PTC Therapeutics, Inc. (NASDAQ:PTCT) Q2 2023 Earnings Call Transcript

PTC Therapeutics, Inc. (NASDAQ:PTCT) Q2 2023 Earnings Call Transcript August 4, 2023

Operator: Good day, and thank you for standing by and welcome to the PTC Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference call over to your speaker today, Senior Director of Investor Relations, Ron Aldridge. You may begin.

Ron Aldridge: Good afternoon, and thank you for joining us today to discuss PTC Therapeutics’ second quarter 2023 corporate update and financial results. I’m joined today by our Chief Executive Officer, Dr. Matthew Klein; our Chief Business Officer, Eric Pauwels; our Chief Commercial Officer, Kylie O’Keefe; and our Chief Financial Officer, Pierre Gravier. Today’s call will include forward-looking statements based on our current expectations. Please take a moment to review the slide posted on our Investor Relations website in conjunction with the call, which contains our forward-looking statements. Our actual results could materially differ from these forward-looking statements, as such statements are subject to risks that can materially and adversely affect our business and results of operations.

For a detailed description of applicable risks and uncertainties, we encourage you to review the company’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission, as well as the company’s other SEC filings. We will disclose certain non-GAAP information during this call. Information regarding our use of GAAP to non-GAAP financial measures and a reconciliation of GAAP to non-GAAP are available in today’s earnings release. With that, let me pass the call over to our CEO, Matthew Klein. Matt?

Matthew Klein: Thank you Ron. Good afternoon and thank you for joining the call. I’m pleased to share PTC’s second quarter results and our expectations for continued strong performance in 2023. First, I would like to extend a warm welcome to our new CFO, Pierre Gravier. I have had the pleasure of working with Pierre over several years and I’m confident his extensive experience in finance strategy and healthcare advisor will be incredibly helpful as we continue to build the PTC of tomorrow. Now, let me begin with our second quarter revenue. We achieved another quarter of strong revenue growth with total revenue of $214 million. This represents 29% growth over the second quarter of 2022. Our DMD franchise revenue in the quarter totaled $162 million, a 21% increase over the second quarter of 2022.

This robust second quarter performance puts us in a strong position to achieve our 2023 total revenue guidance of $940 million to $1 billion which would represent 34% to 43% year-over-year growth. In addition to our team’s continued strong commercial performance Evrysdi is now approved in 100 countries with more than 8500 patients treated globally. Continued growth is expected as access is achieved in countries where Evrysdi is approved. In addition based on the recent positive opinion from the CHMP, the Evrysdi EU marketing authorization will now include pre-symptomatic infants providing another important source of potential revenue growth. As we shared in May we initiated a strategic portfolio review and associated OpEx reduction. With our previously announced decision to discontinue our preclinical gene therapy programs and other prioritization decisions we now anticipate non-GAAP, R&D, and SG&A expense for the full year 2023 of between $810 million and $860 million versus our previous guidance of between $890 million and $940 million.

In addition to the expected impact of our May portfolio decisions on 2023 OpEx we anticipate annualized savings of approximately $150 million in 2024. Moving to our pipeline, Q2 was very busy as we reported results from several clinical studies including strong data sets from our APHENITY and PIVOT-HD study. Let me start with our APHENITY trial of sepiapterin in PKU patients. In May we announced that we met the study primary endpoint of blood phenylalanine reduction with highly statistically significant and clinically meaningful results. Sepiapterin demonstrated substantial Phe reduction from baseline of 63% in the overall primary analysis population and 69% in the subset of classical PKU patients. In addition the vast majority of patients were able to reach target Phe levels in line with US guidelines of less than 360 micromoles per liter.

With these strong data in hand, we requested a pre-NDA meeting with FDA which has been granted and is scheduled for the third quarter. Pending FDA feedback, we expect to submit an NDA in the fourth quarter of this year. Given the strength of the APHENITY data we remain incredibly enthusiastic about the potential $1 billion-plus global commercial opportunity for sepiapterin. In addition as Professor Ania Muntau emphasized in our recent PKU commercial deep dive presentation, the physician community is excited about the potential for sepiapterin to fill the persistent large unmet medical need for PKU patients worldwide. Moving to PTC518 for Huntington’s disease patients, in June we reported interim 12-week data from the PIVOT-HD trial. To summarize all key objectives of this interim data analysis were met.

PTC518 treatment resulted in dose-dependent lowering of blood cell Huntington protein with mean lowering of Huntington protein levels of 30% in the 10-milligram dose cohort. Treatment resulted in the targeted levels of CNS exposure with a ratio of CSF to plasma exposure of 1.5:1 at the 10-milligram dose level. This suggests that greater lowering of HTT protein possibly up to 45% could be occurring in brain cells. Importantly, PTC518 is well tolerated with no treatment-related SAEs, no reports of peripheral neuropathy and no treatment-related CSF NfL spikes, with an overall trend towards lower NfL levels in PTC518 treatment groups. With these encouraging interim data we will continue to enroll Stage 2 and early Stage 3 patients into the PIVOT-HD study.

And of course we look forward to the 12-month results of the initial treated subjects at which time we can learn more about the longer-term effects of PTC518 treatment on key disease biomarkers. These HD data along with the continued global success of Evrysdi further support the power of our splicing platform. Moving to vatiquinone, we reported results from the MOVE-FA trial in pediatric and adult Friedreich ataxia patients in May. While the trial did not meet its primary endpoint the results of the MOVE-FA trial did demonstrate evidence of meaningful clinical benefit on key aspects of Friedreich ataxia, including in pediatric patients for whom there remains a large unmet medical need. In particular, the data demonstrating the vatiquinone’s treatment benefit on the upright stability section of the mFARS scale support a potential long-term benefit in slowing time to loss of ambulation.

Given these results, the well-established safety profile of vatiquinone in pediatric patients and the remaining unmet medical need for pediatric FA patients, we plan to share these results with the FDA to determine if there is a potential path to approval. We requested and were granted a Type C meeting with the FDA, which is scheduled for the fourth quarter of 2023. We expect a number of additional regulatory activities in the second half of 2023. Beginning with Translarna, we expect CHMP opinion for the Type 2 variation to convert the European conditional marketing authorization to standard authorization in the third quarter. In the US, we plan to submit a Type C meeting request this month to the FDA to discuss the totality of data collected to date that could support an NDA resubmission for Translarna.

Upstaza as we’ve previously shared, we are awaiting feedback from the FDA on additional bioanalytical data we submitted can support a comparability analysis between the clinical and commercial drug product. Based on the timing of this feedback, we expect to submit the Upstaza BLA in the third quarter. Overall, I am incredibly proud of our continued successful execution across both our commercial and R&D teams. Our commercial performance in the first half of 2023 positions us well to meet our revenue guidance of $940 million to $1 billion. And the strong data sets from APHENITY and PIVOT-HD position us well for continued future growth. I will now hand the call over to Eric and Kylie to provide an update on our commercial accomplishments. Eric?

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Eric Pauwels: Thanks Matt. It is exciting to see the progress of our pipeline and the future opportunities of new product launches and our customer facing team is eager to bring these much needed treatments to patients around the world. We are extremely proud of the accomplishments of our global customer facing team, which has delivered another strong quarter in revenue. The team continues to accelerate the significant momentum built in the first quarter and is focused on executing on the growth strategy of our commercial portfolio of products. Our global DMD franchise continues to be robust and our strategy of geographic expansion continues to progress in Latin America, Middle East and Northern Africa and CIS regions, while we continue to build out the future foundation and growth of markets in Asia Pacific.

Now, let me turn to the DMD franchise. Translarna and Emflaza continued to be an important growth driver, delivering an impressive $162 million in net revenue for the second quarter, which is up 21% compared to the second quarter of 2022. With a strong first half for our DMD franchise, we are updating our 2023 DMD franchise revenue guidance from $545 million and $565 million to $545 million to $575 million. For Translarna, we achieved $96 million in revenue this quarter, which is a remarkable 25% growth over the same quarter in 2022. Growth occurred across all major regions and we continue to see growth from new patient starts being added in new growth markets. As mentioned previously, due to the unpredictability of large government orders in some of our regional markets particularly in Latin America, Central and Eastern Europe, the Middle East and CIS regions, we expect to see ongoing lumpiness in quarterly revenue throughout the year.

Now turning to Emflaza. The fundamentals of the Emflaza business continue to be solid. Quarterly net revenue was $66 million, which is 16% growth over the same quarter in 2022. We continue to see strong trends in the number of new patient start forms in the second quarter, which will provide important momentum as we progress through the year along with continued high compliance appropriate weight-based dosing and a continued focus on broad access. Now, I’ll ask Kylie to update the progress on our current and future new product launches. Kylie?

Kylie O’Keefe : Thanks, Eric. Let me begin with Upstaza, the first and only approved gene therapy infused directly into the brain. We continue our steady rollout across Europe including treating our first patient in Italy, in the second quarter. We continue to see transformative results for the patients that we have treated thus far, which we shared at the recent European Pediatric Neurology Society, the EPNS Conference in Prague. New treatment centers of excellence are being opened internationally to support the treatment of patients, as we continue the European rollout. We also continue to leverage early access programs and cross-border treatment opportunities and expect to treat more patients both in Europe, and other international markets throughout the second half of 2023.

Moving to Tegsedi and Waylivra in Latin America. We continue to establish Tegsedi as the treatment of choice based on its strong clinical profile, and improved quality of life for hereditary ATTR polyneuropathy patients. In Brazil, we completed delivery of the remainder of our second group purchase order from the Ministry of Health. We continue to see robust growth in patient identification, as well as positive patient responses on treatment across the Latin American region. Lastly, we are extremely excited about the sepiapterin, opportunity as discussed recently at the PKU Deep Dive presentation. With a substantial unmet need and strong differentiation from both the mechanism of action and the APHENITY results, the customer-facing teams are looking forward to bringing this differentiated therapy to physicians and PKU patients, upon approval.

As we discussed at the call, we were able to leverage our strong global commercial infrastructure and we have now established our internal global launch team. This team is actively working to prioritize the global launch and key pre-launch activities, with the first step of bringing sepiapterin to the US market followed closely by Europe, Japan and other key international markets. With physician excitement as outlined by Dr. Muntau and PTC’s proven track record in commercializing rare diseases, the team is poised to achieve the market opportunity of over $1 billion. In conclusion, our second quarter rounds out an excellent first half of 2023 for the commercial team. With significant progress across all our commercial products and across all geographies, we are well set to achieve our ambitious 2023 revenue guidance.

Now let me turn the call over to Pierre, for a financial update. Pierre?

Pierre Gravier: Thanks, Kylie. I want to begin by saying, how thrilled I am, to join the PTC team as CFO. I have known the PTC team as an advisor for several years, and it’s a privilege to be working with such a patient-focused company and bring my skills to continue to build the PTC of tomorrow. It is my pleasure to provide you, with the following highlights of our second quarter 2023. Please refer to the second quarter earnings press release, issued this afternoon for additional details. Beginning with top line results. Total revenue for the second quarter was $214 million. This consisted of DMD franchise revenue of $162 million and other revenue of $52 million. Starting with the DMD franchise. Translarna net product revenue in the quarter was $96 million reflecting growth of 25% over the second quarter of 2022, driven by strong performance across all geographies.

Emflaza net product revenue of $66 million, representing 16% growth in the quarter compared to the second quarter of 2022. Moving to Evrysdi. Second quarter global revenue of CHF 342 million, which equates to about $380 million was achieved earning royalty revenue of $37 million for PTC. As Matt mentioned, the second quarter performance puts us in a strong position to achieve 2023 total revenue guidance of $940 million to $1 billion including an expected $100 million milestone when Evrysdi surpasses $1.5 billion in annual revenue. Non-GAAP R&D expenses were $170 million for the second quarter of 2023 excluding $16 million in non-cash stock-based compensation expense compared to $143 million for the second quarter of 2022 excluding $14 million in non-cash stock-based comp expense.

The year-over-year increase in R&D expenses reflects additional investments in advancement of the clinical pipeline. Non-GAAP SG&A expenses were $75 million for the second quarter of 2023 excluding $14 million in non-cash stock-based compensation expense compared to $66 million for the second quarter of 2022 excluding $14 million in non-cash stock-based compensation expense. As Matt noted earlier, we now anticipate non-GAAP R&D and SG&A expense for the full year 2023 of between $810 million and $860 million. Cash, cash equivalents and marketable securities totaled approximately $338 million as of June 30, 2023 compared to $411 million as of December 31, 2022. Cash increased by $52 million from the end of the first quarter mainly due to the addition of $50 million from restricted cash as a result of the positive sepiapterin data readout based on the Blackstone agreement.

I will now turn the call over to the operator for Q&A. Operator?

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Q&A Session

Operator: [Operator Instructions] And our first question comes from Kelly Shi from Jefferies. Your line is now open.

Kelly Shi: Thank you for taking my question and congrats on a great quarter. My first question is so regarding the Translarna sales in Q1 you mentioned the sales benefited from large government order in Europe. Can you comment on how did the government order impact Q2 and how should we anticipate for the future Q3 Q4 sales? Thank you.

Matthew Klein: Kelly, thank you very much for the question. Obviously, it was another strong quarter of Translarna revenue. I’ll let Eric provide some more details on the differences between Q1 and Q2.

Eric Pauwels: Thanks for the question, Kelly. First of all we’re really pleased with the quarter. I mean we’ve generated $162 million of DMD franchise. That’s 21% growth year-over-year compared to last year. And I think as you’ve seen in the past years, we’ve actually invested in geographic expansion. It’s been very consistent that we know that lumpiness will occur quarter-to-quarter and it’s really nothing new at this point in time. But since we’ve expanded in many of these regions large government orders particularly in Latin America, Central and Eastern Europe in the Middle East and our CIS regions as we’ve seen consistently those orders and the size of the orders and the timing is relatively unpredictable. However, unlike Western Europe and the US, which tend to be more predictable from week-to-week and month-to-month I would say that the fundamentals are still the same.

And we’ve received large orders and the timing of those orders will continue. Our base business in even those markets continue to grow. New patient starts high levels of compliance, dose adjustments and very low discontinuation rates have occurred. So the fundamentals for both the new markets as well as our mature markets are really solid and in place. We anticipate orders in the second half of the year and we’ve raised if you will the upper end of the guidance at this point in time to reflect that. The timing and the size of those orders will likely be more defined in the third quarter. And as we get closer and closer to the third quarter, we’ll be able to if you will adjust and confidently achieve that level of guidance. So just stay tuned Kelly for an update around Q3 as we provide a little bit more color and we’ll have more visibility on the timing of group purchase orders in the second half.

But right now, we feel very confident and we have very good tailwinds in the DMD franchise remaining throughout the year.

Kelly Shi: Thank you very much. And I also have two quick follow-ups. First, can you guide out any trigger for PTC to start reporting Upstaza’s quarterly revenue?

Matthew Klein: So Kylie, do you want to talk about?

Kylie O’Keefe: Absolutely. Thanks, Kelly. So as we’ve spoken about while we did provide guidance last year I think the intent with providing that guidance was to ensure that we clearly indicated that we expected to treat patients very rapidly into the launch. We weren’t expecting a delay from launch to treatment of those patients. As we’ve said previously it’s very difficult to understand the true forecast in the first 12 months of launch. And so as we move through that period and we garner a much clearer understanding on how we’re seeing patient throughput, pricing and reimbursement particularly in Europe being a country-by-country process, gaining more clarity into that and a number of registrations ex-US we’ll be able to provide more granularity and more clarity. So hopefully that answers the question.

Kelly Shi: Yes. Thank you. And the one last one if I may. So regarding the Type C meeting with FDA in ataxia filing, just curious to what kind of a strategy you can share like whether you have done some group analysis and also and a focus on like improved efficacy maybe on some genetic marker and also certain group of patients? Thank you.

Matthew Klein: Kelly, thanks for the question. Can you clarify the Type C meeting for which indications?

Kelly Shi: FA.