can pass the blood-brain barrier, it uses the same formulation that we have. So, and then we think it has a good biomarker, and I think the combination of all that -- there will be others that we're obviously looking at, but we think this would be a very good first choice.

Thank you so much and congratulations.

Thank you.

And I'm showing no further questions. I will now turn the call back over to management for closing remarks.

Thank you, Operator. As we enter the second half of the year, we are excited about moving towards the commercial launch of Translarna for DMD in Europe. We look forward to completing enrollment in our ACT DMD study and advancing Translarna in both CF and MPS I.

In addition to our efforts on Translarna, we are advancing our earlier stage programs also towards clinical development, and clearly what we'll do is communicate with you as we achieve these and other milestones. And, again, we thank you for your interest in PTC and for joining the call today. Thank you.

Thank you, ladies and gentlemen. That does conclude today's conference. You may all disconnect and everyone have a great day.