PTC Therapeutics (NASDAQ:PTCT) Q2 2016 Earnings Conference Call August 4, 2016 4:30 PM ET
Jane Baj - Senior Director-Corporate Communications
Stuart Peltz - CEO
Mark Rothera - Chief Commercial Officer
Shane Kovacs - CFO
Mark Boulding - Chief Legal Officer
Heather Behanna - Wedbush Securities
Simos Simeonidis - RBC Capital Markets
Peter Stapor - Bank of America
Tazeen Ahmad - Bank of America
Good day, ladies and gentlemen, and welcome to the PTC Therapeutics Second Quarter 2016 Financial Results Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to turn the conference call to Jane Baj, please go ahead.
Thank you. Welcome to our conference call. Today, we will discuss PTC’s second quarter 2016 financial results and provide a corporate update. Before we start, let me remind you that today’s call will include forward-looking statements based on current expectations. These include statements about our future expectations regarding clinical developments, regulatory and commercialization timelines and potential outcomes including statements related to our ability to resolve matters set forth in the Refuse to File letter we received from the FDA in connection with our New Drug Application for Translarna for the treatment of Duchenne muscular dystrophy and our ability to obtain and maintain marketing authorizations for Translarna, including in Europe, the potential success of our products and product candidates, addressable patient populations 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 the timing and outcome of interactions PTC has with the FDA with respect to Translarna, including whether we are required to perform additional clinical and non-clinical studies at significant costs which if successful may enable FDA review an approval of an NDA; whether the European Medicines Agency determines that the risk benefit balance of Translarna supports continuation of a marketing authorization in the EEA, whether coupled with a specific operation to conduct an agreed upon new clinical trial in DMD or at all. Or at The outcome of pricing and reimbursement negotiations in those countries in which we are authorized to sell Translarna and the price at which we are able to sell Translarna; and those risks discussed under the headings Special Note Regarding Forward-Looking Statements and Risk Factors in our most recent Form 10-Q. Such statements represent our judgment as of today and PTC undertakes no obligation to publicly update any forward-looking statements except as required by law. The information regarding our use of GAAP and non-GAAP financial measures and a reconciliation of GAAP to non-GAAP is available in today’s financial results press release.
With that let me pass the call over to Stuart.
Good afternoon. Thank you for joining us on the call. We’re happy to report on the progress we’ve made in the second quarter across our regulatory, commercial and clinical front. Important second quarter updates include recent discussions with the regulatory authorities in both the United States and Europe, continued progress on our Translarna commercialization efforts, development in our clinical pipeline and financial results for the quarter. Let me start with the EMA’s review of our current marketing authorization of Translarna for Duchenne muscular dystrophy. As you know, in 2014, Translarna was the first drug ever to receive an approval to treat the underlying cause of Duchenne muscular dystrophy. Translarna was approved in the Europe economic area for the treatment of nonsense mutation Duchenne muscular dystrophy in ambulatory patients five years and older. Translarna is currently available to patients in over 20 countries for commercial sales or early access programs in Europe and other countries around the globe.
As a condition of our approval, we submitted the results of our ACT DMD phase 3 clinical trials to the European Medicines Agency. In parallel, we also submitted the request for annual review of our marketing authorization as you may recall we outlined three possible outcomes; recommendations for conversion to full approval, maintenance of the conditional approval or removal from the market. We believe that either of the first two outcomes would be positive for Duchenne muscular dystrophy patients and for PTC. Over the last few months, we've had constructive dialog with the European Medicine Agency including participating in a scientific advisory group meeting and an oral explanation association meeting. While ACT DMD did not meet its primary endpoint, the results of our analysis in context of an existing conditional approval and higher medical need suggest the benefit risk profile for Translarna remains positive.
In CHMP’s view however additional efficacy data from a new clinical trial is needed. As our discussions with the CHMP are ongoing we are working with the EMA to agree on the study design to generate further data. We are optimistic that the marketing authorization for Translarna will be renewed with a specific obligation to conduct the agreed-upon clinical trials. While we originally expected a decision from the EMA by mid-2016, we now expect the CHMP may complete its assessment by the end of the year. Until we have finalized the protocol with the EMA, we are unable to disclose any additional details about the proposed trial design. We plan to share more information once the CHMP review is completed.
We appreciate all the efforts put forth by the CHMP and their dedication and commitment to the Duchenne muscular dystrophy patients in this renewal procedure. We are committed to continue our pioneering journey in the Duchenne muscular dystrophy field. Over the last two years we have built a strong international business on the basis of approval under a conditional marketing authorization. This is one of the pathways under European regulatory system to allow for commercialization of drugs with high unmet medical needs. We are confident in our ability to continue to grow this business under that framework. I like now to turn to our regulatory activities in the United States.
As you know, we received a refusal to file letter in February from the FDA. We recently filed an appeal with the goal of overturning the decision and enabling Translarna's submission to be probably reviewed. We couldn't disagree more strongly or be more frustrated with the FDA's refusal to file letter concerning Translarna. We believe that Translarna not only meets the FDA standard with respecting to filing, but also includes adequate information include that Translarna does not have the potential for abuse. We believe that Translarna provides a clinically meaningful benefit and has been helping United States boys and young men with the Duchenne muscular dystrophy for years through our extension trial. There are three critical points I'd like to make about our appeal. One, the evidence of effectiveness; two, fair and consistent treatment of Duchenne muscular dystrophy application; and three, the importance of a full review of our clinical results.
Now let me address each of these points in more detail. The first point, we believe our NDA provides substantial evidence of effectiveness with results from over a decade of clinical studies including two of the largest placebo-controlled studies ever conducted in the Duchenne muscular dystrophy in over 400 patients. We believe we have the strongest data to-date for a treatment to address the underlying cause of the Duchenne muscular dystrophy demonstrating benefits across primary and secondary endpoints in a one-year study. For a rare disease indication there is a significant amount of phase 3 data supporting Translarna’s safety profile which is a critical advantage for chronic therapy. In addition, new analysis from our ongoing extension trial continued to demonstrate Translarna has long-term benefit for patients. We enrolled both to 100% percent of patients in our ACT DMD extension trial and our preliminary analysis to reinforce our confidence in the benefits of Translarna. In addition, a new analysis of study 007 extension data is supportive of Translarna's ability to preserve lung function in non-ambulatory patients. The need for ventilation due to compromised lung function has been shown to be an important milestone in the progression of this disease. We look forward to presenting this data at medical meetings in the near future.
Point two, we believe that the Refuse of File letter we received from the FDA was not consistent with their actions with respect to other companies who submitted the NDAs for the treatment of the Duchenne muscular dystrophy. The FDA accepted those files for full review, indeed the FDA has previously approved drugs that did not meet their primary endpoints. Applicant in front of regulatory agencies have a right to expect equal treatment. And point 3, our results can only be fairly assessed with the attention they deserved in the context of a full and fair review with an advisory committee including clinical experts in the Duchenne muscular dystrophy and representative of the patient community. It is clear that the Duchenne muscular dystrophy has been a challenging disease of study giving the emerging natural history data and understanding the [indiscernible] clinical endpoint.
It is difficult to believe the FDA can make a proper assessment in the absence of a comprehensive review. We feel strongly that it is in the best interest of the Duchenne muscular dystrophy patients in the United States that Translarna is reviewed by the agency. We submitted our appeal via formal dispute resolution process that exists within FDA's Center for Drug Evaluation and Research. This process is designed to encourage open prompt discussion of scientific procedural dispute that arise during a FDA review by escalating continuing discussions for the next level of management. We remain focused on working with the FDA to bring Translarna to patients in the United States and we believe that this process is the appropriate next steps.
As part of the appeal process, we are willing to consider multiple paths through advance of potential FDA approval including conducting an additional clinical trial as a post marketing commitment in conjunction with the accelerated approval. We anticipate additional visibility on the path forward in the United States in the coming months. Let's switch gears to discuss our commercialization effort for Translarna. Our global launch of Translarna is tracking well and the feedback we received from physicians and patients remain very positive. We have seen good growth across Europe, Latin America and the Middle East with sales in the first half of 2016 exceeding total sales for all of 2015.
Let me handle the call over to Chief Commercial Officer Mark Rothera for further detail on our commercial efforts.
Thanks Stuart, I will start with an update on the key events and developments in our commercial business. I'm happy to report that patients in England are now able access reimbursed Translarna. On the 20th of July, The National Institute for Health and Care Excellence or NICE issued final guidance recommending Translarna in connection with the managed access agreement or MAA with NHS England. Importantly, as part of the MAA the usual three-month period for implementation has been waived by NHS England. This means Translarna is now available to all on-label patients in England and we are pleased to have received our first commercial order. Moving on to Germany, I'm pleased to report that following our delisting on 1 April nearly all German nmDMD patients previously on Translarna are now receiving the drug on a reimbursed basis from outside of Germany by the foreign importation pathway. Recall, that this pathway allows patients with high unmet medical need to access treatment from abroad when no other treatment options are available locally.
In addition, new patient that were not on Translarna at the time of delisting have been able to access the drug. We appreciate all the assets of the German physician community, the payers and the patients to expedite this process. We continue to work with local authorities across Europe including in countries where we already have reimbursed early access program to finalize reimbursement and pricing agreement. As you know, we have built a global footprint that covers 46 countries and across the board there have been significant interest in Translarna from patients and physicians. By working with investigators and advocacy groups to facilitate genotyping, we continue to identify significant numbers of nonsense mutation DMD patients. As we look ahead to the remainder of this year we expect to expand Translarna adoption into new countries and increase penetration and uptake in countries where reimbursed access is already available. We are confident that we will achieve sales in line with guidance. With a longer term view, we expect ex-US sales could exceed $250 million based on the current label.
Let me turn the call back to Stuart.
Thanks Mark, let me now turn to our program for Translarna in nonsense mutation cystic fibrosis which continues to progress. We submitted a type 2 variation for marketing authorization in Europe to request approval for Translarna in this indication during the third quarter of 2015. Translarna is the only treatment in development to address the underlying cause of cystic fibrosis due to a nonsense mutation which is considered the most difficult population to treat. The submission was based on post-hoc analysis of the results from our previous phase 3 study. Based on recent interactions with the CHMP about our CF filing, the type2 variation procedure is containing. Therefore, we no longer anticipate an opinion regarding the submission in 2016.
As you know, our confirmatory phase 3 trial ACT CF is ongoing with 280 patients enrolled, it is likely that the results from this trial expected in early 2017 will be required for approval. We continue to engage with key opinion leaders as we near completion of ACT CF. Recently, we have received positive feedback from a well attended presentation we hosted at the annual European Cystic Fibrosis Society Congress in Basel in June. Results in [indiscernible] patients from the first phase 3 trial represented by leading physicians. In addition, oral presentation highlighted Translarna’s preservation of lung function and reduction in exasperation in treated cystic fibrosis patients.
I would like now to focus on another program in the rare diseases that is in our clinical pipeline. As we have discussed before, over the last decade, we have developed the platform technology to identify molecules that modulate splicing. This technology has been used to discover potential new therapeutics for spinal muscular atrophy or SMA. We have a robust program in collaboration with Roche and the SMA foundation around oral, small molecule, SMN2 splicing modifiers as a way to address the disease.
Based on our preclinical studies, our oral therapy has demonstrated exposure in both muscle and nerve tissues and therefore has the potential to provide considerable advantages for patients. As we discussed on our last call, we recently completed a Phase I study in healthy volunteers with RG7916 and preliminary results indicate that this compound increased the production of full-length SMN2 mRNA and was well tolerated. Together with our collaborators, we are planning to begin a Phase II clinical study in SMA patients later this year.
To wrap up, while we are working diligently to complete renewal of our European market authorization, we are delivering strong commercial results. We are committed to continuing our global expansion and we are engaging with the FDA to appeal the refusal of the file decision to bring Translarna to the patients in the United States.
With that, let me turn it over to Shane to talk about our financial results for the second quarter.
Thanks, Stuart. We generated $15.4 million in Translarna net product sales in the second quarter of 2016, representing 150% increase versus the same quarter in 2015. This follows first quarter sales of $18.9 million, which were positively influenced by significant orders from Brazil. As highlighted on our Q1 earnings call, bulk national orders from Brazil can impact our quarterly reported revenues.
Net product sales for the first half of 2016 reached $34.3 million, exceeding full-year 2015 revenues of $33.7 million. Overall, we continue to have confidence in our ability to achieve our current revenue guidance of $65 million $85 million in Translarna net product sales for 2016. This guidance assumes current exchange rates and the continued rollout on a country by country basis for Translarna outside of the US.
Non-GAAP R&D expenses in the second quarter were $24.7 million, comparable to the same period in 2015. Non-GAAP R&D expenses decreased sequentially versus the first quarter of this year by $2.3 million. Non-GAAP SG&A expenses were $18.7 million for the second quarter of 2016, compared to $12.8 million for the same period in 2015 and non-GAAP SG&A expenses decreased sequentially versus the first quarter of 2016 by $2.6 million.
We reported a net loss of $38.9 million for the second quarter of 2016, compared to approximately $38.4 million for the same period in 2015. And net loss decreased sequentially versus the first quarter of 2016 by $2.3 million.
Our net cash burn for the second quarter was approximately $26 million or monthly burn rate of approximately $9 million. We ended the quarter with approximately 273 million in cash and marketable securities on our balance sheet, a continued healthy capital position. In addition to reaffirming our revenue guidance for the year, we also have confidence in our ability to achieve our current operating expense guidance.
We currently anticipate non-GAAP operating expenses to be between $185 million and $195 million, excluding approximately $40 million in non-cash stock-based compensation expense for total operating expenses of approximately $225 million to $235 million for 2016, and we expect to finish the year with over $200 million in cash and cash equivalents.
Joining for the Q&A is my colleague Mark Boulding, our Chief Legal Officer and Head of regulatory. Operator, can you now open the call?
[Operator Instructions] Our first question comes from Heather Behanna with Wedbush Securities. Your line is open.
Hi, guys. Congrats on the quarter and thanks for taking the question. I was just wondering if you could give us a little bit of color on the meetings with the EMA. I know that in the minutes from the meeting, they talked a little bit about subgroup identification and then there was a lot of discussion on that. So I was wondering if you could give us a little bit of insight of what was discussed.
Sure. Thanks, Heather for the questions. The question is related to the SAG and we were discussing the overall dataset and then we had multiple subsequent discussions with the EMA and I think at the end of the day, what we found was, what EMA has found is that we had very constructive interactions with them and I think from these interactions, we believe that it’s clear that they’re considering many aspects, including that DMD as a serious disorder with no other treatments for the underlying cause. The fact that we have marketing authorization already and that while ACT DMD didn’t meet its primary endpoints, the results of the analyses performed suggest a positive benefit risk profile for Translarna. So they can’t request additional clinical data, and I think based on this, we believe that we will maintain our conditional approval with the post marketing clinical study obligation.
Okay. Thanks. And then just switching gears for a second to SMA, I just wanted to know if you guys could give us any information on potential monitoring or how you’re trying to look for any ocular toxicity in this Phase II study?
Sure. Thanks for that. Obviously, what we’re -- we’re planning to do a Phase II study, there will be a [indiscernible] 24:30 by the end of the year, both type I and that will have both type I and then type II, III patients in that. And so, right now, we’re putting the finishing touches on that. And so, at the appropriate time, we’ll discuss what we’ll be doing, but right now, we’re not disclosing anything other than that that’s ongoing and we plan to start those by the end of the year.
Thanks. I'll hop back in the queue.
Thank you. Our next question comes from Simos Simeonidis with RBC Capital Markets. Your line is open.
Hi, thank you very much for taking the questions. I was wondering if you can please help us understand what has led to the change in timing for the decision by CHMP for the CF application. I believe it’s a same two repertoires that are reviewing DMD. So I was wondering whether they’re desired to wait and see the ACT CF data has to do with the results of the ACT DMD trial. Thank you.
Thank you. No, there are two independent applications that go independently and the issue there is that it’s an iterative process as you know and that we received questions and the question we have, we’ll obviously have a number of other things going on in terms of completing the DMD and as a consequence, there is a delay in the CF and that’s why there is an alteration in the timing of that. We've always said it's likely that they may require the results from that trial, which is expected early in 2017, but they are not formally connected in any way.
Alright, thank you very much.
Thank you. Our next question comes from Tazeen Ahmad with Bank of America. Your line is open.
Hi. This is Peter Stapor on for Tazeen. Thanks for taking my questions. So my first question is with a positive appeal, would you be able to add additional information to the application, such as new data that you said you continue to collect?
Sure. Right now, we’re working through the refusal of the file. With the reversal of that, there is a possibility of being capable of amending it to add additional data. Mark, maybe you want to add a little?
Yes, so there is always a possibility once we’re under full review to supplement to a minor and major amendment with additional data and you can see, for example in the cases throughout, the agency can also ask for more information. So should we be successful, that would be something we could.
Okay. And just one more, you mentioned some supportive data on improving lung function. I was wondering if you could provide a little more color on when that might be presented.
Yes. So we are working now to get it into scientific meetings in the near future, so we hope to have that in this year or early next year.
Okay, thank you.
Thank you. Our next question comes from Alethia Young with Credit Suisse. Your line is open.
Hi guys. This is Elene on for Alethia. Thanks so much for the call. I appreciate taking my question. Just a couple of questions on the DMD trial that is currently being planned with the EMA, how do you guys see that affecting your R&D spend moving forward and also with the commercial sales that are currently going on, particularly in Europe and do you have any plans to minimize this impact.
Sure. Great question, Elene. I mean, with respect to the potential cost of the trial and the impact to R&D expense, clearly, we're still in the process of finalizing the trial design, so it’s hard to give any specifics with respect to what the cost of that trial may be. If we look at the ACT DMD, which is wrapping up in terms of the actual study and the extension steady, that was a cost of probably about external about $35 million over the course of four years or somewhere depending on where we were $5 million to $10 million per year.
Going forward, in 2017 and beyond, we would anticipate from an operating budget that our clinical expenses with respect to ACT DMD, the ACT DMD extension and ACTS TV would be winding down, and therefore that would probably more than offset the potential new cost from the study that we may conduct in the MDA. And I will pass the next piece over to Mark.
Sure. As you said, Shane, it’s kind of a little premature to give a precise constant when we haven't yet agreed final designs, but obviously our goal will be to grow the commercial business while we conduct a feasible study in a timely manner and our strategy will be to prioritize countries where we are not yet commercial, and that is the advantage of having a large footprint PTC around the world.
Okay, thanks so much guys. I appreciate it.
Thank you. Our next question comes from Gena Wang with Jefferies. Your line is open.
Hi, this is actually [indiscernible]. Thank you for taking my question. So my question is, so I know you guys cannot disclose the discount pricing in UK, but wondering if the pricing is in line with your expectation behind the revenue guidelines for $65 million $85 million in 2016.
Yes. Thanks for that question. Absolutely. We were pleased to get to a negotiated agreement with NHS England and cleared that agreement. We believe it’s sustainable and appropriate from a value perspective and yes, it’s integrated into our prospectus when we give you forward guidance of 65 million to 85 million.
Yes, thank you. So, if I may just one more quick question, so in terms of the ordering from Brazil, can you give us more color, should we expect a bit semiannual fluctuation like a one quarter high, one quarter low?
So there are a couple of things about orders from Brazil. The first is that when new patients come on, we typically can get borders for one or two, new patients coming in at a time over the course of the whole year. But then, in addition to that, there are large bulk intermittent orders directly from the Ministry of Health at a national level and those are the ones that can have a substantial influence from quarterly earnings and so we have had one of those already this year and we would anticipate another one between now and the end of this year.
Thank you so much for the answers.
Thank you. We have a follow-up from Tazeen Ahmad with Bank of America. Your line is open.
Hi, guys. Thanks for taking another question. I was wondering if you could add any additional color on the Phase II SMA trial patient population. Anything else?
Sure. As I said, there is [indiscernible] trials that will go on, one will be for type I patients, and then the second one will be a Type II, III and the goal really here would be to conduct these so that we will have the facts towards registration and that clear we’re to planning to start enrolling of this before the end of the year.
Great, thank you.
Thank you. I'm showing no further questions I would like to turn the call back to Stuart Peltz for closing remarks.
Great. Well, thank you for being on the line and in closing, I am pleased with the progress that we have made in the second quarter across our regulatory commercial and clinical fronts and that we continue to move the ball forward to bring Translarna to the patients . So thank you all for joining the call today and we look forward to updating you in the near future. Thank you for being on.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.
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