PTC Therapeutics, Inc. (PTCT) Earnings Call Transcript & Summary

Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analysts. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have from PTC Therapeutics' CEO, Stuart Peltz; and Chief Development Officer Matthew Klein. Welcome.

Thanks for having us.

Thank you. For those who may not be familiar with PTC, can you provide a brief introduction?

Yes, sure. Well, first, thanks for having us. We appreciate the opportunity to be here. For those who don't know us, we're -- I founded the company, so I was the founder of the company. I was previously at Rutgers University 23 years ago, where we built the company initially on the bonding of RNA biology -- RNA biology to treat diseases, rare disorders of high unmet medical need. That's where we focus, and the other goal was to build a company that both discovered and developed and commercialized products for these diseases. And so over the last now almost a quarter century, we've been doing this such that now we have -- we'll be kind of company about between 1,200 and 1,300 people. We're global greater than 25 sites. We distribute in 50 countries. We now have 4 products that we're commercializing. We also get revenues from Evrysdi, which is a splicing molecule that came from PTC. And so we're now moving towards building to a company that has a larger, a more robust pipeline that will continue to add additional programs. And so we've done this by building out multiple scientific platforms that then will produce programs. And from that philosophy, we've now come to in a sense continue to have what I call sustainable innovation that will continue to add programs. And that led that we now in the next year, we have -- we'll be running 6 registrational studies in the next year. All of them really are potential near-term value drivers. And I think because of Huntington -- because of SMA and Huntington, that's sort of been driving the interest, so these I think are undervalued products that I think it would be good for people to pay attention to because they could be really not too distant or near-term value drivers. I'll start by saying with Translarna, right, that's the first product we've got that's been doing quite well around the world that there'll be -- there's a registrational study that will be done next year in the third quarter for the U.S. We also have from our Bio-e platform, which really is to get rid of excess electrons that can cause havoc when the cell 2, 2 registrational studies using vatiquinone, one in mitochondrial epilepsies and one in Friedreich ataxia. And then we also have I think an exciting program that we're very optimistic about PTC923, which is in PKU. And this is a drug that I think we -- I think is underappreciated from the point of view it's a registrational study that's ongoing where we measure phenylalanine and that when it's already shown in Phase II studies, that it has a greater reduction of phenylalanine in a broader patient population that responds to it. And we're in the unique position that here where we actually know the patient population is simple outcome measure, it's a run-in clinical trial, so we think this could rapidly show evidence in the large patient population that we could deliver this drug to. And then the COVID-19, we have our Emvododstat for COVID-19, which is an orally bioavailable inhibitor DHODH, which viruses need to make remedies, and so by inhibiting that to inhibit viral replication and some of the pro-inflammatory response occurs. That's a clinical trial where we should have results by the end of the year. And then with AADC, we expect a result for our gene therapy program for AADC deficiency by the end of this year and then also putting in the FDA BLA. So lots of exciting programs for value generation. And then the commercial performance, I'm very proud to say, the DMD franchise that has Translarna and Emflaza really showed very robust and continued growth over the year. So we saw a 36% increase year-over-year in revenues. So this has led us to increase the overall guidance from -- to $370 million to $390 million. So I think that's quite exciting. And then of course I think you can't forget about Evrysdi, which has just been doing phenomenal, right? And it's already been approved in 58 countries, 34 additional countries where it's been submitted. It's done well wherever it's been going. We expect this to continue. And I think we're all -- I think everyone's pretty excited about this, and we even expect it to be multiples of what even anyone else anticipated. So we're really excited that this came from our platform, the splicing platform. So we're -- it's in a good spot. So that's the quick overview.

Great. Thanks, Stuart. So maybe let's dig into the DMD franchise. As you said, with 2Q earnings, you raised guidance to $370 million to $390 million, which even on the high end would suggest slightly lower net product revenues for at least a quarter in the remainder of 2021 than in 2Q. I guess is this conservatism in your guidance? Or are there other factors that investors should consider such as the delta variant or seasonality?

Yes. We've -- so look, the franchises -- I mean, the fact that you see continued growth, lots of geographic expansion, it's just -- it's growing and growing. Now obviously as the pandemic evolve there's different environments and challenges. And Brazil, as you know, was hit very hard and had multiple minister of health changes. So that leads us to say, well, we're confident whether it hits by the end of the year or not as always. And so rather than -- this is the thing we do every year, though, right? It's not unusual to us that they buy in bulk. So it can be lumpy. And so rather than -- and so all we're saying is that if there's any -- if there's a -- we know it's not a when, but if and so we put that into the environment. But overall we expect it to do quite well and that we've just recently, for instance, got approval in Russia, where we're studying already immediately the commercialization of that. Patients already are receiving treatment. So we expect continued growth there as well. Middle East and North Africa continues to grow. Central and Eastern Europe is continuing to grow. You've seen Emflaza do phenomenally well, and we expect that continual growth to occur and you could see that as a consequence we've done -- I think the team has done a really good job. And the data is now incredibly compelling on all the data demonstrating the effectiveness of Emflaza. And so that's -- it's going to be -- obviously we expect new patient starts. And then we've also done a very good job in reducing the bridge and the free drug programs that more than and moved over to commercial product. And then there's -- we've done a lot of work to make sure that a compliance, so there's been increased compliance in terms of drug treatment and therefore also lower discontinuations. So all that built in, it's overall that's where we got to the number just to be conservative because it's just certainly some unknowns there. But we're -- all in all, we're very confident of the continued growth that we're seeing. It's not -- as you could see, a onetime behavior. Continues to do well both for Translarna and Emflaza.

Okay. And you've indicated that Evrysdi has almost 20% market share in less than a year since launch. I guess where do you see the greatest opportunity for continued growth? And what geographies outside the U.S. should investors watch for as you complete additional pricing and reimbursement discussions?

Yes. The nice thing about ultra-orphan drugs is some of the rapid pickup, especially to have an orally bioavailable drug that's shown to be effective. And you can see in Europe the not only uptake, but the discussions with not just the regulatory community, but the payer community of showing that they're very receptive for what we've done. And so none of this is a surprise for me. And what's nice is that the majority SMA patients are still not being treated. So as we grow the market, the ease of a oral molecule with broad distribution, I think it really allowed patients to have access to the treatment. And this is only going to grow. And that's why -- in the U.S., it's grown over 1,800 patients and continuing growth. Europe is now taking off, right? The payers are weighing in and it always takes a little more time in Europe to get going. But you have 58 other countries in Latin America, Asia. You saw the approval in Japan. So my -- obviously it's the countries are going to drive a lot of value because of the number of patients, but you get value everywhere. So the fact that it's such a full-blown commercial process in all these countries, it's -- we anticipate -- my guess is there's going to be multiples of what any of us expected from the beginning of just how well it's doing.

Okay. And then for PTC518 in Huntington's disease, can you remind us what you saw in the Phase I? And what do you hope to learn for -- from each of the additional cohorts for which the data are expected by the end of month?

Yes. So we learned -- that was in healthy volunteers to be capable of learning that the drug demonstrates that it targets the -- what you wanted to target. And to be able to do that in a healthy volunteer Phase I trial, I think it's really -- it's really quite remarkable. And we saw -- we did a single ascending dose and multiple ascending dose. And the single ascending dose, we went up to 135 milligrams total. And actually when you saw that at the higher doses, we saw the RNA levels drop to 50%. But that really means you saw 100% of newly synthesized RNA because if you think about the RNA when you started it that you say that's 100% and the half-life of the RNA is about a day, if you didn't add any new RNA to it, the new steady state would be 50% in a day. That's what we saw. So that means we actually hit 100% of the new resynthesized RNA. And that makes sense because when we went to the multiple ascending dose, we saw at 15 milligrams, about a 50% reduction. So -- and that was the target that we were thinking about to get to treat patients. So we've shown that that was what we had shown, right? So what we're going to show next is because people have asked for this is what about the protein? And it makes intuitive sense that the level of reduction in RNA leads to the similar reduction in protein, but that takes a little bit longer because the half-life of the protein is longer. So when you think about steady state, if you get to 50% in a day because the half-life is 50 -- is about a day, the protein half-life is probably between 5 and 7 or 8 days. So you can imagine that would take longer to get to the ultimate steady state. So what we'll be showing you is longer-term treatment a bit longer to show you that the protein -- what the protein level is. And then also one question that investors have asked us, does it get into the brain? We didn't do this part actually in the SMA, but we did do it here, we'll be showing you the CSF levels of drug, right? That's important for everyone to realize. These are healthy subjects. So you don't expect any protein -- Huntington proteins in the CSF, but we can measure the levels of PTC518 in the CSF that -- and you don't get into the CSF unless you pass the blood-brain barrier, and see that, so we'll know those levels and so we'll be able to say this is what we saw in blood, this is the levels we saw in brain, and that's the anticipated reduction. And then you have the same advantage that you had in SMA that because it's oral and you see that level, that level will be seen in all tissues in the brain.

Great. And then meanwhile like planning for the Phase II is underway. Like how should we think about the study design, the number of patients needed and what the primary endpoint will be?

So the way we were initially thinking about the Phase II trial was that what you really want to do is show that what you see in the healthy subjects are repeated in the Huntington's patients, right? So that was our initial plan that we then go to a clinical benefit trial. But I do think that there's been a substantial change as a consequence of the Biogen Alzheimer's drug, right, where the approval is based on a biomarker, right? And that to me is a big game-changer, right, in that they got an accelerated approval based on that. So what we're doing is developing the Phase II protocol in a way similar to what we were thinking about where the trial is going to be based on looking at biomarker data both in blood and probably then in the CSF. But we'll now make sure we do this in a way where we'll be doing biomarker studies, look at also Huntington protein in the CSF and changes that occur as well as in the blood as well as things like neurofilament and others and build it as a potential accelerated approval pathway where we can more rapidly, right -- so if you think about the Alzheimer's result where you're looking at plaque, which, right, is not among, it's a polygenetic disorder where plaque is important, but the clinical interaction directly is different than if you think about Huntington's disease which is a monogenetic disorder, that's a mutation that's a gain of function that leads to Huntington's disease, where there's -- so you know that's true. There isn't anything else. It's the level of the Huntington's expression that leads to the disease. And we know that lowering it both in animal models as well as looking at natural history in the clinic that lower levels leads to better outcomes for patients, that being able to have an accelerated approval on that, we then also do an outcome measure. And so that's what we're thinking about. And so Matt, you may want to talk about a little bit about the Phase II and then the clinical outcome measures.

Absolutely. I think we realized, as you mentioned, when we talk about neurodegenerative disease, there's incredible importance to find what we call the goldilocks population, that population that is going to move enough during the trial that you can demonstrate benefit, but they're not so advanced that you have no ability to affect disease progression or modified disease. And so we've taken advantage of the extensive HD databases that are available, such as enroll HD, which is a 20,000-patient database and really done what we've done before in DMD and pioneering these fields of understanding, the solving that complex equation of the ideal endpoint and the ideal patient population that can meet that endpoint. And so what we've been able to do is to develop a set of criteria that really will allow us to enrich our enrollment for those patients who are likely to progress during the course of the study. And in the Phase II study obviously that's very important for demonstrating those changes in biomarkers that Stu mentioned that could support an accelerated approval. And then, of course, ultimately see how those enrichment criteria can also allow us to practically demonstrate a clinical benefit in the course of a clinical trial, which, again, is always a tremendous challenge in neurogenetic disorders.

Great. That's very helpful. Maybe one question on PKU. The Phase III AFFINITY study starting this quarter, I guess, can you -- how do you determine which patients are responders to 923? And what are your expectations on the proportion of patients that might respond to treatment?

Yes. Thanks for that question. I think this is important, mainly also because if you compare this to anything else we've done before, it's such a well-known pathway, right, where we know you can use the outcome measure of phenylalanine. We already did a Phase II study where we showed that more patients respond and the levels of phenylalanine is lower. And we're in this unique position of a rare disorder that has an easy biomarker. The path is well-drawn and the centers of excellence are known, the physicians, the key physicians are defined, there is newborn screening. There's 58,000 patients, a lot of them and only a small percentage stay on or utilize the products that are already there for treatment. So if you look at the BioMarin they say about 3,000 patients in Kuvan. So there's a huge opportunity in a path that we understand and we'll be doing a run-in study. So you know all the patients that are going in respond to the drug. So you've already preset that up. So to me, we have -- and that was used previously. So in a really good position to get this approved. That's what -- so we feel really good about that. And that will be an ongoing study that we start this year with a readout in 2022.

And what do you need to see to consider the study a success? And can you remind me if -- what were your powering assumptions?

Sure. Matt, do you want to go with that a little bit?

Yes, absolutely. So again, as you said, we had the advantage here we rarely have having an objective endpoint that is present for approval, which is a blood-based measurement, and having the study design that's already established as a precedent for an approvable study design. And that design is exactly as Stu said, you can have a period of run-in where you can treat patients with PTC923 and say do you have X percent reduction in phenylalanine? If yes, okay, then you get randomized to receive PTC923 for 6 weeks or a placebo. And that's really the ultimate enrichment because you know that the only subjects we're getting randomized are those who meet the threshold of phenylalanine reduction. So obviously that puts us in a position to be extremely well-powered with a relatively smaller number of subjects to demonstrate that benefit. And again, the benefit is significant reduction in phenylalanine relative to placebo. So this is a really straightforward study design. We have the advantage of knowing from our Phase II work that we have a drug that works across all PKU patients, including the most severe classic PKU patients, which is incredibly important. And we -- really sets us up to have an efficient trial that we can move through quickly. And as Stu said we're going to be starting that trial as we said this quarter and look forward to data in 2022. And again, it's a short efficacy trial that provides us that necessary package for approval.

Okay. Maybe moving to oncology. You guys have a few data readouts expected I guess this year. Maybe can you talk about the 2 Unesbulin studies and then the Emvododstat study that you're expecting data for? And what do you need to see in each of those studies to consider it a success?

Sure. Thanks for that question. It gets less attention than normal. But I think it's going to start to get more because I think it'll probably get more interesting too. So Unesbulin, which was formerly PTC596, is in clinical trials for DIPG and leiomyosarcoma, right? So the DIPG is the rare brain tumor in pediatric brain tumor. And there's probably 300 to 500 patients per year. Leiomyosarcoma is on the order of about 4,000 per year. So they're ultra-orphan rare disorders with incredible high unmet medical need with really no safety options. And that what we've done is an escalation -- a dose escalation study to really identify the Phase II dose. And so I think at the end of this year, I think we may be in the position to see which of the doses demonstrate some efficacy in the endpoints that then give us a dose that could be in the next, which could be a registration study in both of these diseases, right? So I mean, the orphan disease, these kids die within 9 months to 11 months and then the leiomyosarcoma has very little treatment options. So we're pretty excited about this, and we anticipate results by the end of this year.

Great. And then maybe moving on to AADC. Can you talk about the 300 patients that you plan to identify by launch? And how quickly do you think you could treat those patients? And what are your current plans for continuing to identify and treat additional patients?

Yes. So that's -- so we've been working hard on that. We anticipate a decision in Europe by the end of the year. And I think you're -- it is a good point where really it's because this is a newly derived disease that can easily be diagnosed to look like cerebral palsy or severe epilepsy. It reminds me a lot of like SMA, the patients have that sort of floppy baby syndrome where you see arrested developmental milestones where they can't hold their head up, sit, roll over, stand or walk. And so this actually is injected into the [indiscernible] where we can see -- so we've seen very good really results, transformational results where kids can sit, stand and walk, but you have to search for them. And so we -- and we've been working hard on that. There's -- we've had a large number of different programs in order to find what works best. And it's obviously at the end of the day where you really -- where you can sort of see some of the phenotypes of the children that then lead to genetic testing to look for the mutation of the AADC gene. And so we've been doing a lot of that, and it's been escalating up so such that we'll have, like we said, about 300 patients at launch. So we feel good about that in terms of being able to do that all the while also making sure that there are surgical centers that are ready at launch to do that. So we've been doing a number of these procedures and getting them ready, right, to understand the procedure and get it ready. So it's exciting. It's exciting because this would be the first really where you're actually direct injection into the brain. So quite an approval for that would be really the first of its kind and really quite important. And so we're building up to have the right patients, the right centers to rapidly move through that -- the patients that have it.

Great. And you touched upon this next question a little bit in your overview. But from the Bio-e platform I guess what programs are you most excited about? And when might we see data for these programs?

Yes, the Bio-e -- the both the mitochondrial epilepsy and the Friedreich ataxia are 2 programs, and the reason we're so excited about this platform is because it's an unusual platform where it's targeting a key enzyme called 15-lipoxygenase. And what happens is if you think about it, you get excess electrons and the body is often able to soak that up, right, glutathione is one of the key mediators of that. But in mitochondrial diseases and diseases where things have gone awry, you have free electrons that ultimately lead to [indiscernible]. So it causes havoc within DNA protein RNA membranes, right? And when you use above glutathione, you have this in a sense, very much like an inflammatory response as again said because -- and you turn it on and you overreact. And just like inflammation, right, where you need it sometimes, but you need to rapidly turn it off, and if you don't, it causes problems, that's similar to what happens with having too much excess electrons. And that's what causes mitochondrial epilepsy, Friedreich ataxia. It evolves in a whole series of diseases, right? So -- and this is a molecule that can modulate the key enzyme involved in that and actually be able to move electrons around. That's what makes this unusual. And therefore, it's a good modulator that could be used in many different diseases. Friedreich ataxia and mitochondria epilepsy, we're really quite excited about. Those will be results next year and the year after that. And then also -- but we're also broadening the use of this, which is another compound we have that will be then -- could be used in other diseases like ALS, Parkinson's and others that where you have key where again, if you think about the interest in just the brain itself, well, it's relatively small, uses up 20% of the oxygen. So you can imagine when it goes awry, the mitochondrial goes awry, that's where you get lots of issues, and that's why you see mitochondrial diseases in the brain. And so we'll be working on a number of those that will start subsequently in like ALS first and then Parkinson's and others.

Great. Well, maybe in the last minute, one last question on capital allocation. You already have a pretty deep pipeline. With nearly $1 billion in cash, how are you thinking about acquisition of additional pipeline programs or companies versus internal development?

Yes. So I mean, so when you think about we now are selling 4 products, have revenue from Evrysdi, the potential for revenue with the -- with AADC and a number of things, it's -- the concept is we went from this company with a smaller set of products to a larger one and the build to be able to think about enduring it well beyond where we're at. And therefore, when you think -- we all know drug development is a hard process. And from a macro point of view, you need short-time goal, right? So to make sure that you have enough programs and you believe in all of them enough that you have enough that, at the end of the day, things continuing within whether it's 1, 2 or 3 years as you build a number of programs. And so that's how we think about it. You need a level of pipeline with a big enough set of programs that ensure success at ever one time, and you use both internal research, which we've done. We have the Bio-e gene therapy nonsense metabolic to build multiple programs. And then we use business development and others when -- if we see gaps or changes that we need to fill in, if there's time gaps to have additional products. And so our whole big picture is the notion of I think we're a company that continues to innovate, brings -- either brings in or do it ourselves. We have robust platforms now in Bio-e splicing gene therapy and metabolics to keep moving that and put in the business development opportunities and growth, like you said, depending on -- and so that's how we think now for the next decade of products, how to grow so that innovation leads to revenues, which then leads to innovation. And so it's growing the revenues that we said, look, about $1.5 billion by 2023, but that's a milestone, not a endgame. And you can see with all the number of programs, many short-time goal that can grow much larger than that. And therefore, we continue then to have our own innovation revenue cycle, and that's what we're building towards. And I think we're in a very good position with the 6 registration studies and others that are going through that really see that growth continue.

Great. It looks like we'll have to leave it there. Thanks so much for your time.

Thanks. Thanks for having us.