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

Good morning, and welcome to the 42nd Annual JPMorgan Healthcare Conference. I'm Eric Joseph, senior biotech analyst with the firm. It's great to be back here with you all if you kick off what's my favorite week of the year with an exciting slate of presentations and also what I expect to be a constructive set of discussions over the course of the week. Our first presenting company this morning is PTC Therapeutics, and it's my pleasure to welcome CEO, Matt Klein, to take us through the company. Just a quick programming note. There is a Q&A session after the presentation. So for folks with questions, just raise your hand, we'll get a mic over to you. For folks joining online, you can also submit questions via the portal. I'll just click the ask a question button. So with that, Matt, thanks for joining.

Thank you, Eric. Good morning, everyone. Before I get started, I refer you to our forward-looking statements and other SEC filings for information related to our risks and uncertainties. One year ago, I stood on this stage and explained how 2023 was going to be a transformational year for PTC. Indeed, it was with a number of ups, but also a few downs. As PTC celebrated its 25th anniversary, it was a perfect time to reflect on the company's many pioneering and impactful contributions, including pioneering RNA-directed therapies, establishing the field of drug development for Duchenne muscular dystrophy, discovering and developing the first-ever small molecule splicing agent, Evrysdi, which is now a global leading therapy for SMA and successfully developing the first ever direct-to-brain administered gene therapy. However, it was also a time to make important changes so that we could mature into a leaner, stronger and well-capitalized PTC positioned for future success, and we did that. We made a number of significant changes to our leadership team, our R&D strategy and capital structure, providing us a strong foundation for the future. In building the PTC of the future, we emphasize focus. We focused our R&D portfolio on small molecule drug development in core therapeutic areas. We focused our research efforts on scientific areas where PTC has unique expertise to discover and develop impactful therapies. We prioritized programs through a prism of return on investment and made the decision to discontinue programs that had a low probability of technical success and/or commercial success. We completed 2 reductions in workforce to rightsize the company, reducing head count by over 30%, while maintaining elements of our infrastructure critical to ensure execution across our commercial and R&D teams to bring therapies to patients faster. Through our portfolio prioritization and workforce reductions, we reduced 2024 projected full year OpEx by approximately 25%, reversing years of market OpEx growth. The OpEx reductions fundamentally changed the trajectory of the company such that we can now envision for the first time, being cash flow breakeven in the not-too-distant future. Finally, we significantly strengthened our balance sheet through a royalty financing transaction that not only provided us with sufficient cash to advance the next set of PTC product candidates but importantly, enabled us to retire a debt facility with a very high cost of capital that also significantly limited our financial and operational flexibility. And we made these significant changes relatively quickly. Now I want to emphasize one thing that hasn't changed. Our mission. We remain a patient-focused company that will continue a legacy of discovering, developing and commercializing transformative therapies for patients with rare disease. This will not change. But we will now pursue this mission in a much more efficient, thoughtful and effective manner. Our strategy will leverage our innovative science, our drug development expertise and robust global commercial infrastructure. As I mentioned, we have focused our research efforts on 2 scientific platforms, Splicing and Ferroptosis where PTC has unique expertise to discover and advance to the clinic innovative therapies. We expect these platforms to be a source of PTC developed and marketed therapies as well as a source of external R&D partnerships for indications outside of our core interest. Our development efforts will be focused in 2 therapeutic areas, neurology and metabolic disease, 2 areas in which we have extensive experience and a track record of success. And we will sustain our accomplished global commercial organization through a combination of PTC discovered and developed products and other innovative therapies in licensed through business development transactions. In terms of specific programs, we remain with a diverse commercial product portfolio of important therapies, our world-class commercial teams deliver to patients with rare disorders around the globe. We have a robust development portfolio with a number of promising therapies for rare neurologic and metabolic diseases, including PKU, Huntington's disease and ALS that I'll detail shortly. And our research pipeline includes programs, a few of which are shown here with highly innovative compounds at varying stages of preclinical development. I will now discuss the outstanding performance of our commercial teams in 2023, delivering $946 million in unaudited total revenue, meeting our overall 2023 revenue guidance. Our DMD franchise revenue exceeded guidance with unaudited revenue of $610 million, representing 20% growth over full year 2022. Our commercial teams continue to deliver year-over-year, and I'm confident in their ability to succeed with new product launches. In addition to our corporate restructuring and commercial success, we had a number of other important achievements in 2023. We made significant progress on our development programs with several strong data readouts, positioning us for an exciting 2024 as we advance these programs closer to potential registration. In addition, we expanded the geographic footprint of several of our commercial therapies with a number of regulatory approvals that support revenue growth in the short term. For 2024, we are providing a wide revenue guidance of $600 million to $850 million, with the higher end reflecting a potential positive CHMP opinion on reexamination of Translarna and the lower end, reflecting a potential negative opinion. We plan to update guidance once we have greater clarity. As mentioned, we have significantly reduced 2024 OpEx relative to years past and are guiding to $660 million to $755 million in total non-GAAP OpEx, which includes up to $65 million in regulatory milestones. Now I'm aware that the pending CHMP opinion is in the front of a lot of your minds. As I have mentioned, we believe the data support the continued authorization of Translarna, and we have seen a tremendous outpouring of support from the physician and patient communities who want to ensure that a safe and effective therapy remains available to boys with nonsense mutation DMD. In addition, we recently shared that we will be meeting with FDA in the first quarter to discuss the contents of a potential NDA resubmission for Translarna. But I want to be very clear that while we believe in Translarna, we have not made hope our base operating assumption. Our restructuring and financing activities were done to enable PTC to withstand the downside scenario of a negative CHMP opinion. A positive opinion in Europe or an NDA submission in the U.S. would be potential upside. In other words, regardless of the outcome of Translarna, we are poised to continue to advance our next set of promising programs. Indeed, beyond Translarna, we have a number of important regulatory and clinical activities in 2024. Following a recent successful Pre-BLA meeting with FDA, we plan to submit the BLA for Upstaza in the first quarter. In addition, following a successful pre-submission with EMA, we plan to submit the MAA for Sepiapterin in Europe also in the first quarter, and we expect the NDA submission for Sepiapterin to be no later than the third quarter. We also look forward to readouts from the PIVOT-HD trial with a 12-month interim data report in the second quarter of 2024, and we'll report topline results from the CARDINAL's ALS trial in the fourth quarter. I'll now discuss some highlights from these important programs, beginning with our Sepiapterin program for PKU patients. Last summer, we shared the very strong results from our Phase III APHENITY trial of Sepiapterin in adult and pediatric PKU patients. The study results were not only highly statistically significant, but also clearly clinically meaningful and supportive of how differentiated Sepiapterin is from existing therapies. In the placebo-controlled phase of the trial, there was a 63% reduction in mean phe levels in the overall patient population and an even higher reduction, 69% in the more severe subset of classical PKU patients. The vast majority of patients met established criteria for phenylalanine control, and over 20% of subjects had normalization of phenylalanine levels, which is virtually unheard of in PKU clinical trials. Importantly, Sepiapterin was demonstrated to be safe and well tolerated with no treatment-related serious adverse events. Following completion of placebo-controlled trial, subjects enrolled in a long-term open and label extension study to confirm durability of treatment effect and long-term safety. In addition, a subset of patients entered a phe tolerance protocol. In this protocol, patients progressively increase their dietary protein intake and we check to see if they can tolerate this increased intake by measuring their phenylalanine levels and ensuring they remain in control, defined as less than 360 micromole per liter. I'll now share with you the most recent results from the phe tolerance protocol. I have to say that as we get more and more data, the overall Sepiapterin dataset becomes stronger and stronger. First shown on the purple line is the average increase in protein intake over the 6-month protocol period. For reference, the average recommended daily allowance of protein for non-PKU patients is 40 milligrams per kilogram per day. So as you can see in this protocol, patients are taking in higher levels of protein than is the recommended daily allowance for noneffective patients. Now we see in orange, the average phenylalanine level of patients at each level of protein intake. As you can see patients are able to tolerate far beyond the rDNA and still maintain control of phenylalanine. This is an incredibly important result. It confirms that sepiapterin not only controls phenylalanine levels on restricted PKU diet but it allows patients to liberalize their diets and still have control on phenylalanine with significantly increased protein intake. In fact, over 60% of the subjects who have entered the phe tolerance protocol thus far, have met or surpassed the RDA for protein intake. Again, this is incredibly meaningful for PKU patients who want a therapy to allow them to liberalize their highly restrictive diets. These data are also very important for physician uptake as well as payer negations. Based on the strong data from the Aphenity and the data collected so far from the phe tolerance protocol, Sepiapterin demonstrates the potential to fill the remaining high unmet medical need for the majority of PKU patients who are not served by available therapies. the that's helpful support that we can access 3 key segments of the PKU global population. Those that are therapy naive, including classical PKU patients. Those who have failed on current therapies and those who are not well controlled on current therapies. As Professor [indiscernible] of the global leading KOL emphasized in our commercial deep dive last year, she intends to try all of her PKU patients on sepiapterin, even those currently on other therapies. When one considers the global PKU population of PKU over 58,000 patients, the large number of addressable patients in each of these market segments and enthusiasm of prescribing physicians, we see the revenue opportunity as easily over $1 billion. With the strong data in hand and our existing global commercial infrastructure, we look forward to initiating global regulatory submissions and launch preparation for Sepiapterin in 2024. We expect the submission for the Sepiapterin MAA in Europe in first quarter of 2024 and the NDA submission to be no later than the third quarter of 2024. We are also planning a number of regulatory submissions in additional geographies. We expect 2024 to be an exciting year for our PTC518 Huntington's disease program as well. As we have discussed, the PTC518 program was built on PTC's unique expertise in splicing and important lessons learnt from the successful discovery in development of Evrysdi for the treatment of SMA. PTC518 is a highly differentiated molecule, especially when compared to other HTT-targeted therapies. It's orally bioavailable, highly selective and specific for the Huntington target, readily crosses the blood-brain barrier and is not effluxed and is demonstrated uniform lowering throughout the brain as well as dose-dependent lowering of HTT mRNA and protein levels in the blood. These factors support by PTC518 is one of the most promising therapies in development for HD. As a reminder, the ongoing Phase II Pivot-HD trial is a 12-month study in 2 parts. Part A is 12-weeks in duration and focuses on PTC518 pharmacology and pharmacodynamic effect. Part B is 9-months in duration and focuses on biomarkers of disease including CSF levels of mutant huntingtin protein and NfL levels in the CSF and blood and volumetric changes on MRI. Last summer, we shared the promising results from the initial cohort of subjects completing part A, all key study objectives were met. We demonstrated dose-dependent lowering of HTT mRNA and protein in the blood, excellent CSF exposure that was higher than in the plasma confirming that the current dose levels may be sufficient to reach goal, neuronal HTT lowering. And importantly PTC518 was found to be safe and well tolerated with no treatment related serious adverse events, no evidence of peripheral neuropathy and no evidence of treatment-related NfL spikes. We look forward to sharing the data from the 12-month readout from the first cohort of subjects in the second quarter of 2024. These readout will include additional safety data and new biomarker data including mutant huntingtin protein levels in the CSF, CSF NfL levels and blood NfL levels as well as brain volumetric data. We'll also share results from the clinical scales being collected in the trial. Later in 2024, we'll share part A results for the remainder of patients enrolled in the PIVOT-HD study. Moving now to our Vatiquinone program for Friedreich ataxia. The placebo-controlled MOVE-FA trial demonstrated several positive and important results on key aspects of Friedreich ataxia pathology despite the study not meeting the primary endpoint. We had the important finding of a significant benefit on the upright stability subscale of the mFARS, the most relevant and sensitive component of the scale for treatment effect in pediatric and young adult patients. The upright stability subscale has been demonstrated to be predictive of time to loss of ambulation, the most important disease milestone for ambulatory Friedreich Ataxia patients. The magnitude of effect observed in MOVE-FA on the upright stability subscale translates to a 9-month delay in loss of ambulation with 72 weeks of treatment which is a clear clinical significance. In addition, there was significant benefit recorded on the modified fatigue scale, with fatigue being the #1 most burdensome symptom reported by Friedreich Ataxia patients. Following the written feedback we received from FDA in October, we are scheduled to have a live meeting with FDA in the first quarter of 2024 to discuss how the MOVE-FA data, along with additional clinical and preclinical data could support an NDA submission. In addition, we expect to receive feedback from EMA on scientific advice regarding a potential conditional marketing authorization application in Europe. Finally, I'll discuss our Utreloxastat program for ALS patients. Utreloxastat targets 15-lipoxygenase in the Ferroptosis pathway. There is now extensive evidence confirming the key link between the Ferroptosis pathway and adult neurodegenerative disease, including ALS. A number of in vivo and clinical studies have demonstrated abnormal levels of Ferroptosis biomarkers in blood, neurons and tissue of ALS patients. In addition, there's evidence from a number of studies, preclinical and clinical, demonstrating that through targeting elements of the Ferroptosis pathway, significant benefits and function and survival could be seen in ALS. Utreloxastat is the first clinical compound being developed for ALS with specific Ferroptosis target-based activity. The registration-directed CARDINALS' ALS study is a Phase II study of Utreloxastat in ALS patients. The study includes a 2-month run-in to assess baseline rate of change on the ALSFRS disease rating scale. Patients are then randomized 2:1 to receive Utreloxastat or placebo for 24 weeks. The primary endpoint in the study is the change in the ALSFRS scale with secondary endpoints capturing other important aspects of disease, including respiratory function and survival. We expect to complete enrollment in the CARDINAL study in the first quarter of 2024 with topline results expected in Q4 of 2024. Look, 2023 was an eventful year. We made a number of significant and needed changes, focusing our R&D portfolio, reducing headcount, reducing OpEx and significantly strengthening our balance sheet. We also had another year of outstanding revenue performance and had really great study readouts from our PKU and Huntington's disease programs, all of which position us strongly for the future. As we start 2024, we look forward to a successful year with a number of important expected milestones, including global regulatory submissions for our PKU program, data readouts from PIVOT HD and CARDINAL's ALS trials and the advancement of a number of our promising preclinical programs closer to the clinic. But above all, we look forward to continuing to transform PTC into the company that we want it to be, our stakeholders expect it to be, and most importantly, patients need us to be. Thank you.

Thanks, Matt. I think as we transition to the Q&A session, we're going to invite the PTC team up to the podium. Let me just also note that the webcast -- I guess we had some technical difficulties and the webcast has been down. There will be a recording available on the PTC website after the presentation later today.

Of course, folks have questions, just raise your hand. We're going a mic over to you -- so taking the first question. On your financial outlook Matt, at the top of the presentation, you anticipated cash flow breakeven in the not-too-distant future. I guess, what timeframe should investors kind of have in mind regarding the outlook and perhaps if you could just take us through some of the key topline contributors kind of going into that outlook?

Yes, I'll say not-too-distant future means the not-too-distant future. I think what's really important, just big picture, Eric, is looking at these significant reductions in operating expenses, we're projecting for 2024. As I mentioned, we did a lot of work to prioritize our portfolio. We conducted 2 reductions in workforce, and we project to have about a 25% reduction for year 2024 non-GAAP OpEx. When you look at our revenue as well, we get them for next year in the range of $600 million to $850 million and then consider the revenue that should be coming in the near future, particularly as we begin our PKU regulatory submissions in [ March ] and really the tremendous size of that opportunity, as we talked about, you can envision very easily, that it's not-too-distant future. It's really -- really quite soon that we can be looking at cash flow breakeven.

And also just kind of digging within the 2024 revenue guidance, a pretty wide range there. And obviously, I would think sort of the CHMP outcome with Translarna factors into that a little bit into that range. I guess maybe you can just sort of perhaps a little bit -- what perhaps variation in Translarna revenue, we ought to be thinking about and just also thinking about the contribution by Emflaza, really the growth outlook for the DMD franchise for 2024?

Yes. I'll make a general point, and then I'll let Kylie handle the other part of your question. The important thing is a lot of the work we did last year was to ensure that we could withstand the unfortunate slow and potential negative CHMP and that was really important. So the restructuring efforts, the financing efforts allow us to withstand that and still be able to move forward. That's very, very important. In terms of the specific impact on revenue on the DMD franchise Kylie, do you want to start?

Yes, absolutely. Thanks Matt. As Matt said, I think we're incredibly proud of the continued success of the commercial team year-over-year. And despite mature franchise, we're continuing to grow double digit. Revenue guidance that we provided for 2024, as Matt talked about in the presentation, the low end of the guidance represents the potential of the negative CHMP opinion and incorporates that and the high end of the guidance will be in a more positive opinion. Within that, as we've talked about with Translarna, we've continued to geographically diversify the business. And that is with the intent of ensuring that we have somewhat of an even distribution of contribution of regions across the board, making sure that as we look to growth in outer years of Translarna, that we're able to grow in regions that are more new growth regions. And as we look to Europe, which is a more mature region, we see a lowering contribution over time. You touched on Emflaza also, that still has a contribution and a substantial contribution in [ 2024 ] as we continue to spend time focusing on protecting the business. And so you see across the board a contribution from Translarna on the lower end, the impact of a negative CHMP and a higher end impact of positive CHMP.

[indiscernible] Emflaza as well and the work we've been doing.

Yes, absolutely. I think from an Emflaza perspective, projecting the business has been an important work that the team has had ongoing. And It's not something that starts in 2024. The team started this a long time ago. This has been focused on a number of different areas, including, of course, partnering with specialty pharmacies, hiring with payers, contracting with payers, contracting with manufacturers. We've also started a dispenses written program, which we've seen substantial uptake and increased success with. And these are all activities that will continue into 2024 and beyond. We talked a lot about stickiness to Emflaza and how important this is, seeing a lot of brand loyalty when it comes to physicians, patients, the advocacy groups, and we don't expect that to shift and that's driving a lot of the prescriptions and growth that we've seen sort of moving into 2024, and we expect this to continue...