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

Good afternoon, everyone. I'm Andrew Galler, one of the biotech analysts here at Morgan Stanley, and I'm pleased to be joined today from PTC Therapeutics, Matt Klein, COO; and Kylie O'Keefe, who is the Head of Communications and Global Corporate Strategy. So I think -- and then before we get started, I want to read out some disclosures. So 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.

So to start off, I think that PTC is really in a transformational period right now, based on some of the recent milestones you hit and then also some upcoming data catalysts. So maybe if you want to take a few minutes to start to just talk about where you view the company is right now?

Yes, absolutely. So we said at the beginning of 2022 that this is going to be a transformational year for PTC, and it already has in so many ways with a lot more exciting catalysts to come. But PTC was founded almost 25 years ago with the goal of using pioneering science to develop transformative therapies for patients with rare disorders. And over the past 2 decades, we've been able to deliver on that and have built a biopharmaceutical company that discovers, develops and commercializes innovative therapies for patients with rare disease. We have a footprint in over 50 countries, a strong global commercialization organization and a very broad portfolio that's built on a number of platforms, each of which itself is built on innovative science, whether that be our gene therapy platform from which we recently had Upstaza approved, which was the first in vivo gene therapy approved in several years, the first ever gene therapy approved that's directly administered to the brain that was approved this past summer in Europe, and we look forward to submitting a BLA later this year for approval in the United States; whether it be our splicing platform, where Evrysdi, which has been approved for SMA now in over 89 countries was discovered as the first ever orally available splicing molecule. And now we have our Huntington's disease program that we're developing ourselves in PTC518 that's now in our Phase II PIVOT-HD trial for patients in Huntington's disease with data expected in Q1. Our nonsense mutation platform -- nonsense suppression platform with Translarna, which was the first ever approved therapy for Duchenne muscular dystrophy from which we had a recent Phase III readout, Study 041 that we'll probably talk a bit about with statistically significant functional benefit demonstrated across the key endpoints in DMD. And then also our redox platform with our Bio-e platform, another innovative approach to tackling disorders of high levels of oxidative stress and inflammation. We've also continued to have year-over-year strong revenue growth from our 5 marketed products. We are projecting that revenue between $700 million and $750 million in 2022. And as we reported in our Q2 earnings, we remain on target to reach that guidance. So as I mentioned already, we've had a number of significant accomplishments in 2022. We look forward to readouts later this year from our Phase III study with PTC923 and PKU as well as readouts from registration-directed studies with vatiquinone in Q1 and Q2 of next year, readout from our PIVOT-HD trial in Q1, the first -- 2023. So a lot of exciting things happening already. A lot of exciting things to come in the very near future as we continue, as we said, along this transformational path for PTC.

Absolutely. So you touched on this that you have a broad portfolio [ spanning ] multiple modalities and therapeutic areas. Where do you think about the portfolio right now? Do you think you have everything in your toolbox that you need? Are there any technologies you consider bringing in through external innovation?

We built, as I mentioned, this broad portfolio with all of these different platforms. It's been a combination of homegrown science from our own laboratories as well as acquisition and in-licensing of technologies. And I think we're pretty proud that we are able to offer therapeutics from a number of different modalities. Because what that allows us to do is we can target rare disorders and not be beholden to one specific approach, but rather say which modality is best suited to tackle a disease. For example, Upstaza, our gene therapy, is for the disease AADC deficiency, where kids are unable to make dopamine because they lack the enzyme to make dopamine in the brain. Well, we use gene therapy, targeted delivery, we're able to deliver the gene therapy product directly to the putamen of the brain, which is the region of the brain where dopamine is needed for the neurons that are there. So what a perfect opportunity to have a targeted therapy, gene therapy, replace a broken gene. When we have a disease like Huntington's disease from our splicing platform, we have an oral small molecule that's broadly bio distributed throughout the brain. If you're going to treat Huntington's disease, you're going to need a drug that broadly bio distributes to every region of the brain because Huntington's disease is a full brain disease. So I would say that it's really intentionally that we built such a broad portfolio with many different technological approaches. And I don't think there's any gaps right now. Also, when you think about our commercial infrastructure, we've built a very robust global commercial footprint with activities all over the world. And we have in the past done strategic licensing, for example, with Ionis-Akcea for Tegsedi and Waylivra in Latin America. That's an example where we've leveraged commercial infrastructure in one particular region to bring something and cosset something into an existing infrastructure. So we would certainly be open to doing those types of transactions and be opportunistic in the future, if there are things that we can bring in that can easily fit into our -- either our very strong existing development infrastructure or commercial infrastructure.

Absolutely. So as we think about your growing revenue base, how do your capital allocation priorities shift over time?

Kylie, do you want to take?

Yes. So from a capital allocation perspective, I think one of the things that we've wanted to do is ensure that we have a very strong revenue base to which we can leverage. And I think we've done that with 2022 revenue guidance being between $700 million and $750 million. And I think what we then looked at doing is we brought forward some of the Evrysdi royalty, the $650 million to really strengthen the balance sheet and ensure that we have the right resources to invest in our growing pipeline. Matt just walked you through many details about the breadth and depth of that pipeline and being able to ensure that we have the right infrastructure and research, development and ultimately in commercialization, not just to support the commercial portfolio that we have today, but also to be poised and ready to have a plug-and-play opportunity as we bring some of these late-stage near-term value drivers, hopefully to commercialization. And so really making sure that we have the right infrastructure in place to support that breadth and depth of the pipeline has been key. So we've done that over the last period of years. And obviously, we need to continue to invest in those different platforms. But as we have some very near-term readouts that can help validate these platforms, that will help us understand whether we grow further? Is it breadth? Is it depth? And how do we then allocate capital accordingly.

Absolutely. So let's move to Translarna now if we can. I guess the question that's on top of everyone's mind is can you give any updates on your regulatory discussions with FDA or EMA following 041 data?

Yes, sure. So just for reference Study 041 was a global placebo-controlled trial in boys with nonsense mutation Duchenne muscular dystrophy that was conducted as a confirmatory study for our conditional marketing authorization in Europe and also given the fact that this was a global placebo-controlled trial that was very well designed and very well executed. It also could stand to support an approval in the United States. We were very excited about the data we had from Study 041. We were able to demonstrate for the first time in a disease-modifying therapy for DMD that we were able to register a statistically significant benefit on the 2 key functional outcome measurements in Duchenne muscular dystrophy, the 6-minute walk test as well as the North Star Ambulatory Assessment. We were also able to demonstrate significant benefit on other aspects of disease captured in that study. So it was really a very robust study with outstanding results demonstrating clinically meaningful significant benefit to boys with DMD. In terms of the regulatory time lines, we had said -- we said previously that we plan to submit those data by the end of Q3 to the EMA, and we're on target to do that. It will be as part of a type 2 variation to convert the standing marketing authorization to a full -- I'm sorry, the conditional marketing authorization to a standard marketing authorization, which obviously, the strength of these data position us well to do. In terms of the United States, we said we'll meet with the FDA to discuss the path to NDA in the United States with the plan to submit an NDA shortly thereafter. And we'll look forward to providing an update on the status of the FDA and our Q3 earnings later in October.

Absolutely. But I guess when you think about your regulatory path forward with FDA, where do you anticipate the primary source of pushback being? Do you think it's around the magnitude of clinical benefit across Translarna trials, dystrophin expression or something else?

Yes. Again, I think what's really impressive about the data set from Study 041 is it's incredibly robust and really demonstrates something that the FDA hasn't seen before, which is statistically significant benefit on an entire population of 359 boys, the intention to treat population in Study 041 on 6-minute walk distance and North Star. I think also importantly, when you look at the data from Study 041 and pooled that with the data from our 2 previous placebo-controlled trials, Study 7 and Study 20, we have a treatment experience in over 700 boys, 701 boys to be exact. And we demonstrate in that population a statistically significant benefit on walk test with a p-value of 0.0002. So a tremendous evidence showing that there's a treatment benefit that's not occurring by chance, but there's robust statistical significance associated with that, and that's on the walk distance with similar findings on the North Star. In addition, we also have our long-term STRIDE registry, which is a real-world evidence registry we've generated worldwide in which we're able to demonstrate that we have a delay in loss of ambulation of about 5 years and a delay of loss of pulmonary function of 1.8 years. So this is real-world evidence demonstrating that the clinical benefits we are observing in Study 041 are meaningful. And what they do is they translate to a delay of loss of the 2 key mortgage transition points in the disease that's the loss of ambulation and loss of pulmonary function. So we think that this is a very strong package, both in terms of statistical significance and clinical meaningfulness. This is not -- there was no dystrophin in the study, which is obviously a biomarker that's been used for accelerated approval because this was really focused on functional benefit as we plan to move forward with a full approval. I'd say, in addition, just thinking historically about some of the issues raised by the agency in previous years, I think they're all very well addressed with this data package. There were concerns in the past about whether we were showing significance only in a post hoc identified group. Well, that's answered with the fact that the intention to treat population was a prespecified population. It's also the entire population. There was no hunting for a subgroup that responded. But not only do we see statistical significance in the ITT population, but also if we look at different subgroups, we see that all of them are moving in the right direction in terms of demonstrating transponder treatment benefit. There were also previous concerns about study designs in the past, had addressed the Study 041. It's a well-controlled study. We address things like baseline steroid therapy, showing that there's a stable regimen. We even stratify for steroid type. It's a global study with enrollment around the world, not being driven -- results not being driven by any one specific country. And it's a large study, 359 boys in the ITT population. So we believe we've addressed historical concerns, and we're very well positioned given the strength of these data along with the overall treatment experience with Translarna.

Great. And just to dig into the MCID question a bit. I think your NSAA 6-minute walk test, you saw a little bit below what we've seen in published literature for MCID. Do you think that combining it with the STRIDE registry that's showing that this magnitude of benefit is still prognostic for functional outcomes is more important?

Yes. I think you're referring to literature-based suggestions of what might be clinically meaningful on these endpoints. And I think we also have to be careful distinguishing what's sort of thought about in the literature versus what you actually can observe in clinical trials. And if you think about Duchenne muscular dystrophy, it's a unilaterally progressive disease, where there's a very well-established pattern of loss of ambulation, loss of pulmonary function, loss of cardiac function and death. And if you look at the changes observed in Study 041, you're seeing a 21% slowing in loss of ambulatory function in -- on the 6-minute walk distance. There's a 21% difference on North or is a 25% difference. That's meaningful. And unilateral disease, to be able to slow progression over 20% means a lot. Also, if you look specifically at the time to 10% loss of baseline walk distance, which has also been shown in the literature to be quite prognostic of ultimate loss of ambulation. We see that the median time to 10% loss of baseline ambulation of 6-minute walk distance ambulation is 48 weeks in placebo and 74 weeks median in treatment. That's a 55% slowing of disease progression, incredibly meaningful. And of course, when you sit those data alongside the STRIDE registry, as you mentioned, we know now with that short-term clinical trial data suggests, it suggests that in the long term, we're going to see this play out to a delay in loss of ambulation, and what we're seeing is about 5 years of delay loss of pulmonary function of 1.8 years. So I would say that what the changes in the trial themselves are clinically meaningful in terms of their slowing in a progressive disease, but we also see in the long term what they translate into, which is incredibly meaningful when sort of everyone considers the natural history of DMD.

Absolutely. And then to dovetail off a previous question, where do you think the latest thinking is both in literature and for regulatory agencies run the relevance of dystrophin expression?

Yes. I think the -- I think most people are aware that dystrophin was sort of the path to accelerated approval used by Sarepta and others in the past. And I think what's very clear about dystrophin as there's -- despite of being an accelerated approval metric, there's actually never been any correlation between changes in dystrophin function and changes in overall function. The changes in dystrophin levels and changes in function have never been correlated, which tells you that it may not be that valuable in terms of being a biomarker that predicts clinical benefit. We have shown in 2 studies, Study 4 and Study 45, that Translarna treatment can increase dystrophin expression. But again, the focus of our package is really going to be the functional improvement seen with Translarna and this in Study 041 as well as the overall treatment experience with Study 20 as well as the STRIDE registry and being able to provide the functional benefit in terms -- that is needed for a full standard approval.

Yes, absolutely. Like you've touched on multiple times, STRIDE registry is one of the most compelling sources of data for Translarna. FDA has been not so willing to accept matched open-label studies like this and the use of natural history of the control. So how are you thinking about approaching that with FDA?

Yes. I think -- I mean, I think the FDA and other regulatory agencies do like real-world evidence because it really -- everyone understands that everything that we do in a clinical trial is trying to understand how a therapy is going to perform in "the real world" or out in clinical practice over the long term, not in the confined environment of a clinical trial where only some part of the population is treated for a definitive time. So I think, conceptually, to have a data package that captures real-world evidence and importantly, captures what the FDA is really interested in is, what's your drug going to do on things like loss of ambulation, loss of pulmonary function. It's hard to answer that in clinical trial and the STRIDE registry answers that. I do think the fact that we are -- we'll be presenting the STRIDE registry is supportive of what we've seen in Study 041 and the other trials makes it different than if you were going in and saying, our only evidence of benefit is a real-world registry. No, no, no, we have statistically significant evidence in clinical trials, and then we have real-world evidence which provide supportive evidence of clinical benefit -- long-term clinical benefit to boys with nonsense mutation DMD.

Yes, absolutely. And then just for the nonsense mutation DMD opportunity, how are you thinking about the potential advent of gene therapy for these boys and how you can compete with Translarna?

Yes. Do you want to take?

Yes. So absolutely. If you look at nonsense mutation DMD in the U.S., so there's roughly around 10,000 to 15,000 patients in the U.S. with DMD. Around 10% to 15% nonsense mutation. So that's around 1,000 to 1,500 patients. I think, obviously, it's still early stages with DMD gene therapy. I think we're not quite there yet. But I do think one of the things that's interesting is Translarna has an ex-U.S. label down to 2 years of age. So obviously, a much younger patient population trying to secure to get these patients on treatment as early as possible because as we know, the earlier you treat the patients, the better effect you have on slowing that disease progression. And so I think when you look at the ages in gene therapy, there is a difference and a gap there that's not being met by gene therapies at later ages. In addition to that, I think there is some restrictions around some mutations that are related to gene therapy, and there is somewhat small overlap with Translarna. So I think it's still early days. But I think where we see it is there will be some overlap, but we still strongly believe in the benefit of Translarna. And to date, there is nothing else for targeted therapy for nonsense mutation DMD patients.

Yes, absolutely. If we can move now to Upstaza, if that's okay?

Sure.

So it seems like that $1 billion peak cumulative number you've given out for sale really only includes those 300 or so patients that have been identified. So can you give any updates on how you're thinking about patient discovery initiatives and the real prevalence is thought to be much higher than just 300.

Yes, absolutely. So before I jump straight into that, maybe a little bit about AADC and Upstaza. So AADC is a pediatric neurotransmitter disease that is highly morbid and fatal. So these young kids are diagnosed in the first few years of life and unfortunately, being highly morbid and fatal. They normally pass away in the first decade of life. So they have an inability to develop motor milestones, so they're unable to lift their head, crawl, rollover, walk. They're commonly seeing a number of infections. They're often on feeding tubes and breathing apparatus. And obviously, this puts a huge burden on the family. And so they require round the clock care from a caregiver perspective. With the recent approval of Upstaza in the EU, we were very excited to be able to bring this transformational therapy to AADC patients. And it was sort of made up of 2 major components. One is the initial treatment benefit data, which we see across all AADC patients that were treated in the clinical trials. And the other is durability of effect, which is really important in a onetime administered gene therapy. And we've been able to see that with 10 years of follow-up data. And so as I said, in July, we were able to secure approval in Europe, and this brings about commercialization. And so what we've done at PTC is -- considering this is an ultra-orphan condition and it is a relatively new disease in the sense it was only first diagnosed in 1990, we needed to do a number of different programs that looked at identifying patients. And what we were able to learn very quickly is there's 2 key common diseases that patients are misdiagnosed in, and that is epilepsy and cerebral palsy. So these patients present overlapping symptomatology. They go into these broad epilepsy clinics or cerebral palsy clinics and we are able to put programs in place to have genetic testing in these clinics to be able to genetically confirm patients that are AADC deficiency. So we've done a number of these programs around the world, and we've specifically focused on areas that have access to gene therapy to make sure that we're able to not only correctly diagnose these patients but bring the therapy to them because, obviously, that's very important in motivation. I think, obviously, what we did throughout the pandemic is make sure that we had a mixture of in the beginning, entirely focused on bringing these genetic testing programs to the family homes and the physicians' clinics as well. And then also shifting over time as we start to come back to face-to-face to have both digitally or electronic virtually and also face-to-face activities. I think we've learned a lot in that time, and we've refined those programs to understand where are we seeing the highest yield with patient identification. One of the things I will say is I think what's commonly seen in rare disease is when you ask a family or a caregiver to go down the path of securing the correct genetic diagnosis. And then the other end of that pathway, the doctor says, okay, great, but actually, there's no therapy available or it's only symptomatic treatments and palliative care that we can offer your trials, it's a very different motivation to secure the correct diagnosis that you can have the right diagnosis and now there's a transformational therapy available, where your trial can go from being unable to lift ahead and able to move to a potentially walking and talking. And so I think that's the acceleration that we've seen sort of leading up to having a transformational therapy available and then even beyond launch, as we've really seen that motivation shift and that acceleration of patient identification. So if we look at the opportunity at hand, I think, first and foremost, in front of us as commonly is done, Germany will be one of our first countries to launch with the commercial access. We're also looking at a number of different markets through early access programs, markets like France, Italy, Spain. And we actually announced during Q2 that we had treated our first commercial patient through the French early access program, and we expect more to come by the end of this year. And then the last and most equally as important pathways through cross-border health. So when patients don't have access to treatment centers in their home country, they're able to cross borders in Europe to get access, whether that be in Germany, France, Italy, whatever countries is appropriate. And so they are the 3 pathways that we are targeting in the short term from a European perspective to be able to bring this therapy to patients as quickly as possible. You also talked about the $1 billion cumulative opportunity. I think, obviously, that was something that we wanted to give people an understanding of where this opportunity could go. But I think that that's truly just the beginning. As you alluded to, we have shared that we found roughly 300 patients or a little more than 300 patients, but the work doesn't stop here. So we'll continue to identify them. And right now, we've secured approval in Europe. So we're working hard to bring this to European patients. But obviously, there's more to come. We also expect to submit a BLA by the end of this year, which would open up a U.S. opportunity. And then there's a number of other markets that we're looking at that would also bring additional revenue. So while I think that we wanted to frame out what we think could be the potential, I think there's a lot more growth in there.

Yes, absolutely. And then just given that it's dosed directly into the brain, is there time to for retreatment if durability wanes over time?

Well, the good news is that we now have data out up to 10 years and the first 2 patients with no evidence of waning durability. In fact, we've been able to demonstrate both biochemically in terms of increase in dopamine production over baseline that we have persistent, increases in dopamine reduction and the motor milestones and neuromuscular improvement, cognitive function and other improvements over time, all are durable. So fortunately, we're not in a situation where we have to think about redosing. We've actually had long-term durability. And again, part of that goes back to our overall strategy of targeted gene therapy delivery, not only by targeting the putamen and surgically administering it directly to that region where the gene therapy needs to be. So we're sure it gets to the right place. It also allows us to give a lower dose of the gene therapy of stated dose at 1.8 x 10 to the 11th, which is about 1,000 to 10,000 times the number of fewer vector genome copies that are systemically administered gene therapy, which obviously translates to more patient safety, less exposure to viral pathogens. It also significantly reduces the manufacturing burden. That means that we could treat 1,000 patients with Upstaza for the amount of gene therapy product would be needed to treat 1 patient with systemically administered gene therapy. But the last point is not only we're delivering it to the putamen, we're also delivering it to neurons, which have low turnover. So the fact that you're delivering it to cells with low turnover means you fully expect persistence of the gene therapy -- of gene therapy transduction and persistence of gene therapy product production, which is exactly what we've seen in terms of long-term durability.

Great. So if we move on from Upstaza to sepiapterin ahead of your AFFINITY data later this year. Maybe frame how you're thinking about this readout. Without an active control arm, it seems like it may be difficult to prove your drug works in patients that are not BH4 sensitive.

Yes. I think so just sepiapterin or PTC923, we're incredibly excited about this opportunity. The AFFINITY study is a Phase III registration-directed trial of PTC923 versus placebo. And the way to think about PTC923 really is a more bioavailable cofactor therapy, Kuvan or BH4, a lot of that that is administered is oxidized in the gut to BH2 and excreted in addition to BH4 that reaches the cell doesn't easily get into the cell. By contrast, PTC923 is readily absorbed and it's actively transported into cell where it's in situ, inside the cell converted to BH2, and then ultimately to BH4. So it's a much more bioavailable co-factor replacement. And the hypothesis is that if you have a more bioavailable cofactor that's more potent, that you'd expect to see superiority. And that's what our Phase II study was about when we compared PTC923 head-to-head with Kuvan and demonstrated that not only did we have a significant number of greater responders to 923 relative to Kuvan, but we also had a significantly greater -- 200% greater reduction in phenylalanine levels with PTC923 at the highest dose relevant to Kuvan. In addition, we were able to demonstrate benefit in the classical PKU patients. That's the most severe PKU patients with baseline phenylalanine level of 1,200 micromolar per liter, demonstrating that we're absolutely able to deliver a benefit with 923 where Kuvan was not able to provide a benefit.

Absolutely. So let's talk about that Phase II data for a second. So you did compare sepiapterin to Kuvan, as you noted for the absolute reduction in phenylalanine better for the high-dose arm. This appears to be kind of confounded by changes in dietary phenylalanine intake. And there was a very large increase in the Kuvan arm and really no increase in the high dose sepiapterin arm. So how much do you think this flatter the comparison in sepiapterin's favor?

Not really very much. Those are -- those dietary levels weren't rigorously collected. They basically rely on patient recall of 3 days over any 1-week period during the administration. So I wouldn't put a lot of weight into that. And furthermore, actually, if you look at the -- we looked at 2 different dose levels of 923, 20 milligram per kilogram and 60 milligram per kilogram. And in the 20 milligram per kilogram group, there was even a greater increase in dietary intake than compared to Kuvan. And there was still a 50% greater reduction in phenylalanine levels relative to Kuvan. So I think that really shows that those dietary numbers really didn't play into the observed significant benefit of 923 over Kuvan.

Absolutely. So just a commercial question. Do you anticipate any payer pushback, not having pivotal head-to-head data given in the genericizing market?

Yes. So I think if you look at the PKU market in whole, basically 30% of the PKU population is still therapy naive. And as Matt just alluded to, that's for a number of different reasons that that's inclusive of the classical PKU patients that have a baseline phe level of 1,200 micromolar per liter or greater and have just not had an ability to have a phe reduction from Kuvan. And so that's one element of the patient population that from a genericized market perspective would be open to PTC923 and we have -- we've had an ability to demonstrate that during the Phase II head-to-head data, and that will also be a patient population that's included in the AFFINITY study. In addition to that, if you look at the other 70% of the PKU market, majority of those patients have tried Kuvan and have either initially failed or are poorly controlled over time. So I think from that perspective, we're able to demonstrate that increased responder rate that Matt alluded to in the Phase II study as well as an increased phe reduction. And so that, in combination with the data package that will include the AFFINITY data where we're also able to show in that run-in responder analysis with what patients were previously treated with Kuvan and what phe reduction they were seeing with 923. And then in addition to that, the phe tolerance data that we're collecting as part of the open-label extension, we think, gives us a robust package to demonstrate benefit in that therapy naive patient mechanistically, but then also in those previously treated patients with Kuvan that would give us a good discussion – good robust discussion with payers.

Absolutely. So I see we're out of time now. So I want to thank you both again for joining me and having a great discussion.

Thank you very much.

Thank you. Thank you for having us.