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PTCT Is Still A Short: Update Post CRL

|Includes: PTC Therapeutics, Inc. (PTCT)

PTCT, as anticipated, received its CRL on 25 Oct 2017

It plans to file a Formal Dispute Resolution Response(FDRR) request next week

Doing the same thing over and over again and expecting a different result is Insanity.

As was reported in the press release yesterday PTCT reported that it received the anticipated complete response letter (CRL) for the New Drug Application (NDA) of the investigational medicine ataluren for the treatment of nonsense mutation dystrophinopathies. The press release further went on the say:

We are extremely disappointed for the Duchenne community and strongly disagree with the agency's conclusions," said Stuart W. Peltz, Ph.D., chief executive officer of PTC Therapeutics (PTCT). We believe that this decision fails to consider the benefit-risk of ataluren and the high unmet medical need. Therefore, we plan to file a formal dispute resolution request next week.

Basically what this means, according to the CEO, is the company disagree with the FDA decision and similar to the previous disagreements with FDA regarding the filing of an NDA or approvability of the drug, we are going to dispute FDA judgment for the nth time. The market really liked the belligerent attitude of the company and its CEO Stuart Peltz. It decided to reward the wording of the press release with a  5% jump in the stock price to the previous close. So far so good for the company.

So what does an FDR mean and how does it help the company? FDA has an elaborate mechanism to support any dispute resolution request from the sponsor. To this effect, they even have a guidance for industry and review staff. A CRL is considered an appropriate reason to file an FDR. A CRL sent to the sponsor includes a lot of things which can need clarification or further discussion with the FDA. In the case of PTCT, the only reason they are filing an FDR is to dispute the decision itself. Even though this is allowed by the FDA, going back to the FDA and saying we disagree with your decision and hence you have to approve the drug is simply a waste of everyone's time. FDA gave PTCT a full review and they came to their decision based on the data provided by the company, the company's interpretation of the data, the FDA's response to the very same data, expert and patient testimonies and finally a vote from experts in the medical field. Nothing can be more transparent than this. So by disputing the decision, PTCT stands to gain nothing but the same response. Repeating the same thing, again and again, does not change the outcome. 

For the benefit of the readers, let me walk through the most important aspect of the FDR. 

  1. No new information can be submitted: Because internal Agency review of a decision that has been appealed must be based on the same information as was relied on to make the original decision (i.e., information already in the relevant administrative file; 21 CFR 10.75(D)), no new information should be submitted as part  of an FDRR.
  2. If the sponsor would like to have CDER or CBER consider new information that may affect the original decision on a matter, it should submit the new information to the sponsor application (i.e., IND, NDA, BLA, ANDA) for review by the division and the original deciding official.
  3. CDER and CBER consider new analyses of previously reviewed data to be new information because the original deciding official might have made a different decision had he or she had the opportunity to review the new analyses. 
  4. Most of the communication has a 30-day window post recepit of the FDRR from the sponsor.

So PTCT cannot bring anything NEW to the table other than their repeat protest. If they have something new to offer including new analysis of their old data (FDA is asking them for new information aka a new clinical trial), they will have to re-engage with the FDA to work on filing a new NDA. This is not going to happen anytime soon and at the minimum, will require 3 more years to happen. Pending any new information, what is PTCT trying to achieve here? 

The only thing I can think of is  PTCT wants to buy time. What could be the implication of that? I don't know. There may be an incentive for the insiders to sell a little more of their holding. Maybe their institutional needs the same time. But in the absence of anything meaningful or engaging, I will not hesitate to say this. PTCT has a 0% chance that FDA will change their mind.  What will this lead to? PTCT can appeal the decision again at the next higher level of command. I guess they can keep repeating the process till they reach the highest level, which I believe for the FDA is the executive branch and the President of United States. If they do manage to reach there, I am positive that I will be covering my short position but till then I am willing to be patient.

So the bigger question is what is the downside of this FDRR? I think the negatives bring a bigger downside for PTCT. It keeps PTCT in the limelight for longer than necessary. The EMA and the European payers are paying close attention to the FDA decision. In fact, I speculate, that the private payers in Europe may request EMA to treat the conditional approval as an investigational treatment and make the drug available free of cost to patients instead of the ~$300,000 they have to pay out on an annual basis.  If this were to happen the $150M revenue stream projected by PTCT should disappear sooner than later. By bringing PTCT in the limelight after the CRL definitely makes it a big risk. They can always make a legitimate claim to the same revenues with well designed randomized clinical trials to support the approval of ataluren.  But till then, more disputes, more protests do more harm to the company.

Finally, on a side note, there is a lot being talked about the new drug RG7916 in partnership with Roche and the SMA Foundation (SMAF) in pediatric and adult Type 2/3 SMA patients. PTCT recently received a $20M milestone payment for advancing the drug to the next level of clinical trials (Milestone Payment). This drug is very early in its clinical development and the part 1 of the phase 2 study named SUNFISH showed some promise in a carefully worded press release "RG7916 resulted in a substantial increase in SMN protein production in SMA patients. We believe that a major advantage of RG7916 is that it is an oral drug that distributes throughout the body. This is important because the SMN protein is critical both in the CNS and peripheral tissues". The words "substantial" is not quantified and open to interpretation. What needs to be understood is this drug was licensed from Roche and another drug from the same class being developed for SMA RG7800 was put on clinical hold for safety reason. A fierce pharma article notes the safety issue involved the eye and the development of the drug was terminated.  RG7916 belongs to the same class and investors hoping to see a positive outcome of the future clinical trials of the drug for SMA are being too optimistic. 

To conclude, there are not any positive catalysts waiting to happen to propel PTCT to the next level until 2021. The EMA revenues are likely to be under threat for the reasons stated above. The RG7916 is way too early in its clinical development and with a potential of same class safety signal, one needs to be cautious.

Disclosure: I am/we are short PTCT.

Additional disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.