Aug 12, 2013
Executives
Jane Baj - Director, Corporate Communications Stuart Peltz - Chief Executive Officer Shane Kovacs - Chief Financial Officer Jay Barth - Vice President, Clinical Development
Analysts
Geoff Meacham - JPMorgan Jason Kantor - Credit Suisse Gregory Wade - Wedbush Securities
Operator
Thank you for holding for PTC's Second Quarter 2013 Conference Call. At this time, all participants are in listen-only mode.
Following the formal remarks, PTC management will open the lines for a question-and-answer period. Please be advised that this call is being taped at the company’s request and will be archived on the company’s website for two weeks from today.
At this time, I would like to introduce Jane Baj from PTC.
Jane Baj
Thank you, operator and good afternoon everyone. Thank you all for joining us for PTC’s first investor conference call.
With me here today are Dr. Stuart Peltz, Chief Executive Officer of PTC and Mr.
Shane Kovacs, Chief Financial Officer. Dr.
Jay Barth, Senior Vice President of Clinical Development will be joining us for the QA session of the call. Earlier today, we issued a press release detailing PTC’s second quarter 2013 results, which is available on our website at ptcbio.com.
During today’s call, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements about our future expectations, clinical developments and regulatory timelines, the potential success of our product candidates and financial projections.
Actual results may differ materially from those indicated by these statements, including those discussed in the final perspective for our initial public offering, which is on file with the SEC. Any forward-looking statements represent our views as of today only.
We may update these statements in the future but we disclaim any obligation to do so. With that, let me pass the call over to Stuart.
Stuart Peltz
Thank you, Jane and good afternoon everyone. On behalf of all my colleagues at PTC, I am delighted to welcome to our first investor call.
It’s an exciting time for PTC. Since this is our first call, I wanted to give you a brief overview of PTC.
We are focused on the discovery and development of orally bio-available therapeutic for patients living with serious and life threatening conditions. Our name PTC stands for post-transcriptional control, which are the processes that regulate the levels of protein production.
As you know the absence or over production of specific proteins can lead to disease. At PTC we systematically target post-transcriptional control processes by combining our proprietary technology with extensive knowledge of this area of biology to bring an unexploited approach to drug discovery.
While the therapeutic potential for our product candidates is broad, we are focused particularly on the development and commercialization of treatments for orphan and ultra-orphan disorders. One of our most advanced product candidates is ataluren which is specific to patients with genetic disorders as a consequence of a genetic mutation known as the nonsense mutation.
Ataluren is in late-stage clinical development for the treatment of nonsense mutation Duchenne muscular dystrophy or nmDMD and nonsense mutation cystic fibrosis or nmCF. Available treatments today do not address the underlying cause of the disease.
On the heels of two successful financing this year PTC is well positioned to continue advancing Ataluren in nonsense mutation DMD and CF as well as continuing to develop our pipeline. In March of this year we closed a $65 million private financing.
In June we successfully completed a $144 million initial public offering. These two raises generated approximately $210 million in gross proceeds.
We plan to invest the net proceeds in a number of key areas. Our primary focus is the late-stage clinical development of ataluren in nmDMD and CF.
Additionally we are investing in targeted pre-commercial market development activity for ataluren. We also have a significant focus in our R&D effort.
These are based on exploring the potential for ataluren in additional indications as well as other exciting pre-clinical programs. Let’s start with ataluren, which we developed internally.
It’s an orally administered compound for the treatments of patients with genetic disorders due to nonsense mutations. We estimate that on average 11% of patients with any monogenetic disorders have a nonsense mutation as the cause of the disease.
Nonsense mutations results in premature stop signal in the translation of messenger RNA which prevents the production of full length functional proteins. We believe that ataluren binds to the machinery within the cell that produces the proteins which is called the ribosome and enables the cell to produce full length functional protein by reading through the premature stop signal.
Some of you may have seen the recent publication questioning ataluren’s mechanism of action. I thought it would be good for me to comment on this.
Our experience during the decade long study of the effective nonsense mutation led to methodological design of a high throughput screen to identify compounds that promote nonsense [reaction]. Our understanding of the complex post-transcriptional control processes informed our design and production of reported genes that accurately reflect the events occurring in the natural messenger RNA.
Compounds that demonstrated [leisure] (ph) activity in the reported assay then went through a rigorous screening tier that included a number of cell and animal nonsense mutation based disease model. Compounds that passed these screens were then also tested in human myotube to ensure compounds effective in animals also had activity in humans.
Over 3,500 compounds were synthesized and evaluated using the screening tier and ataluren was ultimately screened and was chosen for development. Importantly 11 independent studies have been published confirming that ataluren promotes read through premature translation codon in a number of different disease model.
Taken together these results show that ataluren can promote read through in many disease models and has the potential to be an important therapy for a subset of patients with DMD, CF and other genetics disorders for which a nonsense mutation is the cause of the diseases. Now I would like to focus on DMD.
We estimate that approximately 13% of the patients have DMD due to a nonsense mutation. The other 87% have DMD because of other types of mutations, such as deletions or duplications.
Within DMD PTC is the only company specifically targeting the nonsense mutation patient population where there is a significant unmet medical need. In 2010 we completed a large Phase IIb study of ataluren in nonsense mutation DMD.
This was the first placebo controlled multi-national study of a new chemical entity for DMD. In addition to a generally well tolerated safety profile data from the Phase IIb study indicated that treatment with ataluren stabilized or slowed the loss of walking ability as measured by the 6-minute walk test.
PTC pioneered the development of 6-minute walk test with DMD working closely with Dr. Craig McDonald and other investigators and demonstrated that the 6-minute walk test was a reliable end point in this disorder.
The natural history data from our Phase IIb study demonstrated that patients five to seven years of age tend to naturally increase their 6-minute walk distance. Their walking distance tends to stabilize at approximately seven years of age and then slowly gets worse until their base line 6-minute walk distance is 350 meters or below.
Patients whose 6-minute walk distance are below 350 meters tend to show a rapid decline in ambulation. Understanding the natural history is important because it enables the prediction of which patients will declined within a given timeframe of a clinical study.
This then can guide the inclusion criteria for a study to best demonstrate the clinical benefit. Without having any natural history to guide our inclusion criteria in the Phase IIb study was not optimal.
The patient population was quite heterogeneous ranging in age from five to 20 years old and the baseline 6-minue walk distance ranged from 75 meters to 554 meters. Nonetheless in our post-hoc corrected ITT analysis ataluren treated patients demonstrated a clinically meaningful 31.3 meter difference in 6-minute walk test versus patients receiving placebo.
However the variability was higher than expected which resulted in P value of 0.056. Armed now with a better understanding of the natural history of the disease we completed a retrospective subgroup analysis of the patients likely to be in the decline phase of disease, then include the patients older than seven and less than 80% predicted in walking in which the number of patients with baseline 6-minute walk distance is less than 350 meters.
In this sub group patients demonstrated an approximated 50 meter difference in change of 6-minute walk distance from baseline of 48 meters. The larger difference in 6-minute walk distance in these patients is consistent with our understanding of the role of dystrophin protein and the natural history of DMD as it relates to the 6-minute walk test.
It is the exact sub group of patients that we are targeting now on-going to preparatory Phase III trial in that mutation of DMD. Ataluren treated patients also showed better outcome than patients on placebo in the time function test, in an accidental fall, in activity step monitoring and in the amount of time they spent in the wheel chair.
Each of these end-points reflect clinical benefits for ataluren-treated patients various functional measures and activities of daily living. Prolonging ambulatory function produces a myriad of benefit that are essential and important for [boys living] with DMD and reflect an overall improvement in muscle function.
To put it in context a child being able to walk further can mean a difference in the walking to a school bus stop giving to walking unassisted being able to interact with peers on the playground and participate in the school functions and field trip. It has been demonstrated that extending walking ability also prevents scoliosis and improves lung function delaying the need for ventilation so that the long-term benefit is significant.
Based on our finding from the Phase IIb study we submitted a marketing application to the EMA for conditional approval of ataluren for nmDMD in October 2012. We filed for conditional approval because we believe that Ataluren has helped nmDMD patients and we want to bring the drug to the patients and their family as rapidly as possible.
While there is substantial risk that we will not receive conditional approval we believe that it was worth the effort for the patients and view it as a potential upside for investors. As part of the MAA process the EMA provided us with (inaudible) in March of this year.
We responded to those questions in July and we look forward to the EMA’s decision which we expect to receive by the end of the year. As many of you know we have an ongoing confirmatory Phase III clinical trial in nonsense mutation DMD which we initiated this past spring.
The design of the trial reflects the knowledge gained from our earlier study as well as the views expressed in discussions with the FDA, EMA our investigators and key opinion leaders. We have adjusted our enrollment criteria in the study to enrich the patient population that are in the decline phase of walking ability, that is patients over the seven years of age with a baseline 6-minute walk distance less than or equal to 80% predicted.
This enriches the patients where they are likely to decline within 48 weeks. As in our previous study it’s a 48-week multi-center randomized double blind placebo control trial evaluating the efficacy and safety of Ataluren.
The primary of objective of this trial is to confirm the effect of Ataluren on ambulation. The primary end-point is the change in walking distance as measured by the 6-minute walk test.
We plan to enroll approximately 220 patients and anticipate that the patient enrollment to be completed by mid-2014 and that the top line data will be available in mid-2015. In addition to nonsense mutation DMD we are also developing Ataluren for nonsense mutation CF patients.
Nonsense mutation account for approximately 10% of all CF patients and is the most severe form of the disease. Available treatments today do not address the underlying cause of the disease for nonsense mutation CF patients.
Results from the completed Phase III clinical trial in nonsense mutation CF show clinical evidence of activity with ataluren and provides us with key insight for the design of upcoming confirmatory trial. The previous Phase III trial was a multi-center randomized double blind placebo controlled trial assessing the effects of ataluren in 238 patients with nonsense mutation CF.
The primary objective of the trial was to evaluate the effect of ataluren on pulmonary function relative to placebo. The study compared patients over the course of 48-weeks and the results were expressed as percent predicted FEV1.
The primary end-points showed a 3% difference between Ataluren and placebo groups. In the large sub group of patients not receiving chronic inhaled tobramycin ataluren demonstrated a clinically meaningful benefit of nearly 6% difference between ataluren and placebo group.
Approximately 45% of the patient population were not using chronic inhaled antibiotics and 63% were not receiving inhaled tobramycin. This is important as we believe that this study as subsequent preclinical work show that tobramycinin interferes with ataluren's mechanism of action affecting the potential clinical benefits of its activity.
Pulmonary exacerbation rate was an important secondary end point and showed that ataluren treated patients not on tobramycin demonstrated a statistically significant reduction in exacerbation rate in our post talk analysis. In the overall population patients receiving Ataluren had a 23% fewer exacerbations.
However in the tobi patients we saw 41% fewer exacerbation. Importantly Ataluren was generally well tolerated.
Based on these results we expect to submit an MAA for conditional approval of Ataluren for the treatment of nonsense mutation cystic fibrosis to the EMA by the end of the year. We are also preparing for the initiation of a confirmatory Phase III clinical trial in the first half of 2014.
We are currently discussing the details of the trial design with the FDA and EMA. We expect the trial design for the confirmatory Phase III to be largely similar to the previous Phase III trial with FEV 1 as the primary end point and exacerbation rate to be a key secondary end point.
Based on our sub-group analysis of patients not receiving inhaled tobramycin as well as the observed interference with ataluren’s mechanism of action we are proposing that the enrollment criteria exclude patients while receiving chronic inhaled aminoglycoside antibiotics. Switching gears from ataluren I’ll wrap up by speaking about one of our programs in our pipeline, our spinal muscular atrophy or SMA program.
Last Thursday we announced the selection of a development candidate in this program. SMA is a rare disorder that is the leading genetic cause of death in instance in infants and toddlers and effects an estimated 30,000 patients in the U.S.
and Europe. It is caused by defective SMN1, leaving SMN protein production solely as a result of expression of the SMN2 gene.
This leads to reduced levels of SMN protein causing significant muscle atrophy and eventually death in the most severe form of the disease. We initially developed our SMA program in partnership with the SMA Foundation in 2005.
Considerable progress has been made in this program and in November 2011 we expanded the collaboration to include Roche who was granted an exclusive worldwide license to products from our SMA program. As a reminder PTC received a $30 million upfront payment from Roche and is eligible to receive up to $460 million upon successful completion of certain developments in commercialization milestone and that’s a double digit royalty on commercial sales.
Under the terms of the agreements the recent selection of a clinical development candidate triggered a $10 million milestone from Roche. We are very proud of this achievement in this area of an important unmet medical need and gratified by the caliber of our collaboration with both the SMA foundation and Roche, both of which have dedicated outstanding resources to support the advancement of this program.
In summary PTC has made great strides in the development of our pipeline and has achieved a number of key clinical and corporate milestones in the recent months. I am very proud of the incredible efforts of everyone at PTC, our ongoing collaborations and our close relationships with the patient communities.
We look forward to continuing to provide you updates on the development of our programs as we move closer to the ultimate -- presentation. Before we open up the call for Q&A let me ask Shane to review our financial results.
Shane?
Shane Kovacs
Thanks, Stu. Since we issued a press release earlier outlining our second quarter 2013 financial results, I’ll just review the highlights and then speak to our cash balance and our financial guidance.
The company had reported a net loss of approximately $15 million for the quarter ending June 30, 2013. That compares with net income of approximately $154 million for the second quarter of 2012.
In 2012 we had recorded a gain of about a $160 million which was related to the exchange of convertible preferred stock in connection with the recapitalization. Total revenues for the second quarter were approximately $7 million comprised primarily of $6 million of collaboration revenue and 1 million of grant revenue.
That compares to total revenue in the second quarter of 2012 of approximately $7.5 million which was comprised of $6 million in collaboration revenue and $1.5 million in dollars related to grants. Research and development expense in the second quarter was $14.7 million, a 23% increase over the $11.9 million of R&D spend in the second quarter of 2012 and as you would expect the increase resulted primarily from the initiation of the confirmatory Phase III clinical trial of ataluren for the treatment of nmDMD.
G&A expense for the second quarter was $6.6 million which was a 108% increase was over 2012 and that was driven primarily by public company related expenses, pre-commercial activities and increase stock-based compensation. Of note in July of this year we repaid our outstanding balance of $2.6 million in venture debt.
With the proceeds from our IPO financing we ended the second quarter with over a $165 million in cash and based upon our current operating plans we expect that this capital would be sufficient to fund our operations through 2015. With that let’s open up the call for questions.
Operator?
Operator
(Operator Instructions). First question comes from Geoff Meacham from JPMorgan.
Geoff Meacham - JPMorgan
Good evening guys and thanks for taking the question. Ataluren in DMD I am curious here how many of the sites in the ongoing Phase III were in your previous trials?
I know it’s not a complicated endpoint, but want to get a sense of the experience with ataluren and then I have one follow-up.
Stuart Peltz
Yeah so and so let me have Jay actually.
Jay Barth
All of the -- hi Geoff, all of the sites that were previously participating in our Phase III study plan to participate in our Phase III study, we will also have additional sites.
Geoff Meacham - JPMorgan
Got you. And then you know I know you are perhaps a year away in CF from starting a pivotal there.
How are you guys thinking about expanding the opportunities, is there an appetite for doing Phase II combo with either one of Vertex’s correctors or is there a strategy for growing beyond the homozygous nonsense mutation population? Thanks.
Jay Barth
Yeah, sure. Obviously we are moving forward to look at ataluren in the nonsense mutation cystic fibrosis patients, but clearly the (inaudible) has showed some activity with being able to open up the chloride channel in other types of mutations as well as in wild type gene.
So it’s something certainly that we’re interested in evaluating and I think we will think about ways to evaluate them and that’s what we are doing right now.
Geoff Meacham - JPMorgan
Yes but would you start a trial before like a Phase II before with that strategy or would go full-on to Phase III and then do a [Phase II] (ph) following?
Stuart Peltz
Well I think we are just looking at evaluating this right now perhaps even pre-clinically and then deciding what to do after that.
Geoff Meacham - JPMorgan
Okay, thanks guys.
Stuart Peltz
Thanks, Jeff thanks for your call. Thanks for the question.
Operator
Thank you. (Operator Instructions).
Our next question comes from Jason Kantor from Credit Suisse.
Jason Kantor – Credit Suisse
Hi, thanks for the update. Couple of questions.
I guess on the plans to file for cystic fibrosis for conditional approval in Europe. Is that in anyway tied to what happens with the DMD filing.
Are you waiting to get the recommendation or not, is there any read through from one filing to the other?
Stuart Peltz
Hi, Jason thanks for the question. Yeah we are working now towards the MAA filing and that probably has a good chance of being done prior to that although we’ll evaluate that as time moves on.
We’ll probably put it in before the end of the year though.
Jason Kantor – Credit Suisse
But I mean if the European authorities reject the DMD filing I mean do you think that this stands separately on the merits as well and you would pursue that, there is no linkage there in your mind?
Stuart Peltz
No, we think that we’re going to be having, we’re working hard on this right now and we’ll evaluate it as it comes in but we’re working hard now to get that in.
Jason Kantor – Credit Suisse
Got it. And then in terms of the SMA program that you spoke about I guess what would the next milestone that would trigger a payment.
How big might that payment be and could you just speak a little bit to what makes this program particularly differentiated?
Jay Barth
Sure we are pretty excited about the SMA program. It’s an orally bio-available molecule that can pass obviously the blood-brain barrier and has shown really incredible changes in the preclinical, as a -- a severe form of the SMA model.
So we were happy to with Roche in the SMA Foundation to pick a development candidate that triggered the $10 million milestone. So the next step of that is obviously to move it through the development phase.
So that’s where we are now working with our partner. Beyond that we can’t disclose all that much more beyond where we are right now.
Jason Kantor – Credit Suisse
And then if I can ask one more question. There has obviously been a lot of discussion about the FDA’s willingness to potentially look at accelerated approval paths for DMD trials and I am just wondering is there any way to potentially get Ataluren approved even if the 6-minute walk comes in with some sort of mix result.
Is there any kind of end point that you are looking at you’ve been discussing with FDA or is that pretty much the only path available to you?
Stuart Peltz
Well we are obviously doing the 6-minute walk test and the time function test, quality of life as well that we’re measuring as well. We think we are pretty well positioned in terms of the 6-minute walk since as you know we were the first to really do a Phase IIb study and where we pioneered really trying to understand the natural history, even though we weren't optimal in terms of inclusion criteria because we didn’t know.
I think we now understand this quite well and I think we really positioned the trial to have the best chances of success. But we are pretty confident of this upcoming trial.
Jason Kantor – Credit Suisse
Thank you.
Operator
Our next question comes from Gregory Wade from Wedbush.
Gregory Wade- Wedbush Securities
Hi, good afternoon. Thanks for taking my questions.
Well Stu, I have a quick question on the SMA program, how long do you think it’s going to take to get this candidate into the clinic and then can you share with us a potential clinical path to registration statement or registration filing? Thanks.
Stuart Peltz
Sure, so we are working with the Roche and the SMA Foundation on the next steps and they are really putting a lot of resources in to this. This program right now is actually getting a high senior attention at Roche.
So that we are confident they are going to move it as ratably as possible. But that's about all that we can disclose about this at this time.
Gregory Wade- Wedbush Securities
Okay, thank you.
Operator
Thank you. I am showing no further questions in queue.
I would like to hand the conference back over to management for any closing remarks.
Stuart Peltz
Okay, well thank you operator. As you know I founded the company really with the vision of bringing these medicines to patients with a range of debilitating and fatal diseases, particularly rare disorders and we are very proud of what we and our partners have accomplished so far.
We really know that everyday counts for patients living with DMD and CF and so we really look forward to bringing these small molecules to these patients who are declining and their families and their physicians. So thank you again for joining us to our first call and we look forward to speaking with you all soon.
Thank you.
Operator
Ladies and gentlemen, thank you for participating in today's conference. This concludes our program for today.
You may all disconnect and have a wonderful day.