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New Issue Analysis: PTC Therapeutics, Inc. (PTCT) Convertible Senior Notes Due 2022

|Includes: PTC Therapeutics (PTCT)

PTC Therapeutics (NASDAQ:PTCT) priced its $150 million 144A senior convertible note at 3.0%, up 30%. That was at the cheap end of price talk, perhaps reflecting investor misgivings about the shares' recent trajectory as well as a general lull in biotech enthusiasm. The company is in the midst of launching its first drug to treat Duchenne Muscular Dystrophy (nmDMD) on a global basis. nmDMD affects males in one in 3,500 live births, or about 20,000 births annually worldwide.

The company's research is focused on treatments for rare disorders arising from nonsense mutations, or mutations in DNA that prematurely stop the transcribed mRNA and result in damaged proteins. These diseases include cystic fibrosis as well as muscular dystrophy.

PTC Therapeutics's lead drug, Translarna, has received conditional marketing authorization from the European Union for the treatment of nmDMD and generated product sales of $11.2 million in the first six months of 2015. The company is also developing additional indications for Translarna to treat cystic fibrosis and has an oral therapeutic in Phase 1b/2a trials to treat spinal muscular atrophy (NYSE:SMA). The SMA development program is in collaboration with Roche, which gave PTC Therapeutics an initial upfront payment of $30 million in 2011. PTC Therapeutics is also developing a drug to target fibrosarcoma, prostate and colon cancer stem cells by inhibiting BMI1.

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The initial HOCS slash line is 61 overall/69 growth/47 safety. The score, while not especially compelling for a new deal, is still reasonable for a biotech just coming out of the development stage. Still, the company's pipeline of additional indications and drugs did garner some interest.

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Translarna sales grew to $6.2 million in Q2 from $3.7 million in the first quarter and is now being used to treat 106 patients. The company lost $38.4 million in the Q2 2015 versus a loss of $25.1 million in Q2 2014 as R&D and SG&A expenses ramped for the global launch of Translarna and additional research on the company's development-stage drugs.

PTCT's second quarter cash burn was approximately $30 million. After issuing the convertible, PTC Therapeutics' pro-forma cash will be slightly over $400 million, allowing the company significant runway to continue its launch of Translarna and its other R&D programs.

LTM Revenue: $28 million
LTM EBITDA: ($134 million)
Pro Forma Cash: $405 million
Pro Forma Debt: $150 million
Net Debt to EBITDA: NM

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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