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

All right. Thanks, everyone, for joining us. I'm Tiago Fauth. I'm a biotech analyst here at Wells Fargo. We have PTC Therapeutics joining us at our health care conference this year. Thank you so much for spending the time. We have Matt and Pierre for a fireside chat. I usually like to give you guys some time just for quick intros overall setup. Again, PTC has been changed substantially over the last 18 months, 2 years. So yes, if you can give like the brief intro and then again, a detailed discussion on Sephience and some aspects of the business.

Yes, absolutely. Thanks, Tiago. It's great to be here. And as you said, we're really at a point in time today where a lot of the work we've put in over the past 1.5 years to 2 years to shed a lot of legacy challenges and position ourselves for future success has come to fruition. We recently had our global approvals of Sephience begin, including both the U.S. and Europe. And as we talked about, we see that as a significant commercial opportunity for the company that can take us to cash flow breakeven and beyond in the near future. We closed the second quarter with over $1.9 billion in cash. So we come to this point in time where we can move towards cash flow breakeven with sufficient capital in the bank, not only to get us there, but execute on all of our commercial and R&D priorities as well as have firepower for potential BD activities as we see fit to complement both the commercial and R&D portfolios. We're also excited later in the year, we'll have an R&D Day where we can share with people the excellent work we've been doing in advancing our research platforms, including our splicing platform, which has brought us Evrysdi, votoplam, and we've been doing a lot of great work to advance a number of promising therapies to the preclinical stages. So a lot going on. But most importantly, we sit here today ready in the midst of a launch of something that -- for a product that we believe will be tremendously successful, strong cash position and look forward to continuing to build the company into the future.

Fair enough. Let's talk about the launch, and let's start with bigger picture, right? I feel like the market's understanding of the PKU opportunity has evolved more recently, and you do see some numbers being taken up and a little bit more optimism. But again, historically, there has been a lot of skepticism on the potential to increase treatment rates and how exactly that could happen. PKU has been a market where from a prevalence perspective, it should be a huge market, but the therapies that have launched on that have had less-than-expected success, let's call it, like subpar success. What are some of those factors that are still being overlooked? And why will Sephience be different, I guess?

Yes, I think there have been a number of, let's just say, misconceptions that are starting to get corrected. The first is mistaking the individual therapies that have previously been approved, their opportunity is reflective of the market opportunity in PKU. And I think that's a mistake. Both -- we've talked about -- there's about 15,000 to 17,000 patients in the United States with PKU. As you said, Tiago, that's a significant commercial opportunity. And what Sephience brings is really being the first therapy that has a strong efficacy profile across the full spectrum of PKU patients as well as a very favorable safety and tolerability profile. If you look at the previously approved therapies, you -- first, you had Kuvan, which is an oral therapy, which -- while a large proportion of patients were tried on Kuvan, not a lot stayed on it. And I think that was because there wasn't a perception of meaningful efficacy. If you think about the life of a PKU patient, in newborn screening, so you're diagnosed early in life and you're relegated to a highly restrictive diet, diet control. Those diets are hard to maintain. They don't taste well. They're incredibly stigmatizing and really can impact quality of life. And so you can imagine if that's the mainstay of treatment, you now introduce a drug on top of that. If you can't change having to have that really difficult and challenging diet lifestyle, why would you stay on a therapy? And that's very different than we see in other diseases, right? We think that other rare diseases, including a number of neurological neuromuscular diseases where we'll have therapies. The goal of the therapy is to try to slow progression. Well, and patients often have nothing else that's going to slow progression. And so you'll stay on a therapy in the hopes that over 1 or 2 years, maybe there'll be some slowing of progression, not that you may notice it, but there'll be -- the inclination is to stay on that therapy. It's different in PKU because your day-to-day life is already highly restricted. And if a therapy can't change it, why would you -- so it's the inverse of what you used to. So that was the challenge with Kuvan. So you have basically -- I don't think peak penetration never got very high. That's why peak revenue globally was $500 million. Then you move to Palynziq, which was approved in 2017 and was approved adults only, a tolerability profile that I think is challenging. There's a black box warning for anaphylaxis. Patients are encouraged to carry EpiPen. If you look at some of the trial data, I think there's an 89% adverse event rate for arthralgia. So you'll hear patients talk about very -- a lot of pain in their joints, difficulty walking. It often can be a lengthy titration period. We've heard up to 2 years. And so there's an enormous burden for an injectable on the patient, also an enormous burden on the health care team going through titration. And that's why you've not seen a lot of penetration with that product. So basically, you still have all the -- today, all the pillars of success for commercial success. You've got newborn screening. There's centers of excellence. There's educated physicians on how to prescribe. There's patients who desperately want safe, effective therapies that can change their life. There's payers that understand PKU, understand that value can be tied to phenylalanine lowering. So yes, you have this very large market opportunity. And now we believe there's finally a therapy that can provide a benefit potentially to the full spectrum of patients, change Phe levels. Our data showed that patients can have a diet liberalization, which is really, really important. And the drug has a very favorable safety and tolerability profile. And that's why we've been so bullish on the commercial opportunity.

Got it. Fair enough. And I guess one of the follow-up questions that we get often is, again, for patients that are in clinic versus out of clinic, that's a term that I think BioMarin introduced a while back, just trying to segment some of the market here because the bare argument will be this is mostly going to be a Palynziq, Kuvan switch story, right? Because if patients were severe enough, they would be on some kind of treatment. What's mistaken about some of those assumptions?

So I think there's 2 fundamental flaws with those assumptions. First is that if a patient isn't on the current therapy, it means they don't want to be on a therapy, not true. Patients want to be on a therapy. They want to be able to have something that's safe and well tolerated and make a difference in their life. The second fundamental assumption is it's not 1981, where the only way a patient can hear about or get access or know about a therapy is because they go to their physician. It's 2025. And what we have seen in social media is, first of all, a tremendous amount of interest in patients, including ones that doctors will say are lost to follow up. They're like I'm right here. I have like a drug, too. And you see this in social media and there's networking aggregation and patient pull for a therapy, and so you could be out of clinic and still very much want a therapy. And in fact, one of them -- there was a whole lot of social media around the time of approval, and there were several posts talking about me and my friends, we're e-mailing our clinic right now. We want to get back in. We want to get on a therapy. And sure, admittedly, there may be adult patients who are years removed from being in contact with the clinic, whereas a lot of patients are still tied to a clinic for nutrition support. There's those who aren't. Certainly, we wouldn't say that that's the "low-hanging fruit" of the launch, but we have initiatives already in place, and we've been doing a lot of work with the community to ultimately get those patients on therapy if they desire. And as I said, the misconception that patients don't want to be on a therapy is a horrible misconception and a misunderstanding of the burden of PKU as a disease. What patients want is a therapy that's going to make a difference and be tolerated.

Got it. And again, you did indicate there are a few centers of excellence that treat PKU. Do you have a sense of the number of patients that are being treated and being seen in some of these core centers? How widespread is the PKU patient population?

So our work -- well, so there's about 104 centers of excellence in the U.S. and our research suggests that a little over 80% of PKU patients are tied to these centers. So treatment is really concentrated at these 104 centers. And our team has been working on this launch for over 2 years now, and we, of course, have done a lot of the work of mapping these centers, understanding the demographics of the patients there, understanding the clinic staff itself. I think one of the important things to understand about the PKU clinic is, yes, there's a physician who's very important. But patient management, prescription decisions are often driven by nurse practitioners as well as dietitians because if you're not on a therapy and the vast majority of patients are not on a therapy, their care, their standard of care is diet management, and therefore, dietitians become very, very important in counseling and management. And so a lot of the connection patients will have with the clinic is through the dietitians. And I think the other important aspect of this launch and the key to success of this launch is the experience of our teams. We have very experienced teams in doing rare disease launch. The U.S. team was our Emflaza team, which clearly has a track record of success in a competitive and genericized market. And so they've been working on this for 2 years getting ready for the launch, understanding the dynamics of each, knowing what you have to do to sort of get patients in support teams at the clinics to ensure that we're getting patients start forms, getting patients on drug and making sure that we can really keep that funnel wide in terms of the opportunity.

Got it. And there is one question that we hear all the time just related to the pace of new patient adds, right? Like even from our survey work that we've done, there seems to be a huge intent to prescribe and expectations for a substantial uptake early on. So based on the early days or I guess, based on your expectations, is that going to be a slow grind kind of more typical rare disease launch? Or is there an initial bolus potentially for some of these patients? How can we think about some of those dynamics? And again, I'm assuming that's going to be across different patient segments. So I don't know how helpful it is to subsegment the market further.

I think it's hard to -- I think we can subsegment the market further, but I don't know if it's helpful because one of the things that we've heard and your research has shown and a lot of the KOL interviews have demonstrated is that the initial segments that physicians want to target are going to vary center to center. We certainly heard a number of say, look, it's so easy for me to just take my patients who are on Kuvan branded or generic and just switch one once a daily therapy for another. There's not a titration to do. There's not adverse event management to do. It's a very easy prescription switch. Others say, well, I'll get to them, but we know we have severe patients who don't have any therapy who would certainly benefit from an efficacious oral therapy, and I'm going to get those on first. We do expect it to be different. And as I mentioned, the way we're thinking about this is given that the data support the potential to benefit the full spectrum of patients, including those more severe patients, what we're watching for is the breadth, right? And I said wide funnel. What I mean is that if we're seeing centers have interest in prescribing for the full spectrum of patients, given the response rate we had in the trials, including for the severe patients, that's when this opportunity could get very big. I think we will see a "bolus" I think that will be the case. But I also think you'll have sort of the sustained bolus over time. We heard an interview recently with the Director of the PKU Clinic at the Children's Hospital of Philadelphia. And he said, "Look, I've got 200 patients. I think over time, I'll trial all 200 patients on the drug. My goal is to try to get 100 on therapy by the end of the year. I'm putting in start forms for 2 to 3 patients a week." So when you hear that, and he's not alone. We've heard that from other centers. That sort of suggests that you're going to see initial strong interest, but it's going to be sustained just because of you have to be realistic about throughput in the clinics and then getting folks from PSF to prescription. So we see this as a strong sustained start.

Got it. So again, before we go into a little bit more detail on the near-term launch dynamic, just thinking about payer feedback and what we've seen so far, again, one of the pushbacks we used to get less so now, but it's still like, "Hey, if you have Kuvan and it's generic, this is better Kuvan. So why wouldn't you step through it?" Like so are you seeing any -- like what exactly have you seen? Can you quantify a number of policies or lives cover that might have some sort of limitation initially versus not?

Yes. So I think, again, that's another one of those misconceptions that this is sort of Kuvan 2.0. And I think it's so clear from the data that this is a highly differentiated therapy. The data also show that if you did have benefit on Kuvan, the benefit on Sephience is much stronger. Several thousand miles away from here in Japan at the International Metabolism meeting, our team shared data this week. It was a small head-to-head study done to support pricing and payer discussions in Europe, about 40 patients crossover study with Sephience versus Kuvan branded generic or sapropterin and basically showed a 70% greater reduction on average with Sephience. So again, highly differentiated therapy. And then, of course, when you consider the potential to benefit patients who have what's been called these sort of non-BH4 responsive mutations, most of them are classical, that tells you this is a different therapy. And I think the payers understand that. And in our payer discussions, a lot of this was about are the payers viewing this as -- the value proposition is there as a highly differentiated rare disease therapy. And the answer is yes. It turns out that the majority of patients, to our understanding, have been tried on Kuvan in the past. So you have the potential already to have medical documentation of previous treatment with Kuvan. We've had some payers say that we understand as well that there'll be patients with these "non-BH4 responsive mutations." There's no reason to think they'd respond to Kuvan. So it makes no sense to step through that. Now we do expect there will be some who will have steps, but this is another sort of way in which PK is a bit different than other diseases because you can try Kuvan, if you have to do the step, it's a few weeks and a blood test. It's very easy to tell what your level of response is and then you can go ahead and demonstrate the superiority with Sephience. And just by way of contrast, our teams are used to Emflaza, where we have to step through the prednisone, and that's 6 or 9 months trying to show some benefit in DMD, which is a lot less objective than a blood test for phenylalanine. So in terms of having to do a step in the cases it's required, it's obviously relatively simple and straightforward.

Got it. And again, can you just recap what's payer mix? And again, I'm assuming because of that competitive dynamic, there's -- you shouldn't expect necessarily substantial gross to net discounts or things like that. So what is the mix? And do you expect that to change over time? There has been a lot of focus on some other launches with a more dynamic payer mix going forward. So that is one of the questions we get early on.

Yes, 2/3 of the patients are commercial.

2/3 commercial.

So in midstream dynamic versus other rare disease. When you take Duchenne, it's the complete opposite, right? At the start, we believe most of these patients will be commercial. And so we'll give more guidance on gross to net at Q3, et cetera. So you will see, I believe, probably on the lower end than other rare disease and slowly...

Going to...

Go a little bit, but again, similar and typical rare disease gross to net.

Got it. Perfect. And again, thinking about like near term, like trial patients converting to commercial patients, right? So how many patients do you have in the U.S. that are still kind of on trial drug? And some folks assume that it's kind of an overnight switch that you just start them and they start generating revenues. Like how should we think about the magnitude and pace of that conversion?

Yes. We spent a lot of time thinking about this and -- because we get asked a lot about that and did you consider an expanded access? Do you have an expanded access? So maybe I'll talk about what we did in Germany and then in the U.S. because it's a great example of how we think about the problem and make sure that we have a strategy that's aligned with the context of the situation. So in Germany, we initiated an early access program because in Germany, as soon as you list [ and out of tax ] and become commercial, those patients do convert to commercial almost right away. So in that case, it made a lot of sense to have a program where we have patients on drug because those would be then commercial patients very early in the launch. And so the objective of the early access program in Germany was twofold. One was to say, okay, let's get patients on drug. But the other was let's get the drug in the hands of the key prescribers at the leading centers in Germany because while they may not have a lot of patients that they're going to put into early access, sort of the inertia of being in motion, they're already in the habit of treating, the drug has been in their hand. They have experience with the drug and their enthusiasm will build so that when you are commercial where we became commercial in July, we're seeing these folks now come and get even more prescriptions. That worked really well. In the U.S., we don't have a lot of patients left in the open-label extension, I'd say probably fewer than 20. But -- and we again looked at this question of how do you accelerate access. And as you said, Tiago, I think it's a misconception. It's not easy to go OLE to -- it doesn't happen overnight. And it similar is true for expanded access. It's not like we have -- it's not like we had to find -- do patient finding, right? It's newborn screening. So it's not like you had to find them and warehouse the patients. It wasn't like we were in an overly competitive space where we had to try to get them on drug. That really wasn't the case. And the third part is what we heard is in a number of centers, there's been waiting list for patients, where the larger centers, in some cases, had hundreds of patients on a waiting list to get on the drug. And the fourth is we had an opt-in program, PTC Reimagines PKU. And what that did is we got over 1,000 people participating in that program that allowed us then to proactively reach out upon approval. Our patient services team to reach out to help sort of provide this white glove service to get folks to centers and get on drug. So we thought that, that was a much more effective and efficient way of getting early prescriptions than relying solely on the OLE.

Got it. Again, like everything sounds pretty bullish. And I think the Street is slowly trying to recognize that the $1 billion in the U.S. alone peak sales opportunity, again, it takes you about 3,000 patients a little less, a little more than that, about 3,000 versus 15,000 total prevalence.

Yes.

Got it. And again, 2025 consensus depending on how you do the math is like 300 patients on drug gets you there. Like that seems overly conservative, but I don't want to get too ahead of myself here. But what are some of the things that could actually imply a slightly slower ramp than folks are modeling or slightly faster ramp than folks are modeling?

Look, I think it's early days. We've held out that at least $1 billion number is something we believe in. And as you pointed out, it's fairly modest penetration, certainly when one considers the rare disease opportunity in the landscape and the potential of the therapy. We've said consensus revenue for the rest of this year, I think it's $6 million for Q3, $22 million for Q4. We said we're very comfortable with those numbers. And look, we're really focused, again, on -- I'll come back to that term, the wide funnel. We're very focused on making sure that centers are -- have the information they need to follow what the CHOP said -- for example, the CHOP clinic head said, trial all of our patients on the drug. Because we believe with the response rate that we have in our trials, we had 2/3 of patients respond. If you look even at the most severe patients, we have about half of them respond with greater than 30% reduction, more than that, greater than 15% reduction. That's going to get us to big numbers. Exactly when we get there, look, we'll see. I think we'll have a much better grasp on trajectory as we close out '25, move into '26. And what I can say is right now, we haven't had any surprises in these early days of the launch. A lot of the things that we planned for have been coming to fruition. And I'll also say what's really encouraging to us is when we see the interviews done with the physicians and surveys done with the physicians and discussions with payers, time and time again, the feedback that's coming from those interviews is consistent with everything we've said. So I think when you hear that, that's really encouraging to us that the opportunity as we see it really is indeed the opportunity in front of us.